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Calculate the non-margin buying power

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Reference no: EM132864109

Short Put ETF: IWMPrice: $234.33Expiration 4/9/2021, 28 days

The account you manage is $1 million. It has $500,000 in equity and $500,000 in money market. Using IWM, you short a put as follows:

Strike 209

Bid/ ask 1.58/ 1.67

Delta .1294

Gamma .0088

Theta .0927

a. Calculate the non-margin buying power (NMBP).

b. Calculate the margin requirement.

c. Calculate the number of contracts but leave a $50,000 cash buffer.

d. Calculate the profit per contract assuming the stock rises $5, and 10 days go by.

e. Provide the probability of being OTM at expiration after letter d.

f. Assume the broker assesses high risk and suddenly changes the MR (margin requirement) to a cash secured put. Calculate the new MR and compare it to the ORIGINAL NMBP.

g. Is there a MC (margin call)? If yes, what is the margin/ house call?

h. At what stock price, will you have a 0.35 delta?

Reference no: EM132864109

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