Is there a time limit to cover an open short position? [duplicate]
"There are situations where you can be forced to cover a position, particular when ""Reg SHO"" (""regulation sho"") is activated. Reg SHO is intended to make naked short sellers cover their position, it is to prevent abusive failure to delivers, where someone goes short without borrowing someone else's shares. Naked shorting isn't a violation of federal securities laws but it becomes an accounting problem when multiple people have claims to the same underlying assets. (I've seen companies that had 120% of their shares sold short, too funny, FWIW the market was correct as the company was worth nothing.) You can be naked short without knowing it. So there can be times when you will be forced to cover. Other people being forced to cover can result in a short squeeze. A risk. The other downside is that you have to pay interest on your borrowings. You also have to pay the dividends to the owner of the shares, if applicable. In shorter time frames these are negligible, but in longer time frames, such as closer to a year or longer, these really add up. Let alone the costs of the market going in the opposite direction, and the commissions."
Is it correct that there is no limit on the length of the time that the company can keep the money raised from IPO of its stocks, unlike for the debt of the company where there is a limit? Yes that is correct, there is no limit. But a company can buy back its shares any time it wants. Anyone else can also buy shares on the market whenever they want. "4PM is the market close in NYC, so yes, time looks good.  If ""out of the money,"" they expire worthless.  If ""in the money,"" it depends on your broker's rules, they can exercise the option, and you'll need to have the money to cover on Monday or they can do an exercise/sell, in which case, you'd have two commissions but get your profit.  The broker will need to tell you their exact procedure, I don't believe it's universal." "The two dimensions are to open the trade (creating a position) and to buy or sell (becoming long or short the option). If you already own an option, you bought it to open and then you would sell it to close. If you don't own an option, you can either buy it to open, or sell it (short it) to open. If you are already short an option, you can buy it back to close. If you sell to open covered, the point is you're creating a ""covered call"" which means you own the stock, and then sell a call. Since you own the stock, the covered call has a lot of the risk of loss removed, though it also subtracts much of the reward possible from your stock." "A ""covered put"" of the form of being short, and buying at the strike price if the ""put ... is put"" (excercise), is off the table simply because you can't do shorts in the retirement account. Even if you feel you ""win"" the argument that you're hedged by being short, any broker can say, ""we simply forbid shorts"" and that's that. A ""covered put"" of the form of posting the cash, and spending it to buy at the strike price if the ""put ... is put"" (excercise), might be forbidden by brokerages because, frankly, how do you account for the ""dedicated"" cash? Is it locked down like margin is, or escrow, or what? I don't know offhand how I would address that in my very own firm. Thus, any broker could say, ""we forbid it"" and that's that. The other answers are very interesting in conjunction with this. JoeTaxpayer says, very paraphrased, 'just cuz it's legal doesn't mean we have to offer it.' Jaydles says (again, completely paraphrasing), 'complex stuff for a safe little retirement savings account;' 'difficult to administer' (as I said, how do you account for it); and 'tradition' So maybe look at Scott, per Thorn's answer, LOL. It appears that you can shop around on this issue." http://www.investopedia.com/university/shortselling/shortselling1.asp  'Therein lies the major risk of short selling, the fear of infinite losses. While the maximum loss for a long investor is the amount invested in a security, the maximum loss for a short seller is theoretically infinite, since there is no upper limit to a stock’s price appreciation. This risk is compounded by the fact that during a short squeeze or buy-in...'  Never have shorted a stock. Too intimidated by that! "And what exactly do I profit from the short? I understand it is the difference in the value of the stock. So if my initial investment was $4000 (200 * $20) and I bought it at $3800 (200 * $19) I profit from the difference, which is $200. Do I also receive back the extra $2000 I gave the bank to perform the trade? Either this is extremely poorly worded or you misunderstand the mechanics of a short position.  When you open a short position, your are expecting that the stock will decline from here.  In a short position you are borrowing shares you don't own and selling them.  If the price goes down you get to buy the same shares back for less money and return them to the person you borrowed from.  Your profit is the delta between the original sell price and the new lower buy price (less commissions and fees/interest).  Opening and closing a short position is two trades, a sell then a buy.  Just like a long trade there is no maximum holding period. If you place your order to sell (short) 200 shares at $19, your initial investment is $3,800.   In order to open your $3,800 short position your broker may require your account to have at least $5,700 (according to the 1.5 ratio in your question).  It's not advisable to open a short position this close to the ratio requirement.  Most brokers require a buffer in your account in case the stock goes up, because in a short trade if the stock goes up you're losing money.  If the stock goes up such that you've exhausted your buffer you'll receive what's known as a ""margin call"" where your broker either requires you to wire in more money or sell part or all of your position at a loss to avoid further losses.  And remember, you may be charged interest on the value of the shares you're borrowing. When you hold a position long your maximum loss is the money you put in; a position can only fall to zero (though you may owe interest or other fees if you're trading on margin).  When you hold a position short your maximum loss is unlimited; there's no limit to how high the value of something can go.  There are less risky ways to make short trades by using put options, but you should ensure that you have a firm grasp on what's happening before you use real money. The timing of the trades and execution of the trades is no different than when you take a plain vanilla long position.  