Question about naked selling (sort of)

[leot445]

I'm approved for option trading @ Level 2 with TD Ameritrade. Meaning, I can buy/sell basic options. No spreads/naked selling allowed.

Currently, I own some stocks of company A and also sold a call of company A. I want to sell my stocks in A. But since I'm not approved for "naked selling", I won't be able to sell stock A right away. Is there an intermediate step that I can take to eventually sell stock A before the expiration of the options?

Such as, buy call options of A and then sell stocks of A? After selling stock A, I'd have both short and long positions of options A.

I've requested authority to sell "naked" over a week ago, but they still haven't gotten back to me. I have a feeling that my request is denied. Meanwhile, I'm trying to find if there's another way.

 

[inertia_trader]

Since you're not approved for spreads, the only choice you have is to buy back your short call. You would then be in the clear to sell your stock.

 

[option911]

Since you're not approved for spreads, the only choice you have is to buy back your short call. You would then be in the clear to sell your stock.

That may be true, would you be able to buy your out of the money call and sell an in the money call? this would get you synthetically short stock. Id have to know more about your situation though.

Mark
Option 911 Blog

 

[MrMiyagi]

I'm approved for option trading @ Level 2 with TD Ameritrade. Meaning, I can buy/sell basic options. No spreads/naked selling allowed.

Currently, I own some stocks of company A and also sold a call of company A. I want to sell my stocks in A. But since I'm not approved for "naked selling", I won't be able to sell stock A right away. Is there an intermediate step that I can take to eventually sell stock A before the expiration of the options?

Such as, buy call options of A and then sell stocks of A? After selling stock A, I'd have both short and long positions of options A.

I've requested authority to sell "naked" over a week ago, but they still haven't gotten back to me. I have a feeling that my request is denied. Meanwhile, I'm trying to find if there's another way.

Why bother with all this permissions business.. just sign up with IB or TOS and trade whatever you like

 

[inertia_trader]

That may be true, would you be able to buy your out of the money call and sell an in the money call? this would get you synthetically short stock. Id have to know more about your situation though.

Mark
Option 911 Blog

Not a bad idea as long as one is mindful of the fact that below the strike of the ITM call, all the downside risk of the long stock position still remains.

Also, the bid/ask spreads of deep ITM calls are often pretty wide. He might have to offer the call for below intrinsic value to get his order filled.

 

[leot445]

That may be true, would you be able to buy your out of the money call and sell an in the money call? this would get you synthetically short stock. Id have to know more about your situation though.

Mark
Option 911 Blog

Mark,
I'm not sure what you're asking. But my current short position is ITM. If I buy back my short position to close it, then the lost would be about the same as the gain on my stocks once I'm able to sell them. If that's the case, then I'd rather do nothing.

~Leo

 

[option911]

So you intend to let your stock get called away?

mark
Option 911 Blog

 

[leot445]

My reasoning behind asking the topic question was to maximize my profit position with the current and future positions in company A due to its trend/fate (this is my bet). Currently, company A's stock is at a relative high that I don't think will maintain. It will go down and stay there for a while, with possibility of going bankrupt. If that's the case, I'd make money on the premium of my short position and lose on my long position.

That's why I'm asking if there's a way for me to sell the stocks now. I guess I should have thought of this scenario before I sold the call.