If I sold GME $300 naked call and get assigned, and the broker doesn't have any shares available to borrow, what happens? If the shares are available to borrow, I will be short 100 shares of GME when assigned. But I'm not sure what happens when broker doesn't have any shares to lend me. Will I be sued by the broker or the call holder? I know selling naked calls is risky but I'm ok with that as long as GME doesn't cross $3000.
What happens to a short naked call when assigned if there are no shares to borrow?
- Thread starter GoogTgt
- Start date
I think it happens what has already happened because they might have already issued some shares extra (+100%) from borrowing already borrowed shares...
You might not be able to sell back those calls if price flies away, IV goes bonker and brokers might freeze. The topic has been discussed in the forum and some traders reported negative balances.
You might not be able to sell back those calls if price flies away, IV goes bonker and brokers might freeze. The topic has been discussed in the forum and some traders reported negative balances.
Your post is about a week too late, but you will be short uncovered. You have X number of days to locate shares others you will be bought in.
Typically for a retail trader, this is a bad place to be.
newwurldmn, why x number of days? Won't you be bought in right on the open after you have failed to deliver, per reg SHO rule 204?
You have till the next business day after settlement: for normal trading that would be T+4, for option exercises t+3. this is based on reading reading summaries of reg sho.
i was mistaken as I had originally thought X was like 10 days.
Got it. FYI, settlement has moved to T+2 a while ago. So it would be buy-in at T+3 these days (except for market makers who get bought in at T+6). Talking about unfairness!
Could you please elaborate on "you will be bought in"? What does it mean and why it is a bad place to be in for a retail investor? Sorry about all these questions as I'm new to shorting.
The broker automatically buys the stock for your account to cover the short.
The broker doesn't care what price you get filled at so they will put in a market order. Typically they will do all of them at the same time (and other brokers will do it around the same time as well) so the market makers move their markets making your fill even worse.
As a rule of thumb, you shouldn't ever put yourself in a position where you aren't the one closing your trades (even if you are forced to close them by a certain time).
Thanks for these details. Appreciate it.