Owning a stock both as long as well as short

[deaddog]

The only reason I could see is to be able to show what a great trader you are in the account that makes money.

 

[Robert Morse]

Trading platforms show the net which is required so the broker can do a regulatory check to see if the stock requires a locate or is Threshold.

Other than trying to dodge taxes as @RobertMorse stated, I can see one other purpose for simultaneously holding a stock both long and short. If a stock has very few shares available to short, and you expect a major announcement, after market close, that could drastically move the stock price (such as earnings or an FDA drug approval/rejection), it could be beneficial to have shares long that could be sold instead of trying to borrow shares to short. This is a way to play the announcement with the only risk being trading commissions if there is no price movement.

 

[earth_imperator]

I think I just found another good reason... Must first test it though... More later...

Here is it, folks! Enjoy! :

Imagine you have a CoveredCall in your account. A CoveredCall consists of course of a LongStock plus a ShortCall.
Then some time later you see an opportunity to short the stock. If the short order gets a fill then it would
mean closing the LongStock-part of the CoveredCall, which of course was not intended!
Voila!
There you have a good reason to allow "Buy to open" and "Sell to open" also for stocks! Q.E.D.

 

[DaveV]

Trading platforms show the net which is required so the broker can do a regulatory check to see if the stock requires a locate or is Threshold.

I had never heard of threshold securities, and had to Google it. How does your statement apply if the OP has already shorted the shares using a different brokerage account than the long shares?

 

[Robert Morse]

If long in brokerage 1 and short in brokerage 2, each other broker would have no idea. You would have a higher margin requirement in both, possible buy-ins on the short stock, possible overnight charges on the short stock and possible interest on debit balances for the long stock.

I had never heard of threshold securities, and had to Google it. How does your statement apply if the OP has already shorted the shares using a different brokerage account than the long shares?

 

[M.W.]

That is an entirely different concept, something some desks at prop groups (and many Index arb desks) did a lot. They were long a bespoke basket of stocks in the index, short the index future and either net added to their stock purchases or long sold existing positions as functions of their intraday views. But they were always back to opening positions at the end of each business day to offset the short future exposure.

This is completely infeasible for a retail trader (way too high capital and funding requirements) hence this argument is moot.

Other than trying to dodge taxes as @RobertMorse stated, I can see one other purpose for simultaneously holding a stock both long and short. If a stock has very few shares available to short, and you expect a major announcement, after market close, that could drastically move the stock price (such as earnings or an FDA drug approval/rejection), it could be beneficial to have shares long that could be sold instead of trying to borrow shares to short. This is a way to play the announcement with the only risk being trading commissions if there is no price movement.

 

[M.W.]

Nonsense. If you held a longer term view of the stock declining you would reduce both your short call and long stock exposure. If your view was short term you would just open new short calls or long puts and subsequently reduce OI in them.

Here is it, folks! Enjoy! :

Imagine you have a CoveredCall in your account. A CoveredCall consists of course of a LongStock plus a ShortCall.
Then some time later you see an opportunity to short the stock. If the short order gets a fill then it would
mean closing the LongStock-part of the CoveredCall, which of course was not intended!
Voila!
There you have a good reason to allow "Buy to open" and "Sell to open" also for stocks! Q.E.D.

 

[destriero]

Here is it, folks! Enjoy! :

Imagine you have a CoveredCall in your account. A CoveredCall consists of course of a LongStock plus a ShortCall.
Then some time later you see an opportunity to short the stock. If the short order gets a fill then it would
mean closing the LongStock-part of the CoveredCall, which of course was not intended!
Voila!
There you have a good reason to allow "Buy to open" and "Sell to open" also for stocks! Q.E.D.

Your position as stated above:

Long stock - (n)call = CC at n

Long (n) call (bto)
Short (n) call (sto)

The CC position was existing. You're just transacting for the sake thereof and losing edge via NBBO. You're still in a CC.

CC -> short shares = short call at n

1) You can avoid this by grid-trading your calls at a alternate strike (than the CC-strike)

2) The fuck you can... no US broker is going to allow you to carry both calls at n-strike as it's a violation of FIFO.

You need to stop posting and take that job at Alexandru's dirt farm.

 

[destriero]

Other than trying to dodge taxes as @RobertMorse stated, I can see one other purpose for simultaneously holding a stock both long and short. If a stock has very few shares available to short, and you expect a major announcement, after market close, that could drastically move the stock price (such as earnings or an FDA drug approval/rejection), it could be beneficial to have shares long that could be sold instead of trying to borrow shares to short. This is a way to play the announcement with the only risk being trading commissions if there is no price movement.

He wasn't doing that, dude. He's long and short a call. Can you stay on point? Let us know when the broker allows it.

You can short the synthetic in one tenor and go long in another tenor (roll arbitrage/calendar box) but yeah, nobody asked.

 

[destriero]

If long in brokerage 1 and short in brokerage 2, each other broker would have no idea. You would have a higher margin requirement in both, possible buy-ins on the short stock, possible overnight charges on the short stock and possible interest on debit balances for the long stock.

WHY?!