An option is "at the money" when the stock price equals the strike price. When the stock price is above the strike price by a certain amount, the call is in the money by that amount and the put is out of the money by that amount. When the stock price is below the strike price by a certain amount, the call is out of the money by that amount and the put is in the money by that amount. In other words, the ITM amount is the amount an option would be worth if it expired today.
ahh, ok so for PUTS, its the amount less than the strike and for CALLS, amount greater than the strike
I'm not going to touch this one until you get your numbers right. The put is ITM. There is no out of the money amount. FWIW, the margin req. is $1,245 Your SMA debit is $760 You cannot apply the $485 to your margin requirement AND spend it elsewhere
wow, that is correct, so margin req' is 156% the value you sold the naked PUT at. Thats seems pretty hefty ... I'll defenitely play CALLS long on this trade, but now that I understand naked short puts, I can think of a few situations I might wanna use them on.
Think about it, the risk is not the premium. Selling a $40 put means you are obligated to buy the stock for $4,000. that is the maximum true risk in the position so it makes sense that it would have some significant margin for being naked an obligation.
Yes, I know. I wanted you to say it. To learn option basics/terminology/structure read these books: <a href="http://www.amazon.com/Options-Strategic-Investment-Lawrence-McMillan/dp/0735201978/ref=pd_bbs_2/104-6624375-5290302?ie=UTF8&s=books&qid=1193434419&sr=8-2"> Options as a Strategic Investment</a> Followed by: <a href="http://www.amazon.com/Option-Volatility-Pricing-Strategies-Techniques/dp/155738486X/ref=pd_bbs_sr_3/104-6624375-5290302?ie=UTF8&s=books&qid=1193434419&sr=8-3"> Option Volatility & Pricing: Advanced Trading Strategies and Techniques</a> <p> And/or see this website: <a href="http://www.theoptionsguide.com/"> The Options Guide