BYND, Short call assigned on hard to borrow on Interactive Broker

Discussion in 'Interactive Brokers' started by Br1828, Aug 3, 2019.

  1. Br1828

    Br1828

    I opened a large position of a calendar call spread that was fairly DITM for BYND. The position was opened on July 30. I was concerned that I would be assigned on the short call for the calendar. I called IB several times after market was closed to see if I was assigned. The representative told me that there were no shares to borrow and if the short calls where assigned, IB would buy it in the open market to cover. It didn't sound so bad to me as I was more concerned with the hard to borrow fee. I was frequently checking my IBKR mobile just in case to see if the options got assigned which would afford me the ability to buy back the shares in after market which is the same day to avoid the borrowing fee. On July 30, the borrowing fee for BYND was about 190%. On July 31st at approx 2am, I see that the short call option was assigned and I was short a substantial amount of BYND. Of course, when the market opened, IB quickly auto liquidated to buy back the short position of BYND. I was thinking that since IB auto liquidated the same day, there would be no borrow fee. Later in the day, I recieved a notification that the short call option was exercised on July 30 with that trade date. Worst is that the borrow fee was based on the settlement date of Aug 1 which turns out to be 386%. The borrowed fee for 1 day was 15k which was absurd.

    Im hoping someone can point me in the right direction or provide me with advice as I am in Canada and not familiar with the regulation in US. Basically, when options are assigned, you have no way knowing or provided the ability to cover until next day which means the borrowing fee is applied. How can IB show the option assignment on my trade log and portfolio as July 31 at 2am yet value the trade date as on July 30? I understood the risk of being assigned before expiration with the intention of buying back the shares to convert immediately. What bothers me is the fact that I had no opportunity to be notified on the same day. I had thought that option assignment after market closed which would be the next business day.

    Any help would greatly be appreciated. Thank you.
     
  2. Ugh, nasty situation. Don't know what can be done, other than trying arbitration to maybe get some back? This is a great cautionary story of the (possible) dangers of short calls, especially on a crazy one like BYND. I think a close strike vertical is about as risky as I would get. I've been burned by funky vol skew on calendars. Of course you still would have gotten nailed by the sh*tty borrow fee I guess.

    Hopefully some of the option pros here can offer helpful advice. Good luck. :)
     
    guru likes this.
  3. etrades

    etrades

    Hi guys

    Is this scenario possible in covered calls ?
     
  4. zdreg

    zdreg

    no.
     
  5. mskl

    mskl

    so tempting to buy the stock synthetically at a large discount and then sell deep calls or do a complete box (with deep call).

    IB did nothing wrong. The day they are exercised is the "trade date". You just don't find out till the next day. But 99% of all these deep BYND options are being assigned every day so you should have expected it. Every day there are "deep" buy writes bid .05 above fair value and at times they are trading .10 above which you don't often see.

    It could have been worse if you sold the deep calls on a Wednesday and they are assigned that day and you cover the shares on Thursday. In this case you would have been charged three days of short interest as the shares you were short would have settled Friday (2 day settlement) and the shares you bought back would settle on Monday.

    A good lesson for you.
     
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  6. zdreg

    zdreg

    Here is the hard truth. It has nothing to do with regulation in Canada vs. the US. You should have read the option prospectus instead of assuming it is just jargon or caveats similar to when you fill a medical prescription
    The buy in cannot take place in the after hour session.
    The loan rate was approximately 1%/day. The 15k in stock loan fees suggests very roughly you were short maybe 72 options with stock value at roughly 1.5 million.
    You did a trade that usually only market makers do. why traders on ET think they're smarter then the MMs is a separation from reality.
     
    Last edited: Aug 3, 2019
    guru and nooby_mcnoob like this.
  7. Yeah like others have said, probably no basis for arbitration. You signed the agreements. "Substantial Risk..." and all that. But it's been 20+ years since I read an OCC or broker agreement. Maybe your exact situation is not spelled out clearly. Doubtfull.
     
  8. Br1828

    Br1828

    I get the risk associated with options. The trade I had on was a calendar that was just ITM. I didn't try to short a call as a synthetic to borrowing the hard to borrow stock. My risk with the spread was defined as I had the long back month of the same strike. I could have exercised that to offset. I'm not disputing the short call being assigned to me. I'm not disputing why IB auto liquidated after assigning shares to me. My concern is quite simple. If you are charging me for the interest on the hard to borrow stock on July 30 which was the valued trade date, why was I not notified on July 30 and only after the fact on July 31? I had no opportunity to cover the position which could have easily been bought back during after hours. This was essentially what IB did anyways but they did it the next morning during the open. It is unsettling to me that I am charged the borrowed interest for a stock that was loan to me which I had no access to on that date. That is my issue. I've been trading options well over 10 years. I was prepared to be assigned. I called IB several times. Even on the morning, the representative confirmed to me what on my trade log, the shares were assigned and in my account on July 31st at 2am. If I closed that position the same day, no borrowed fee. In my case, the shares were assigned with trade date of July 30. I would have been ok with being charged the borrowed fee if I knowingly was assigned and did nothing with it till next day.
     
    athlonmank8 likes this.
  9. newwurldmn

    newwurldmn

    T+1 settlement. Meant you paid borrow through aug 1.

    Options are exercised by 430pm and it takes a few hours for the back office to process those trades.

    In the 10 years you have traded options, hasnt this been the case? Have you never been assigned before?
     
  10. zdreg

    zdreg

    As explained above for at least 1 day you did not have an offsetting long position. Hence the 15k charge
     
    Last edited: Aug 3, 2019
    #10     Aug 3, 2019