You place your order, either market or limit or whatever, and it executes when your trade criteria occurs." I use over half my buying power of my portfolio for options, and I'm not a fan of any of the strategies listed above either (I stay away from negative theta trades for the most part), but I just listed them to point out that saying the reason someone wouldn't enter a short position is for fear of infinite losses is asinine. It's easy enough to make any trade risk defined if that is something the trader cares about. First off, you should phone your broker and ask them just to be 100% certain. You will be exercised on the short option that was in the money. It is irrelevant that your portfolio does not contain AAPL stock. You will simply be charged the amount it costs to purchase the shares that you owe. I believe your broker would just take this money from your margin/cash account, they would not have let you put the position on if your account could not cover it. I can't see how you having a long dated 2017 call matters. You would still be long this call once assignment of the short call was settled. "If you sell a stock you don't own, it's called a short sale. You borrowed the shares from an owner of the stock and eventually would buy to close. On most normal shares, you can hold a short position indefinitely, but there are some shares that have a combination of either a small float or too high a short position that shares to short are not available.  This can create a ""short squeeze"" where shorts are burned by being forced to buy the stock back.  Last - when you did this, you should have instructed the broker that you were ""selling to open"" or ""selling short."" In the old days, when people held stock certificates, you were required to send the certificate in when you sold. Today, the broker should know that wasn't your intention." "In India the Short is what is called in other markets call as ""Naked Short"" [I think I got the right term]. It means that you can only short sell intra day and by the end of the day you have to buy back the shares [at whatever price, if you don't; the exchange will do it by force the next day]. In other markets the Intra day shorts are not allowed and one can short for several days by borrowing shares from someone else [arranged by broker] India has a futures market, so you can sell/buy something today with the execution date of one month. This is typically a fixed day of the month [I think last Thursday]" This is a Short Diagonal Calender Put Spread Generally, you're writing that long dated one at the money, and buying the short dated one out of the money.  The maximum amount that can be made is if the stock breaks out strongly to the upside, and you keep the upfront credit minus whatever small amount it took to buy the April puts back.  You can also make money if it breaks strongly to the downside, but only if the credit when you opened your positions was more than $10. Example:  Now say the stock falls to $500 by the time of that march expiration. You'd make $90/share on the march put, and lose $100/share on the April put (or a little more; but that deep in the money, there won't be much premium on it). That's a loss of $10/share, or -$1000. So: I make a point of pointing this out because in that article I linked to the fact that your upfront credit needs to be greater than the strike spread in order to profit to the downside is not clearly mentioned. "Am I getting it right that in India in terms of short selling in F&O market its what in the rest of the world is called naked short and you actually make promise to depositary that you will deliver that security you sold on settlement without actually owning the security or going through SLB mechanism? In Future and Options; there is no concept of short selling. You buy a future for a security / index. On the settlement day; the exchange determines the settlement price. The trade is closed in cash. i.e. Based on the settlement price, you [and the other party] will either get money [other party looses money] or you loose money [other party gets the money]. Similarly for Options; on expiry, the all ""In Money"" [or At Money] Options are settled in cash and you are credit with funds [the option writer is debited with funds]. If the option is ""out of money"" it expires and you loose the premium you paid to exercise the option." An option is freely tradable, and all options (of the same kind) are equal. If your position is 0 and you sell 1 option, your new position in that option is -1. If the counterparty to your trade buys or sells more options to close, open, or even reopen their position afterwards, that doesn't matter to your position at all. Of course there's also the issue with American and European Options. European Options expire at their due date, but American Options expire at their due date or at any time before their due date if the holder decides they expire. With American Options, if a holder of an American Option decides to exercise the option, someone who is short the same option will be assigned as the counterparty (this is usually random). Expiry is after market close, so if one of your short American Options expires early, you will need to reopen the position the next day. Keep in mind dividends for slightly increased complexity. American and European Options do not in any way refer to the continents they are traded on, or to the location of the companies. These terms simply describe the expiry rules. Well, Taking a short position directly in real estate is impossible because it's not a fungible asset, so the only way to do it is to trade in its derivatives - Investment Fund Stock, indexes and commodities correlated to the real estate market (for example, materials related to construction).    It's hard to find those because real estate funds usually don't issue securities and rely on investment made directly with them. Another factor should be that those who actually do have issued securities aren't usually popular enough for dealers and Market Makers to invest in it, who make it possible to take a short position in exchange for some spread. So what you can do is, you can go through all the existing real estate funds and find out if any of them has a broker that let's you short it, in other words which one of them has securities in the financial market you can buy or sell. One other option is looking for real estate/property derivatives, like this particular example. Personally, I would try to computationally find other securities that may in some way correlate with the real estate market, even if they look a bit far fetched to be related like commodities and stock from companies in construction and real estate management, etc. and trade those because these have in most of the cases more liquidity. Hope this answers your question! If you buy puts, there are no guaranteed proceeds though.  If you short against the box, you've got immediate proceeds with a nice capital loss if it doesn't work out.  Conversely, you could write a covered call, take the contract proceeds, and write off the long position losses.  Nobody ever factors tax consequences into the equation here.