ameritrade is forcing me to cover a short

Quote from 151:

I am not sure I understand your reply. I had no idea that ameritrade would exercise my options if they were negative ford shares.

Basically they took the 600 I paid for the options gave it to the writer of the options, then told me sorry you cant sell the shares.

Then they charged me to cover the short.
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1. Next time, read the rules.
2. If you don't read the rules, don't bitch when you get caught out by them.
3. If you want to stay short Ford, find a better broker, or buy some more Ford puts.
 
You need to focus on what one of the previous posters said earlier...

Buying puts does not grant you the right to SHORT an instrument at a certain price, it grants you the right to SELL an instrument at a certain price.
 
gts,

what I would have liked them to have done differently would be to not offer a stock for me to short when they did not own the stock in the first place.

It may be impossible with ameritrades system but it would have been nice if they had informed me, when the options that I paid 600 for were worth 830, that they would not be able to exercise because it is illegal for them to sell me a naked short.

Or they could have said sorry chris we havent been keeping our books very well, and we loaned you shares that we never owned. This is called naked short selling and we are very sorry that we made this mistake. So we are going to go buy 1000 shares of ford stock, so that you can keep your trade open, because we value you as a customer.

Or had they even just said look man we messed up. If we are caught in a naked short the SEC is going to forbid us to ever short ford stock again. would you please cover your shorts at no charge to you and we will pay you the small loss that you are going to incur.

Instead they called and said hey we don't have the shares to loan you so go cover your short now or we will do it for you and charge you all the fees.


I am really not that upset about the issue I just think its a glitch in the system when I never know if I should cover my shorts because ameritrade (basically) lied to me when they offered the shares to me to short.
 
Reardon, That is exactly the lesson I learned.

And I will probably not use the same method again. I was thinking that if I was wrong and the stock did not rise I could sell out and exercise the options reversing my position in the money.

Obviously it backfired on me.

However, think about this. Somewhere out there is a guy who was paid 600 for the puts. He however did not sell 1000 shares of ford when I exercised my options. So he got off with the money I paid for the options.

I wonder if I can track who I bought those puts from?
 
Quote from 151:

However, think about this. Somewhere out there is a guy who was paid 600 for the puts. He however did not sell 1000 shares of ford when I exercised my options. So he got off with the money I paid for the options.
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Again, thanks proving my previous point, you clearly don't know what you are talking about.
 
Aren't you glad Ameritrade gave you a call to tell you to cover because they didn't have the shares to lend? Try what you did at Interactive Brokers, and see whether you will get a call.
 
Why would you Short a stock at $3.00? Doesn't seem like much upside to that trade. Even if Ford were to go bankrupt, and I doubt the gov't would allow that, you don't stand to make much.
 
Since I have only been using options on commodities and closing long before being excercised , or letting them expire worthless, and buying & selling short outright stocks, could someone explain his options in this trade if my take on it is wrong. I will probably start playing with stock options in the future and actual scenerious are more insightful than just reading the books.

1. once 151 decided he was going to excersize the option and actually short the stock, he should have verified that Ford was easy to borrow , realizing that even if he was allowed to sell it short, he may at anytime have to close his trade if the stock became hard to borrow. (assuming only reason to do it this way, is to save on commissions)

2. terminated his put before the excersize date and found a broker that had shares to borrow again realizing he may have to close his trade if the stock becomes hard to borrow.

3 let ameritrade excercise his option at which point Ameritrade will buy some shares for him at market and sell them to the put writer for a nice little profit to him. this may however not be as much profit as his option was worth somewhere back in time. (that's life deal with it.) and may not be as much as he paid for the option.

thanks
 
a short sell is protected by selling puts...you short the stock @ 3, sell Nov 2.50 puts, collect the premium...price goes down, let's say @ 2.49, you get exercised...because both sells (short and puts) are placed on short account, when you buy the shares due to assignement, you also cover your short position, so you deliver the shares back to your broker...

what 151 did was half of married put but you have to combine the long put with long stock, not short stock...


anyways, good luck in the future:)...
 
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