halted stocks and options

Discussion in 'Trading' started by kotika, Jul 27, 2011.

  1. kotika

    kotika

    so with all those chinese stocks getting halted left and right, whats up with expiring options? Search on the net shows the following main point:

    THE RIGHT TO EXERCISE AT ANY TIME REMAINS INTACT!!!

    beyond that there are four possibilities.

    1) If you are long a call you can call it

    2) if you own a put you can put your shares

    I think most people will agree with these two points, but what about this other two situations?

    3) you own a put, but have no shares to deliver. If you were a bigshot client,
    would you be able at least in theory to call your broker and have them
    go out and try to borrow and deliver the shares in order to stay short?
    Is there any rule or regulation to stop you from doing this?

    4) if you are short the naked calls and someone calls them in,
    would this not nearly always result in a delivery fail?

    Any comment from the oldtimers? Explanations of actual practices of different brokers will be very much appreciated.
     
  2. rmorse

    rmorse ET Sponsor

    I thought you asked this before. If you fail on delivery, they can't buy you in unless the stock is trading. With regard to large accounts being treated differently, they are not. When you're trading in a margin account, the clearance firm is failing, not you. The short stock is in street name, not yours. You can exercise your put/call whenever you want. It's the contract your have with the OCC. They determine which clearance firm gets Put the stock/ or called away. The clearance firm then has a set procedure to determine which account get hit. After the stock resumes trading, you can be bought in on the open if the stock is failing.

    Old Timer Bob
     
  3. enjoy paying 200% borrow rates while they peruse the paperwork.