Anyone had a short recalled on them?

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ducatista

I'm designing a strategy that requires me to take a short position in some single names and trying to determine what the risk of recall might be.

In particular, I'm referring to HTB shares, or even any shares with margin rates higher than normal. When does recall typically happen, if at all? Is it when share vol spikes, when they need to recall shares for their buyers, etc.

My strat appears fairly low capacity just based off IBKR short availability (~50k as of this writing), is there some rule of thumb that exists to lower the risk of recall? Eg don't exceed x% of short availability, etc

Also, does any broker publish or disclose their recall rates? I can't find much info
 
Calculate a consensus by back-solving from the BS option models by pricing few strikes. Far from perfect, but a consensus.
 
ducatista said:
I'm designing a strategy that requires me to take a short position in some single names and trying to determine what the risk of recall might be.

In particular, I'm referring to HTB shares, or even any shares with margin rates higher than normal. When does recall typically happen, if at all? Is it when share vol spikes, when they need to recall shares for their buyers, etc.

My strat appears fairly low capacity just based off IBKR short availability (~50k as of this writing), is there some rule of thumb that exists to lower the risk of recall? Eg don't exceed x% of short availability, etc

Also, does any broker publish or disclose their recall rates? I can't find much info
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Depends on your trading universe. If you short penny stocks or low liquidity chances are you won't be able to to execute it.

Those that are somewhat liquid and not too low priced might be feasible. I short wide universe of stocks with at least a thousand trades this year alone. Many are HTB. In 2021 had only one warning from a broker that shares might be called.
 
ValeryN said:
Depends on your trading universe. If you short penny stocks or low liquidity chances are you won't be able to to execute it.

Those that are somewhat liquid and not too low priced might be feasible. I short wide universe of stocks with at least a thousand trades this year alone. Many are HTB. In 2021 had only one warning from a broker that shares might be called.
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That's what the broker told me. Aka on paper its a real risk, in practice it rarely happens.

In your situation, what were the conditions that drove the broker warning? Upwards Px vol in the shares?

Are you ever taking on a significant portion of all shortable shares available in the market? For example, given the example I used above (50k shortable shares), is there some max threshold % that is more likely to not be called back?

My tickers are all liquid names, no pennies... just HTB is all. Or higher borrowing rate than avg.
 
ducatista said:
That's what the broker told me. Aka on paper its a real risk, in practice it rarely happens.

In your situation, what were the conditions that drove the broker warning? Upwards Px vol in the shares?

Are you ever taking on a significant portion of all shortable shares available in the market? For example, given the example I used above (50k shortable shares), is there some max threshold % that is more likely to not be called back?

My tickers are all liquid names, no pennies... just HTB is all. Or higher borrowing rate than avg.
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It is so rare I didn't even bother to dig deep, can't really say why that happened. Just one of those rare things that you can't really model. Similar to unable to short because broker or an affiliate had a position or bs like that. If your number of trades is high enough - live vs model might differ short term and yet still converge on a longer interval.

I do take most of available shares occasionally on HTB. Sometimes everything, the moment they become available, which sometimes result in a partial fill at a worse than desired price.
 
It really depends on how hard to borrow the stock is. If you want to avoid the recall risk, you can just do an option combo, buy put sell call, or buy a very deep put. The short rate will be "written" in the options, but you won't have the risk of being bought in on your short stock.
 
Make sure you factor in borrowing cost and if applicable locate fees.
Borrowing costs are huge on some popular penny stocks or low floaters.
 
What happens if you are short the stock and it’s either taken private or taken over? I assume you must cover in the former. Are you automatically short the new company in the latter?
 
Are you factoring no risk on being assigned on the short call??

FSU said:
It really depends on how hard to borrow the stock is. If you want to avoid the recall risk, you can just do an option combo, buy put sell call, or buy a very deep put. The short rate will be "written" in the options, but you won't have the risk of being bought in on your short stock.
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