I tryed to short TWITTER , IB didnt allow me, saying this contract is not available for shorting. Is this normal, by regulations when can I short Twitter. Thanks.
It will be hard to find TWTR Shorts as its a new IPO. Most of the time they implement this restriction so the stock cannot be influenced to go down unnaturally.
As discussed in other threads, I think the issue is simply locating shares to short. But what about options? How come there are no options that I can see for Twitter? Also, who decides what options are available at a particular strike price and expiry date for a given equity? Thanks
The stock just IPOed. There are requirements for options to get listed. It takes at least 7 business days for the options to list. http://www.cboeoptionshub.com/2013/11/05/twitter-options-coming-till-next-week/
Thanks Jeb. I didn't know that an exchange has to ask the OCC every time they want to list a particular option including each expiry and strike price. Is that correct? There are so many equities out there, I would imagine they are asking the OCC for listings on a regular basis. I wonder how they decide what the option market interest is in a particular equity. For example, maybe there are a lot of investors/traders out there who would buy a particular far out of the money call or put on a given stock, but that stike price isn't listed. How would these potential traders notify their interest in this product so that an exchange can go ask the OCC to list this? Do they do this through banks/brokers? Sounds like a somewhat complicated process.
Yesterday, on CNBC, Dan Niles, some technology expert, said he shorted TWTR at 47-something. He was with Maria Barturomo.
Maybe Dan Niles is an active ET'er? Lol Options don't start trading the same day as the IPO as noted above and there is a restriction on short selling new listed stock, pretty common knowledge if you have been trading for awhile.
I believe he said he shorted at $45.60, and clearly the rule against shorting IPOs only restricts (in practice) retail.
heres is the rule on shorting which I never even knew till now as I've never tried shorting on and the last response looks correct as only the well-connected can do it the first day. Are IPOs available to short sell immediately upon trading, or is there a time limit that must pass before short sales are accepted? The quick answer to this question is that an IPO can be shorted upon initial trading, but it is not an easy thing to do at the start of the offering. First, you have to understand the process of IPOs and short selling. An initial public offering (IPO) happens when a company goes from being private to being publicly traded on an exchange. The company and an underwriting firm will work together to price the offering for sale in the market and to promote the IPO to the public to make sure there's interest in the company. Generally, shares in the company are sold at a discount by the company to the underwriter; the underwriter then sells it on the market during the IPO. When an investor short sells, he or she essentially borrows a stock and repays it in the future. If you do this, you're hoping the price of the stock will fall because you want to sell high and buy low. For example, if you short sell a stock at $25 and the price of the stock falls to $20, you will make $5 per share if you purchase the stock at $20 and close out the short position. To be able to short a stock, you usually need to borrow it from an institution such as your brokerage firm. For them to lend it to you, they need an inventory of this stock. Here's where the difficulty can arise with IPOs and short selling: an IPO usually has a small amount of shares upon initial trading, which limits the amount of shares that can be borrowed for shorting purposes. On the day of the IPO, two main parties hold inventory of the stock: the underwriters and institutional and retail investors. As determined by the Securities and Exchange Commission, which is in charge of IPO regulation in the U.S., the underwriters of the IPO are not allowed to lend out shares for short sale for 30 days. On the other hand, institutional and retail investors can lend out their shares to investors who want to short them. However, only a limited amount of shares would probably be available on the market as the company would've just started trading publicly and the shares may not have been completely transferred. Furthermore, there might be a lack of willingness among investors to lend their shares out to be short sold. So, while there are regulatory and practical obstacles to doing it, it is still possible to short sell shares in a company the same day the company goes public.
Why would you want to short TWTR? The trend is your friend and that trend is up. My guess is that it will be back above its high next week (Nov11 - Nov15), maybe even hit $50.00.