Short forced buy-in ... just re-short?

Discussion in 'Retail Brokers' started by heech, May 27, 2009.

  1. heech


    Hi there,

    I have a short position on MWJ. According to the IB borrow tool, they have tens of millions of shares available to borrow.

    3 days after the borrow, they notify me they can't actually locate the shares... and forced a buy-in before the open this morning.

    Well... I just re-opened the short position again. Nothing wrong with that, as long as IB lets me, correct?
  2. Occam


    It's unclear; if they failed to locate once, they'll probably fail to locate 3 days later. And ET is known to "fire" clients they find annoying. And you might be forced to buy in at a bad time and/or price.

    On the other hand, if the symbol is on their publicly-available short list, they're basically declaring it shortable.

    On the balance, I wouldn't do it, but it's your call...if it's a really compelling position then maybe it's worth it to you, given the risks.

  3. heech


    Hmm, would this really make me annoying in their eyes...? TWS is still allowing me to short, and the tool still shows shares available... is there actually manual labor involved in finding my 300 shares? I assumed it'd just all be automated.

    This is actually the hedging leg of a combo option position... so unless I close out the entire position, I'd really like to keep going in/out of the position as price demands.
  4. 10's of millions to borrow on this seems , uh, unlikely.

    And since when do they force a cover in thee pre market without notice?
  5. heech


    1) According to the IB tool:

    Available 9'900'000 shares

    (And historical shows > 10 million for most of the day)

    2) I had notice all day yesterday. I just wasn't going to do anything about it until they actually forced my buy-in.
  6. pspr


    Get on the phone or instant messaging system with them to see what the problem is. Don't contact IB by email or it may be weeks before they reply.
  7. well, if you believe the figure then a buy in is IMPOSSIBLE.

    I'd recheck that number. I don't know what the float is on this , hard to come by, but I suspect its less than the # you're quoting.

    and nice of you to clarify the timing on the buy in, you made it sound like they gave you 10 seconds to cover. your bad
  8. heech


    Happening again with LTM. Their tool still advertises 900k shares available, but can't find 400 shares for me.

    I'm going to try closing/reopening the position *today*... and see if anyone gripes about that.

    I had no problem with re-opening MWJ after the buy-in, earlier this week.
  9. sleuth


    IB sends out their "notice of possible buy-in" at 2:55pm EST. I have received them even when the stock shows huge availability to short, but I was still bought in, because their Short Stock Availability database isn't always accurate.

    If they do buy you in, they will do it for the number of shares in the email message, adjusted for any trades you made that day. I.E., if they tell you they might buy you back in for 400 shares, and you shorted another 100 shares that day, then they will actually buy you in for 500 shares.

    You can tell if you got bought in later that night (not sure what time) if you check account activitity on their website, it will show a transaction with a "place-holder" price. The actual buy-in will be a market order the following morning at 10 minutes after the open, which will set the actual price you pay. You can immediately re-short if the stock is available, and I have done that without getting subsequently bought in again.

    My personal policy is that whenever I get a "notice of possible buy-in" from IB, I cover for that number of shares, adjusted for trades I made that day, before the close. I don't want to take my chances with a market order the next morning, especially if the number of shares to be bought in is large in relation to the liquidity of the stock. And my short positions are part of a pairs strategy that I don't want to become unbalanced.

    Also, if you're carrying short positions overnight, you should check IB's Short Stock Availability tool every day on their website to see what the current borrow rate is on the stocks you are short. This rate can change a lot, and IB doesn't itemize their interest charges so it's hard to tell what rate you're paying to borrow the stock. I've seen it range from 0% for major stocks to > 20% for hard-to-borrow ones. You need to factor this into your P/L and make sure your strategy throws off enough profit to cover the interest charges.
  10. good post but how is it possible that this is your first post , having registered in DEC 2007?

    Next post DEC 2010?
    #10     Jun 14, 2009