Why do some brokers prohibit sell,and then assign?

Discussion in 'Options' started by rabmanducky, Jun 26, 2006.

  1. alanm


    I would first guess that it has something to do with not having sufficient funds to take a position in the underlying.

    Could also be a communication issue, based on the OP's apparent inability to accurately describe the exact scenario here.
    #11     Jun 26, 2006
  2. LOL...but probably true, sorry OP!
    #12     Jun 26, 2006
  3. no sorry I just reread what I wrote.

    I mean why do some brokers don't allow clients to buy a stock and then excercise a put. Or conversly sell a stock and then excercise a call. Alot of brokers force you to excercise first and then do the buying and selling of the underlying. But allowing clients to buy and sell the stock first, and then excercising would seem to limit the risk to the client.

    #13     Jun 27, 2006
  4. I understand.

    You'd be opening a sell short position (by selling in advance to having the shares assigned to you). The shares would have to be borrowable on the open market.

    Same with puts that get exercised. You'd have to buy the stock outright, and then 'sell' (the assigned) those shares you bought at the market price you wanted.

    Perhaps any brokers or actual professionals should answer this - I assume its easier to do with put assignments, if it is possible, than call assignments, since stock would have to be available to borrow to sell in advance to receiving it.
    #14     Jun 27, 2006
  5. alanm


    Quote from rabmanducky:
    I mean why do some brokers don't allow clients to buy a stock and then excercise a put.

    Who? Why not? As long as you have the money to buy the stock, why would they prohibit it? If you don't have the money, you'd be free-riding, and it should be prohibited.
    #15     Jun 28, 2006