Hi all, If I want to build a short position, but I can not borrow shares from my broker. can I sell a deep In-The-Money call and wait to option exercising? Thanks.
Happens often when options get assigned or exercised, but if the broker doesn’t have shares available then they will ask you to buy them back in the morning after you’ll get short shares assigned.
Yes, you will end up selling that call below parity and you will likely be assigned the following day and then bought in by T+2. Not a good idea unless it is a day trade.
When I read these kind of posts you understand why the agreements you have to sign with brokers run over so many pages.
You're saying it won't work to maintain a position, right? Or are you saying doing it for a day trade is an SHO violation?
Daytrade may not be OK depending on the brokerage firm's compliance department. Why not just buy the grotesquely overpriced put as the "daytrade" and you can actually hold it longer if you choose.
It was more of a theoretical question; I'm not trading TLRY. However, you'd get a much better entry on the call since it'll trade a few cents off intrinsic value, while the put will have a wider spread. I definitely see it could cause a lot of problems for your broker to make delivery, but only if you don't buy the stock or sell the call by the end of the day. The only case I could find was this: https://www.sec.gov/news/press/2011/2011-264.htm. But in that case they were avoiding making delivery. Do you know of anything more on point?
Again - search reg. show violations - plus if the options are as "mispriced" as you claim there would be dozens of opportunities in the matrix. Is this stock multiply listed? If the stock cannot be borrowed to cover the short - the brokerage house will buy you in. They won't wait for you and there is a good chance that the second time you do it - they'll boot your account. If the spreads are a bit wide it's still an uneconomical trade-off. Your griping about a few cents of spread versus multiple needless commissions. IB was just fined $5.5Million for Reg. SHO violations. I doubt there anxious to accrue more happiness with the SEC.
FINRA Fines Interactive Brokers $5.5 Million for Regulation SHO Violations and Supervisory Failures https://www.finra.org/node/86129