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Naked short sell FNM and FRE: help ???
- Thread starter Digs
- Start date
Well, you can always short via puts, though they are high as a kite. I like to buy them deep in the money and far out. Some are trading at astronomical implied volatilities. I'm looking at Corus Bank Shares which cleverly has maneuvered itself into a spot where they have, according to that Thalman report a ratio of non-performing and over 90-day delinquent to reserves + common equity of 75%. That's got to be bad. Also Doral seems to be doing everything in their power to go bankrupt. Bless their hearts.
Quote from piezoe:
Well, you can always short via puts, though they are high as a kite. I like to buy them deep in the money and far out. Some are trading at astronomical implied volatilities. I'm looking at Corus Bank Shares which cleverly has maneuvered itself into a spot where they have, according to that Thalman report a ratio of non-performing and over 90-day delinquent to reserves + common equity of 75%. That's got to be bad. Also Doral seems to be doing everything in their power to go bankrupt. Bless their hearts.
As it stands now, you must "Preborrow" stocks before exercising puts, and even if you are auto exercised you must have already pre-borrowed.
Update for everyone: I got a call from Goldman this morning pre market. They have modified their eLocate to function as a "Pre borrow" for these 19 securities, which will our people to short these stocks (subject to the electronic paper trail of pre borrowing centrally through our office).
A "fail" in the same day of shorting can result in a fine to the Clearing firm, Broker Dealer, and down to the individual behind the keyboard as it stands currently.
If I learn more, I'll try to post more info.
Don
This is what happens when the SEC does something like this. Small guys like us have to have the broker locate the shares for us and we are charged an extra fees per share. On the contrary the investment banks can short away to infinity from their inventory without any regulation. So what's new?
I think its time to look at using Single Stock Futures for Shorting.
Single Stock Futures ( SSFs) are an alternative to short selling and portfolio adjustments in investment strategies. SSF's are an agreement to purchase or sell an underlying security at a designated date in the future (the Expiry date). SSFs is a derivative product whose value is derived from the stock the need to locate stock when trading SSF is not required.
Single Stock Futures ( SSFs) are an alternative to short selling and portfolio adjustments in investment strategies. SSF's are an agreement to purchase or sell an underlying security at a designated date in the future (the Expiry date). SSFs is a derivative product whose value is derived from the stock the need to locate stock when trading SSF is not required.
Quote from mr19:
You might want to double check that with IB tomorrow. I had locates on both FRE & FNM today and GS started rejecting my orders mid-day with "Security not available to borrow" messages. Doubt this only applies to GS.
The others on Don's list were ok with just a locate, but I'm guessing that will change as well come Monday.
(I'll be in on the conference call tomorrow with GS and hopefully get more clarification).
Exactly my point. IB's system checks in real time whether they have shares available for borrowing. If they do, your order is entered. If not, you receive the message "Security not available to borrow". This ensures no naked short selling. So IB customers should not see any change resulting from revised rules.
Quote from Hurricane:
Exactly my point. IB's system checks in real time whether they have shares available for borrowing. If they do, your order is entered. If not, you receive the message "Security not available to borrow". This ensures no naked short selling. So IB customers should not see any change resulting from revised rules.
GS has the same type of system, but like Don said above, a locate is different than a pre-borrow. The GS e-locate/redi system is now doing pre-borrows on the names listed earlier in this thread. I have already seen my locate/pre-borrows for the listed financials take longer than usual this morning.
Quote from mr19:
You might want to double check that with IB tomorrow. I had locates on both FRE & FNM today and GS started rejecting my orders mid-day with "Security not available to borrow" messages. Doubt this only applies to GS.
The others on Don's list were ok with just a locate, but I'm guessing that will change as well come Monday.
(I'll be in on the conference call tomorrow with GS and hopefully get more clarification).
No problem shorting with IB.
Here is the problem. If FNM and FRE is too big to fail, either
1) Nationalized them.
2) Replace them with more public housing.
3) Or Break them up into individual little piece that are small enough to fail.
As of right now, there is no such thing as all upside and no downside. This system is a mess.
1) Nationalized them.
2) Replace them with more public housing.
3) Or Break them up into individual little piece that are small enough to fail.
As of right now, there is no such thing as all upside and no downside. This system is a mess.