Can a broker restrict you from closing positions?

Hello, newbie here. I believe my broker is an idiot, but I'd like to hear some of your opinions.

Recently I incurred a margin call on my account. Last Friday I attempted to take care of this by liquidating positions.

I am an options trader, and I typically sell naked puts. On Friday I had 20 PUTS SHORT of company X. In order to liquidate this position, I entered an order: BUY 20 PUTS TO CLOSE of company X. Are you following me?

My broker refused to execute the trade, saying "Margin call accounts are restricted from buying."

I've spent the last 48 hours trying to explain that BUY TO CLOSE is very different from BUY TO OPEN. But I've had no luck getting through. Am I going mad here? I have never heard of a broker that will restrict a client from liquidating positions. Can someone cite an SEC rule that will force my broker to honor my order? I don't like being stuck with contracts I can't get rid of.

Thanks

 

Sounds really crazy, I mean the first course of action for a broker who cannot reach you when you have a margin call is to liquidate your position, so I don't see why they're preventing you from doing just that.

 

Just wondering.....how much did you end up losing on this trade? X is going nuts today.......What does the broker tell you too do? send a check to cover the margin call, THEN close out the position at a loss?

 

I don't think he/she meant X as a ticker.

 

Haha, yeah I was just saying 'X' to be generic. The actual stock is APOL (and due to the fact that I couldn't buy back my puts, I'm stuck with 2000 shares of this turkey).

But MTE you're right... the 1st thing they would do is liquidate my positions, which is what I was trying to do on Friday! I dunno... I guess this is what I get for going with a discount broker (Brownco).

 

oh, i didnt even notice that.....probably a good thing though, he'd be getting his ass handed too him right now if he was short X/Steel

 

Hey, that's the first thing that's made me feel good all day. Coulda been worse...

 

Maybe you should try a different broker, the one that specializes in options....where stuff like this wouldn't happen.

 

your broker is a bitch.

name & shame.

 

send a registered, return receipt reuqested letter to the firm's compliance office and the broker demanding they compensate you for any losses you suffered. Give them 3 days to perform, if you dont hear from them, file a complaint with the SEC, and sue them in Small Claims Court.

It'll make you feel better you did something and they'll probably settle cause its cheaper than fighting with you. Ifd they fight, just drag it out so their costs exceeed your loss, you'll still feel better than swallowing the loss.