Uptick rule, how will it affect premiums?

Discussion in 'Options' started by KINGOFSHORTS, Feb 25, 2009.

  1. Uptick rule and/or shortsell restrictions. How will this affect the premiums?
  2. If you are asking a <i>serious</i> question, it's possible it will have the effect of raising option prices and thus, implied volatility.

    To the extent that anyone buys puts when stock is difficult to sell short, you may see put prices increase.

    Although it can be argued that the would-be short seller could sell calls instead of buying puts, that's less likely because the potential profit when selling a call is very limited.

  3. No joking around this time. :)

    I figure call premiums might drop due to less buying of calls as a hedge.
  4. If the plan is to buy calls and short stock - and especially when the stock is difficult to sell - why not buy puts? It's the equivalent transaction, completed in a single transaction.

    Too many of those options traders will be too unsophisticated to recognize that they may be paying too much for the puts. Why? Because getting a short position is probably the momentary priority, and a good price may be secondary.

    But, it's anybody's guess.


  5. I'll call some mm's and see. It's a very good question.
  6. spindr0


    Is this a general question about something you're looking at or is some new restriction/rule being implemented?
  7. Looks like the uptick rule is something that the SEC wants to implement, I would not be surprised if shortselling is restricted afterwards.
  8. spindr0


    I'm glad to read that there's nothing official that I missed. When they implemented the no shorting ban last September it really put a crimp in my trading. And the odd thing is that the market drop accelerated despite their ban.
  9. Don't forget, along with the ban, they included a rule that you could not own ITM puts.

    Cannot believe that will come to pass again.

  10. Those stocks were shorted. Deepcapture proved it with data from the SEC gained under an FOIA request. Those pus pockets at the SEC couldn't stop a fly with a 55 gallon drum of ddt.
    #10     Feb 26, 2009