selling OTM naked calls - Option Clearing Q

[Abundance Magnet]

Clearing firms charge fees for being short stock that is hard to borrow. That is how they make money.

I understand that part but if I just sold OTM calls, I wouldn't be short until I actually get called on the contracts. " If the stock has halted, they can't buy you in.", then wouldn't i just be short the calls?

do you mean i can be charged interest on being short the calls?

thanks!

 

[Robert Morse]

No, not for short call, only short stock.

 

[spindr0]

i see... so I would 'buy it' at current MV and deliver to the buyer (caller exercised) at the OTM price. sounds like a profitable scenario now that i am typing it out...

If I am shorting at a lower price than what I am selling to the call buyer at, wouldn't that be a net positive equation? Or am required to buy the stock while it is halted, resulting in a crazy fill price?

You do not understand this process at all.

Some made up numbers: If you sell an OTM call ($50) and the stock's price is well below that ($40), you will not be assigned on the short call. The call owner is never going to buy the stock from you for $50 (making you short at $50) when he can buy it in the open market for $40.

And no, you are not "shorting at a lower price than what I am selling to the call buyer at". If you were to be assigned, you would be short at the strike price of the call that you sold. At best, you would be short at the strike less the premium received.