Course Name: Systematic Options Trading, Section No: 20, Unit No: 6, Unit type: Quiz
Total cost = call margin + put margin
What about the premium recevied on Options sold (10 +2) *75? Shouldnt this be reduced from the cost?
Hello Bharat,
That's a very good question.
The total cost i.e. the sum of the call margin and put margin is the amount you need to maintain in your account to place the sell orders (sell orders of a call and a put option in this case).
Once the orders are executed, then you need to maintain an amount of (total cost - Net premium received) i.e. (total cost - (10 +2) *75) to keep your positions open.
For this reason, in this quiz, the total cost would be the sum of call and put premiums whereas the amount required to maintain the trade would be (total cost - (10 +2) *75).
Hope this helps!