Yes, now that I think about it, I can see equities suddenly sneaking into and up hard the htb list in the middle of carrying a spread. And early assignment on a friday. Yeah, that would be a clusterf**k. This has never happened to me, but I haven't been trading options for 30 years.
I see banks doing this...Maybe pension funds. But a $5,000. account, never should have been allowed!! But you said "here, please take my money"..."I know exactly what I am doing and the risk involved". I think of credit card companies on college campus a few days before class begins. 18 year olds have no idea what hit them!! Shakespeare said it best...Gilligan's Island put it to music!!
Because it can leave newbie traders suddenly short 5200 shares. On a run-of-the-mill stock like JPM, you're suddenly short over half a million dollars. Yes, you're hedged with the other side of the spread, but if (like OP) you're assigned at a time where you have to hold overnight before you can execute your long side, you're on the hook for interest. But more importantly, it puts a lot of psychological stress on a newbie trader with a $5k account to suddenly be that deep in the red. Maybe you don't 100% understand how option assignments work, or what your long leg allows you to do. Maybe it's just the fact that you're 19 and in the hole -- in reality, even if maybe not in theory -- half a million dollars. It's not a good place to be in. And yes, if you open an options spread, you should know all this stuff and stay calm ... but we all know that won't always be the case.
Maybe? I'm seeing a 5k account (i.e., likely new trader) running a fistful of spread options. Bad for new trader's mental stability; bad for firm's risk management. I don't see a compelling reason to let a small-account trader open a ton of option spreads.
Was mowing the back lawn...Thinking about your situation. You could try and sue. But in the last 10-15 years no broker allows it...In the fine print. You could try arbitration...But I think you will lose. You will say "they did me wrong"!! "They should have never allowed me to get into this situation". The broker will come back with a reply in two minutes and it will be done. The broker will say this client misrepresented him/herself. See when filling out the option form agreement, they said they were an expert trader in options. They also said they had at least 3-5 years experience trading complicated options, including margins, (that is how they allowed you to get into this situation). A few weeks later you'll get your answer in the mail...You lose. Oh, and you have to pay your half of the arbitration cost!! Oh, and the broker may wish to talk to the local DA...This client may have committed fraud!! I don't think they would do that (reputation and all...If it got in the news). Eyes wide open from here.
Someone already sued ETrade for this. https://www.courtlistener.com/recap/gov.uscourts.nysd.527355/gov.uscourts.nysd.527355.1.0.pdf Ongoing - https://www.courtlistener.com/docket/16518777/rupnow-v-e-trade-securities-llc/ I haven't looked to see if finra has anything. Etrade changed to show this when shorting, not sure if it's showing for put spreads: "it now informs customers in the trade preview window that the security they are shorting is hard-to-borrow and what the indicative borrow rate is going to be"
I think they will come back by saying you should have called to see what the current rate is for the "hard to borrow" stock...Before trying an option with such a risky move. They may even say the words "hard to borrow" would be indicative of how risky this move is!! You presented yourself as an expert, did you not?? They would ask you if you knew what an "uncovered position" means. Do you understand margins and float on accounts? If you say no, they would say you lied on your option form!! If you had made $100,000. from this account there wouldn't be a problem. Just saying...