52 
TABLE 2-10. 
Return if unchanged-margin account. 
Method 1 
Unchanged stock value (500 
shares at 43) 
Plus dividends 
Less margin interest charges 
(10% on $10,910 debit for 
6 months) 
Less debit balance 
Less net investment (margin) 
Net profit if unchanged­
margin 
$21,500 
+ 500 
545 
10,910 
- 9 470 
$ 1,075 
Part II: Call Option Strategies 
Method 2 
Profit if unchanged-cash 
Less margin interest charges -
Net profit if unchanged­
margin 
$1,620 
545 
$1,075 
Return if unchanged = $ l ,075 = 11 .4% 
$9,470 
TABLE 2-11. 
Break-even point-margin write. 
Net margin investment 
Plus debit balance 
Less dividends 
Plus margin interest charges 
Total stock cost to expiration 
Divide by shares held 
Break-even point-margin 
TABLE 2-12. 
Percent downside protection-margin write. 
Initial stock price 
Less break-even price-margin 
Points of protection 
Divide by original stock price 
Equals percent downside protection-margin 
$ 9,470 
+ 10,910 
500 
+ 545 
$20,425 
+ 500 
40.9 
43 
-40.9 
2.1 
+43 
4.9% 
The return if exercised is 18.4% for the covered write using margin. In Example 
1 the return if exercised for a cash write was computed as 11.2%. Thus, the return if 
exercised from a margin write is considerably higher. In fact, unless a fairly deep in­
the-money write is being considered, the return on margin will always be higher than