Shorting on DOWNTICK

Discussion in 'Retail Brokers' started by lojze, Jun 11, 2002.

  1. If the stock closed at say 50,and it was an uptick,you can short the next day's open at 50 or higher.If 50 was a downtick,you can short the next day's open at 50.01 or higher.And also since the short sale rule doesn't apply in premarket or after hours trading,you can short through an ECN.
    #21     Jun 13, 2002
  2. You could trade futures which eliminates the shorting on a down tick problem.

    Or you could use options but it will be very capital intensive and it would only make sense if you traded the same few stocks. You would put a position on like this and trade it to expiry.
    Long Stock
    Long ATM Puts
    Short ATM Calls
    Long OTM Calls
    This position is almost delta neutral (depends on how far OTM the Long Calls are).

    When you sell your Long Stock you are synthetically short.
    #22     Jun 13, 2002
  3. Awhile back there was a time IBM went 3 days without an uptick.

    #23     Jun 13, 2002
  4. also known as a conversion
    #24     Jun 13, 2002
  5. what's that?

    I have yet to find something as a professional I can't short.

    under $ 5

    most securities hard to borrow list --well I can always get a bullet and hit sell

    #25     Jun 13, 2002
  6. I couldnt borrow INVN a while back( just that one day) or Amzn ( just that one day) .... and this was when i was prop...dont know why it would be any different for you...anyways there is a glitch in the watcher...that lets u be short ......
    #26     Jun 13, 2002
  7. Whats the exact reason for the extra OTM long on your conversion? To avoid being naked short?
    #27     Jun 13, 2002
  8. Moa


    Is'nt it more simple (also more expensive?) to be neutral whith a permanent long position on the stock and an In the Money Put?
    Then, the 'synthetic short' will be to sell the stock and the 'synthetic long' will be to buy the stock again(then you are 2 times long with the stock and 1 time short with the put = 1 long).
    The cost in capital is 2 times stock + IM Put, = about x 2,3.
    #28     Jun 13, 2002
  9. The extra OTM call is to avoid being naked the short call. Some retail firms won't let you sell naked options and it provides some insurance.

    Moa is correct, it would be easier to be long a deep in the money put and save yourself some commissions. You'd have to figure out the cost of each strategy to see which one is cheaper.
    #29     Jun 13, 2002
  10. alanm


    Actually, you can't, since the ECNs have all closed that gap.

    Instinet will mark any short sale at or below the last NYSE close, up to 0.01 above the last NYSE close.

    Island and ARCA will simply reject any short sale priced at or below the last NYSE close.

    REDIBook, of all people, has a somewhat more liberal policy, implementing the NYSE uptick rule based on trades that occur on REDIBook. So, if a trade happens below the previous NYSE close, you can then short down to that trade price (+0.01 if it was a downtick). Unfortunately, while it marks up a new order to the allowable price, it won't move it back down if it becomes possible to short at a lower price that was at or above your limit.

    I wish someone would explain, though, why they've chosen to check all short sales against their own borrow list and reject those that they think are not borrowable (like U) even if your broker has them available.

    I don't know what BRUT does - I don't have access to it for listed stox.

    I long for the old days (last year) :-(
    #30     Jun 14, 2002