I guess I got myself into the situation. Its really not that big of a deal. I wonder though if when shorting a stock the borrower shouldnt be given a time frame for the transaction. Something like I will let you borrow these shares for no less than x days.
GTS sorry if I gave you the impression I wasnt fully aware of what I was doing. You do realise I wanted to exercise the options.
You can only get assigned if the options finish in the money. The alternative to what they did is to let in-the-money options go un-exercsied, in which case you would have lost the gain on your position. My advice would be to write this off as a little "market tuition" and NEVER put yourself in such a position again. If you aren't sure you want to be assigned, close the position before it becomes an issue.
Thanks Rob. I feel the same way. Guys I must not have explained clearly. Although I did not buy the options with the intent of shorting the stock, I did at some point change my mind. So, I sold my shares of ford and held on tho the options. I intentionaly let them exercise because they were in the money a good bit. My problem did not arrise until I was told by ameritrade that I had to cover the short. I did not want to cover the short and I still want to be short. But they went ahead and covered for me and in the process charged me fees for the trade. Yes understand they didnt have the shares. I also understand they cant be naked on the sale. I just would like ameritrade to not offer me the shares if I cannot keep them. Its really no big deal this time. But Imagine if you for some crazy reason shorted a stock with your entire savings. The stock falls and you are making money. Then your broker calls you and says oops I wasnt suposed to loan you those shares. I am going to have to ask you to cover your position. If that happened I think you would feel the same way I do. That if they werent suposed to loan you the shares, then they should not have offered me the shares. I know my case is a little different because I ended up short when my options exercised, but ameritrade knew there was a chance I would exercise those options. Anyhow case closed thank you all for the replies.
151, you are actually lucky that your broker gave you a courtesy call and some time to cover the short yourself. They could simply cover it themselves.
In the example you just described I would be happy because I just made a ton of money. I guess I still don't understand what you wanted Ameritrade to do differently - they could of either allowed your options to expire so you get nothing or they could exercise your options so you are short a $2.5 stock at $3/share - e.g. an instant profit of $0.5/share. Given the choice between these two options I guess I'm having a hard time seeing what is wrong with what they did. Again - what would you have had them done differently given that they can't give you shares to short when they don't have any.
Ameritrade didn't offer you any shares though. And even if they <i>did</i> let you short the stock directly (which they didn't), they'd still have the right to terminate the stock loan at will, forcing you to cover. Buying puts <b>never</b> entitles you back-door entry on a short position in hard-to-borrow stock.