Suppose that a trader writes three naked put option contracts, with each contract being on 100 shares of underlying stock. The option price is $3 on each share, the time to maturity is six months, and the strike price is $60. a. Write out the formula and draw the graph for the trader's profit on each put option on 1 share of stock. b. What is the margin requirement for the trader if the current stock price is $58? C. How would the answer to (b) change if the trader is buying instead of writing the options?

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
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Suppose that a trader writes three naked put option contracts, with each contract being on 100
shares of underlying stock. The option price is $3 on each share, the time to maturity is six
months, and the strike price is $60.
a.
Write out the formula and draw the graph for the trader's profit on each put option on 1
share of stock.
b. What is the margin requirement for the trader if the current stock price is $58?
C. How would the answer to (b) change if the trader is buying instead of writing the options?
Transcribed Image Text:Suppose that a trader writes three naked put option contracts, with each contract being on 100 shares of underlying stock. The option price is $3 on each share, the time to maturity is six months, and the strike price is $60. a. Write out the formula and draw the graph for the trader's profit on each put option on 1 share of stock. b. What is the margin requirement for the trader if the current stock price is $58? C. How would the answer to (b) change if the trader is buying instead of writing the options?
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