A trader writes 5 naked put option contractswith each contract being on 100 shares. Theoption price is $10, the time to maturity is 6months, and the strike price is $64. (a) Whatis the margin requirement if the stock price is$58? (b) How would the answer to (a)change if the rules for index options applied?(c) How would the answer to (a) change if thestock price were $70? (d) How would theanswer to (a) change if the trader is buyinginstead of selling the options?

Calculation of maximum lossMaximum loss = (Strike Price - Stock Price) * No. of shares * Contract…

Answered: with each contract being on 100 shares.…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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with each contract being on 100 shares. The option price is $10, the time to maturity is 6 months, and the strike price is $64. (a) What is the margin requirement if the stock price is $582 (b) How would the answer to (a)