Part I
Initial margin requirement= 60000 x 15.29 x 10% X 2 cents + $ 1200
= $ 3,035
Loan from broker = 60000 x 15.29 x 2 cents x 90%
= $ 16,513
Margin call= 16,513/1-0.10= $ 18,347
Hence, price at which margin call will be recd= 18,347*100/(60,000*2)= 15.28 cents
Part II
Higher the volatility, higher the futures price. Hence, the initial margin requirement will also increase
Part I
Price of Call Option= Intrinsic value of call option + Time value of call option
Intrinsic value of call option (XYZ July 40)= $ 45- $ 40= $ 5
Since, price of one of the option is $ 8, it is price of XYZ July 40 call as time value of option can not be negative
Hence, time vlue of XYZ July 40 call = $ 3 and price is $ 8
Part II
Under Strategy A, the buyer of the option can buy share at a strike price of $ 40
Under Strategy B, the buyer of the option can buy share at a strike price of $ 50
Hence Strategy B offers a higher level of protection.
Part I
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