NAKED SHORT SELLING

[antelopedundee]

How is it possible to sell shares that you don't own or haven't borrowed or can't borrow? If you can't deliver the certificate wouldn't be the sale be canceled?

 

[npaden]

I think @JohnCushman has the naked short selling thing figured out. Maybe he will chime in.

 

[huntandfly]

Maybe in 1920 that’s how it worked, but now they have what is called “margin” where you can trade with money you don’t actually have if the brokerage deems that you are good for it.


Naked short selling is obviously very dangerous for individual investors and usually won’t be approved unless you have a larger account. Larger institutions have no issues using margin like that

 

[SAJ-99]

Option market makers don't have to do a locate on short sales. If they end up net delta negative, they hedge that options exposure and can easily be naked. The MM fixes this by jacking up the cost of the option (see implied vol). Regular investors can't be naked short. The broker is required to do a locate before the sale is executed.

I'm sure Cushman's explanation is far more entertaining.

 

[JohnCushman]

I think @JohnCushman has the naked short selling thing figured out. Maybe he will chime in.

At first I thought this was about midget strippers.... Imagine my disappointment

 

[Gellar]

At first I thought this was about midget strippers.... Imagine my disappointment

This wouldn’t be the first time a thread has been hijacked on hunttalk.

 

[utah400elk]

I thought you guys had talked to my wife…carry on.