I have been trading stocks for a while now and have never had this problem before as I stick to trading liquid large cap stocks. I set up a new trading account 3 months ago with my current broker. In the last few days I got an email stating I might be forced to exit a short position on 400 SPY because of a borrowing problem. The 400 SPY is a part of a pairs trade which I dont want to exit at this point. The SPY is one of the most liquid ETF'S. Is this normal to receive an email asking or telling you to cover a short when you are tradign liquid stocks, I could understand if it was a low cap stock.
They are basically telling you that they are having trouble borrowing the shares, and you might get bought in. You can replace the short stock position with a 4 long puts and 4 short calls on the same strike, that covers the time period you need to be short. You can do it as one trade including the stock, if you know how to value the conversion.
Nothing to 'value,' really -- market prices are super tight for SPY & SPY ATMs. More to the point -- what broker doesn't have SPY to lend? He needs a new broker.
it is normal to have these emails generated. glitches occur in the borrowing process. they are cleared up in stocks like spy before any buy-in forces you to close your position.
Thanks for the replies. My broker is I.B so I am hoping its a email generated glitch as zdreg mentioned. Good idea to use Options if it happens again in the future. Will stick to trading liquid stocks/ETF'S.