Portfolio Margin question/answer - Review and feedback?

Discussion in 'Options' started by sw_trader, Jan 16, 2015.

  1. sw_trader



    Need to have someone review and provide your input on answers to this portfolio margin test. Any input is appreciated.

    1. You establish the following positions:

    Long 1,000 OEX JUN 640 Calls @ $21.00

    Long 1,000 OEX JUN 640 Puts @ $10.76

    What is the traditional margin requirement?

    a. $3,176,000

    b. $1,588,000

    c. $1,024,000

    d. $317,600

    e. None of the above

    2. You establish the following position:

    Short 1 ABC 50 Put @ $2.25

    If the price of ABC is $40 at expiration, what is the profit or loss from

    this short put position?

    a. $750 Profit

    b. $750 Loss

    c. $775 Profit

    d. $775 Loss

    e. $1,000 Loss

    3. Which of the following is NOT permitted when an account is restricted

    to “Liquidation Orders Only”?

    a. Depositing additional funds or securities to the account

    b. Placing an order to open an naked position

    c. Buying to close an uncovered position

    d. Selling to close a long position

    e. None of the above is permitted

    4. You have opened several accounts with XYZ Broker. Which of the

    following is an account under identical ownership as your individual

    portfolio margin account?

    a. Your Roth Individual Retirement Account

    b. Your Individual Margin Account

    c. Your Joint With Rights Of Survivorship Account

    d. Your Corporate Account

    e. Your 401k Account

    5. You have already been approved for covered call writing but must be

    re-approved for which of the following in order participate in portfolio


    a. Purchasing Straddles

    b. Purchasing Spreads

    c. Purchasing Options

    d. Short-selling

    e. Selling Uncovered Options

    6. The following positions belong in the same “security class” or “product

    group” as a long position in MSFT, EXCEPT

    a. Short puts with the obligation to purchase MSFT shares

    b. Short calls with the obligation to sell MSFT shares

    c. Long position in the QQQQ, tracking the NASDAQ 100 Index, of

    which MSFT is a major component

    d. Long LEAPS options on MSFT

    e. Long position in MSFT preferred shares

    7. All LEAPS

    a. are unlisted derivatives of equity indices

    b. are options on commodities and futures contracts

    c. are issued with longer life than standard options

    d. are options on Exchange Traded Funds.

    e. are options on individual stocks

    8. Which of the following is a synthetic long put?

    a. Long stock, short put

    b. Long stock, short call

    c. Long stock, long put

    d. Short stock, long put

    e. Short stock, long call

    9. To hedge a long position in IBM, a customer can do all of the following


    a. Buy to open at the money IBM puts

    b. Buy to open in the money IBM puts

    c. Sell to open out of the money IBM calls

    d. Sell to open in the money IBM puts

    e. All of the above

    10. A customer establishes the following position:

    Short 1,000 IBM 100 Call

    Short 1,000 IBM 100 Put

    If the price of IBM is $100 at expiration, what is the resulting IBM

    position in the customer’s account on the business day following the


    a. Flat or no position in IBM

    b. Long 100,000 shares in IBM

    c. Short 100,000 shares in IBM

    d. Both (b) and (c)

    e. Unable to determine

    11. A call writer hoping to benefit from the time decay of the option

    premium would use which of the following measures?

    a. Theta, expressed in percentage

    b. Theta, expressed in dollars

    c. Delta, expressed in percentage

    d. Delta, expressed in dollars

    e. Gamma, expressed in percentage

    12. Which of the following measures the change in an option value given

    one percent change in the volatility?

    a. Delta

    b. Gamma

    c. Theta

    d. Vega

    e. Rho

    13. Which of the following measures the change in an option value given

    one percent change in interest rate?

    a. Delta

    b. Gamma

    c. Theta

    d. Vega

    e. Rho

    14. Which of the following is NOT a primary component in theoretical

    option pricing calculation?

    a. Annual interest rate

    b. Quarterly dividend amount

    c. Change in volatility

    d. Strike price

    e. Days to expiration

    15. The price of IBM is $100. You establish the following position:

    Long 1 IBM 100 Call @ $4.50

    If the delta of the call is .50, what would be the theoretical price of the

    option if the stock decreased by $1?

    a. $2.50

    b. $3

    c. $3.50

    d. $4

    e. $4.50

    16. You establish the following position:

    Short 1 XYZ 100 Put @ $4

    If the delta of the put is 0.50 and the gamma is 0.0673, what would be

    the new delta if XYZ increases from $100 to $101?

    a. 0.3654

    b. 0.4327

    c. 0.5673

    d. 0.6346
  2. rmorse

    rmorse Sponsor

    This is the Apex Clearing PM test.
  3. sw_trader



    Also missed marking question 13 response as E.

    Any thoughts?
  4. rmorse

    rmorse Sponsor

    Are you asking me if the correct response is E or are you asking me why is E correct?
  5. sw_trader


    Number 13 was not answered (in bold) so I did. I was more referring to overall thoughts on bolded answers - and if you or anyone may tell me specifically for questions 3,6 and 14 if they are correct and if not why.
  6. rmorse

    rmorse Sponsor

    I can't provide answers for you. I can help educate you.

    -When an account is restricted, you may not enter any opening positions.
    -For PM haircut calculations, stock options are one product group and index options are another. You can't offset a stock options and index options just
    because the stock is in the index.

    In the question, they ask for what is NOT a primary component. They are all components but one is not in the model and is more of an adjustment.

    I hope this helps. My firm monitors my communication so I can't provide answers but I'm happy to help you find them.
  7. sw_trader


    My goal is certainly to get educated and understand the concepts than just get answers. Thanks for your responses and pointers.
  8. rmorse

    rmorse Sponsor

    Most of the questions don't provide clarity that a client is an experienced trader and understands PM rules. However, Apex requires this test even if the PM client has no intention of trading options.

    Good luck. I don't know anything about your situation, but if you want to talk one day to find out if or when we might be a good fit, contact me directly.

    Trade well, have fun.

  9. Is that not a trick question with the correct answer being e. None of the above?

    It will cost $3,176,000 to open the position, but the margin required to maintain the position is zero.

  10. sw_trader


    Good catch :)
    #10     Jan 18, 2015