If the stock closed at say 50,and it was an uptick,you can short the next day's open at 50 or higher.If 50 was a downtick,you can short the next day's open at 50.01 or higher.And also since the short sale rule doesn't apply in premarket or after hours trading,you can short through an ECN.
Shorting on DOWNTICK
- Thread starter lojze
- Start date
If the stock closed at say 50,and it was an uptick,you can short the next day's open at 50 or higher.If 50 was a downtick,you can short the next day's open at 50.01 or higher.And also since the short sale rule doesn't apply in premarket or after hours trading,you can short through an ECN.
You could trade futures which eliminates the shorting on a down tick problem.
Or you could use options but it will be very capital intensive and it would only make sense if you traded the same few stocks. You would put a position on like this and trade it to expiry.
Long Stock
Long ATM Puts
Short ATM Calls
Long OTM Calls
This position is almost delta neutral (depends on how far OTM the Long Calls are).
When you sell your Long Stock you are synthetically short.
Or you could use options but it will be very capital intensive and it would only make sense if you traded the same few stocks. You would put a position on like this and trade it to expiry.
Long Stock
Long ATM Puts
Short ATM Calls
Long OTM Calls
This position is almost delta neutral (depends on how far OTM the Long Calls are).
When you sell your Long Stock you are synthetically short.
Is'nt it more simple (also more expensive?) to be neutral whith a permanent long position on the stock and an In the Money Put?
Then, the 'synthetic short' will be to sell the stock and the 'synthetic long' will be to buy the stock again(then you are 2 times long with the stock and 1 time short with the put = 1 long).
The cost in capital is 2 times stock + IM Put, = about x 2,3.
The extra OTM call is to avoid being naked the short call. Some retail firms won't let you sell naked options and it provides some insurance.
Moa is correct, it would be easier to be long a deep in the money put and save yourself some commissions. You'd have to figure out the cost of each strategy to see which one is cheaper.
Moa is correct, it would be easier to be long a deep in the money put and save yourself some commissions. You'd have to figure out the cost of each strategy to see which one is cheaper.
Actually, you can't, since the ECNs have all closed that gap.
Instinet will mark any short sale at or below the last NYSE close, up to 0.01 above the last NYSE close.
Island and ARCA will simply reject any short sale priced at or below the last NYSE close.
REDIBook, of all people, has a somewhat more liberal policy, implementing the NYSE uptick rule based on trades that occur on REDIBook. So, if a trade happens below the previous NYSE close, you can then short down to that trade price (+0.01 if it was a downtick). Unfortunately, while it marks up a new order to the allowable price, it won't move it back down if it becomes possible to short at a lower price that was at or above your limit.
I wish someone would explain, though, why they've chosen to check all short sales against their own borrow list and reject those that they think are not borrowable (like U) even if your broker has them available.
I don't know what BRUT does - I don't have access to it for listed stox.
I long for the old days (last year) :-(