Why margins are required when clients write options

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Reference no: EM131237149

1. An investor sells a European call option with strike price of K and maturity T and buys a put with the same strike price and maturity. Describe the investor's position.

2. Explain why margins are required when clients write options but not when they buy options.

3. A stock option is on a February, May, August, and November cycle. What options trade on (a) April 1 and (b) May 30?

4. A company declares a 2-for-1 stock split. Explain how the terms change for a call option with a strike price of $60.

5. ‘‘Employee stock options issued by a company are different from regular exchange-traded call options on the company's stock because they can affect the capital structure of the company.'' Explain this statement.

Reference no: EM131237149

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