Question

An investor sells short 100 shares of abc stock at $87 and sells 1 abc jan 85 put @ $2 on the same day in a margin account. the customer must deposit:

Answer 1

Answer: $4,150
To sell short stock, initial margin is 50%. 50% of $8,700 = $4,350. No margin is required on the short puts since they are covered by the short stock position. The $200 of premiums received from writing the puts is applied against the margin requirement of $4,350 for a deposit of $4,150.