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Option Trading 3 Microsoft stock is trading at $107. A call option expiring in two months...

Option Trading 3

Microsoft stock is trading at $107. A call option expiring in two months has a strike price of $123.80 and is trading at a premium of c=$0.15. Jodi, who has no other Microsoft stock or option positions, writes 22 contracts. Find Jodi's margin requirement in total.

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Answer #1

Relevant information :

Current Stock Price =$107

Strike price = $123.80

Call Option Premium = $0.15

Nature of contract = writing the 22 call option contract. means writing the call buy option to some other option holder.

Hence, total premium payable to Jodi is =22*.15

= $ 3.3

In general, Initial margin = Daily Absolute change + 3 standard deviation.

However, in given question no information is available about Daily Absolute change and standard deviation. therefore, it is assumed that Margin requirement is equal to premium payable in such case.

hence, Margin Requirement = $ 3.3 in total

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