Could a $5.00 Put option have an actual market value of $5.00? And if you could short sell this put for $5.00, would there be any downside risk?
not unless the stock can go negative. its the same situation for a spread -- if you can sell a 15 put and buy a 10 put for a total of $5 credit. good luck finding one. i am guessing this was a hypothetical.. edit: answer to first question: no.
Thanks for confirmation CaroKann. I figured the lowest actual market value would be $4.90 for a WCOEQ Sep02 5.00 Put. But I guess I do need to study some basic option trading as my broker (IB) placed the market value at $5.00, thereby raising the margin maintenence requirement to $750 (I had $740/contract set aside) and sold me back the contracts at $5.00 each (plus commissions) to satisfy margin call. Note WCOEQ stock never dropped below 11 cents.
The problem is that the retail margin requirements do not treat the margin for the position as $500 per contract as it should.