IB And Stock Options Questions

tyrant · Dec 3, 2006

I use Interactive Brokers ( IB ) but am not resident in US. If I short a stock option and subsequently exercised against, will IB automatically deduct funds from my account and take up the stock for me.

And what if a dividend is declared on the stocks I now hold, will they be sent to my home address or is it credited into my IB account?

If I am short calls on a stock and exercised against, am I now short the underlying stock? Is this allowed with IB? Do I have to buy back the stock within a certain time frame?

dpt · Dec 3, 2006

Quote from tyrant:

I use Interactive Brokers ( IB ) but am not resident in US. If I short a
stock option and subsequently exercised against, will IB automatically deduct
funds from my account and take up the stock for me.

If you write a put(call) and are assigned, you automatically receive a
long(short) position in the stock at the strike price. You must have
sufficient margin in your account to hold the stock position or else IB will
immediately liquidate positions to bring you into compliance.

And what if a dividend is declared on the stocks I now hold, will they be
sent to my home address or is it credited into my IB account?

When a company declares a cash dividend it sets a date called the `record
date.'

Then the stock exchanges or the NASD set another date called the `ex-dividend
date.' The ex-dividend date is two business days earlier than the record
date. If you purchase stock before the ex-dividend date, the stock settles by
the record date (on T+3), and you are entitled to receive the dividend since you
are the owner of record, that is, you're on the company's books as owner of
the stock by the record date. If you purchase stock on or after the
ex-dividend date, you will not receive the next dividend.

In a margin account your stocks are held in street name: in this case IB
receives the dividend and credits it to your account.

If you are short stock then dividend are deducted from your account and
sent to the owner of record (the owner of the shares you've borrowed).

You must still have sufficient margin for all of your positions after paying the dividend.

If I am short calls on a stock and exercised against, am I now short the
underlying stock?

Yes.

Is this allowed with IB?

Yes, as long as you have sufficient margin to hold the position.

Do I have to buy back the stock within a certain time frame?

No, as long as you have sufficient margin. Note that sufficient margin is
more for overnight positions than for intraday.
More...

tyrant · Dec 3, 2006

Thanks a lot, dpt.

dpt · Dec 4, 2006

Cheers, tyrant. Good trading!

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IB And Stock Options Questions

tyrant

dpt

tyrant

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