Can I cover a short sale with the stock I already own?
Yes, you call the broker and tell him to use those shares to deliver to the short position. Yes you can.  This is known as a short selling against the box.  In the old days, this was used to delay a taxable event.  You could lock in a gain without triggering a taxable event.  Any loss on one side of the box would be offset by a loss on the other side, and vice versa.  However, the IRS clamped down on this, and you will realize the gain on your long position as soon as you go short on the other side.  See http://www.investopedia.com/terms/s/sellagainstthebox.asp. As to how to initiate the short cover, just transfer the long position to the same account as your short position and make sure your broker covers the short.  Should be relatively easy.
It would involve manual effort, but there is just a handful of exclusions,  buy the fund you want, plug into a tool like Morningstar Instant X Ray,  find out your $10k position includes $567.89 of defense contractor Lockheed Martin,  and sell short $567.89 of Lockheed Martin.  Check you're in sync periodically (the fund or index balance may change); when you sell the fund close your shorts too. 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. "My take on this is that with any short-selling contract you are engaging in, at a specified time in the future you will need to transfer ownership of the item(s) you sold to the buyer. Whether you own the item(s) or in your case you will buy your friend's used  car in the meantime (or dig enough gold out of the ground - in the case of hedging a commodity exposure) is a matter of ""trust"". Hence there is normally some form of margin or credit-line involved to cover for you failing to deliver on expiry." When you set up a short sale for equities you are borrowing stock from someone else; typically another client at the broker.  The broker usually buries an agreement to let your shares be borrowed for short sales in your account details.  So if Client A wants to short a stock, he borrows stock from Client B to do the short sale (it's usually not this direct as they can borrow from many clients).  If Client B then wants to sell his shares; if the broker can't shift around assets to find another client's shares to let Client A borrow; then he has to close the short position out because he doesn't have the shares in the brokerage to let Client A borrow to short anymore. This is the bird's eye view of how shorting works: When you place an order to sell a stock short, your broker attempts to grab the desired number of shares from any accounts of its other customers and makes them available for you to sell. If no other customers own shares of this stock, then generally you are out of luck (It is more complicated like that in practice, but this is just an overview).    Your odds are better if the particular stock has a large float (i.e. a large number of shares that are actually available for trading) and its short ratio is low (which means relatively few shares   are currently being sold short). Also, a large brokerage may be more likely to have access to the shares than a small niche-market broker.   The example you've given, Angie's List (ANGI) is a $600M small-cap with a comparatively low float, and though I haven't been able to glean the short ratio, it appears that a lot of investors are bearish on this stock and probably already had the same idea to short it.  There is really no way to find out if a specific broker has shares in inventory available for shorting, short of (forgive the pun) checking directly with the broker. Yes, to change which stocks you owe you need to sell one and buy the other, which for tax purposes means taking the profit or loss accrued up to then. On the other hand this establishes a new baseline, so you will not be double-faced on those gains. It just makes a mess of this year's tax return, and forced you to set aside some if the money to cover that. "This stock is the same as any other, but you need to keep clear in your head that you and your company are now different entities.  You (the person) will pay tax on capital gains and losses when you sell any stock that you hold in your own name.  You'll also owe ""regular"" tax if you draw a salary, etc.  The fact that it may be ""your"" company does not change these things. The company will not recognize a gain by selling stock to raise capital since it's nominally exchanging things of equal value, say $100 in cash for $100 in stock.  In order to sell stock, however, you MIGHT need to register with the SEC depending on how you're going about finding your investors, so keep that in mind." "It is true, as farnsy noted, that you generally do not know when stock that you're holding has been loaned by your broker to someone for a short sale, that you generally consent to that when you sign up somewhere in the small print, and that the person who borrows has to make repay and dividends. The broker is on the hook to make sure that your stock is available for you to sell when you want, so there's limited risk there. There are some risks to having your stock loaned though.  The main one is that you don't actually get the dividend.  Formally, you get a ""Substitute Payment in Lieu of Dividends.""  The payment in lieu will be taxed differently.  Whereas qualified dividends get reported on Form 1099-DIV and get special tax treatment, substitute payments get reported on Form 1099-MISC. (Box 8 is just for this purpose.)  Substitute payments get taxed as regular income, not at the preferred rate for dividends. The broker may or may not give you additional money beyond the dividend to compensate you for the extra tax. Whether or not this tax difference matters, depends on how much you're getting in dividends, your tax bracket, and to some extent your general perspective. If you want to vote your shares and exercise your ownership rights, then there are also some risks.  The company only issues ballots for the number of shares issued by them.  On the broker's books, however, the short sale may result in more long positions than there are total shares of stock. Financially the ""extra"" longs are offset by shorts, but for voting this does not balance. (I'm unclear how this is resolved - I've read that the the brokers essentially depend on shareholder apathy, but I'd guess there's more to it than that.) If you want to prevent your broker from loaning out your shares, you have some options:" "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." "There some specific circumstances when you would have a long-term gain. Option 1:  If you meet all of these conditions: Then you've got a long-term gain on the stock.  The premium on the option gets rolled into the capital gain on the stock and is not taxed separately.  From the IRS: If a call you write is exercised and you sell the underlying stock, increase your amount realized on the sale of the stock by the amount you received for the call when figuring your gain or loss. The gain or loss is long term or short term depending on your holding period of the stock. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010630 Option 2: If you didn't hold the underlying and the exercise of the call that you wrote resulted in a short position, you might also be able to get to a long-term gain by buying the underlying while keeping your short position open and then ""crossing"" them to close both positions after one year. (In other words, don't ""buy to cover"" just ""buy"" so that your account shows both a long and a short position in the same security.  Your broker probably allows this, but if not you, could buy in a different account than the one with the short position.)  That would get you to this rule: As a general rule, you determine whether you have short-term or long-term capital gain or loss on a short sale by the amount of time you actually hold the property eventually delivered to the lender to close the short sale. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010586 Option 1 is probably reasonably common.  Option 2, I would guess, is uncommon and likely not worthwhile. I do not think that the wash sale rules can help string along options from expiration to expiration though.  Option 1 has some elements of what you wrote in italics (I find that paragraph a bit confusing), but the wash sale does not help you out." No, the dividends can't be exploited like that. Dividends settlement are tied to an ex-dividend date. The ex-dividend, is the day that allows you to get a dividend if you own the stock. Since a buyer of the stock after this date won't get the dividend, the price usually drop by the amount of the dividend. In your case the price of a share would lose $2.65 and you will be credited by $2.65 in cash such that your portfolio won't change in value due to the dividend. Also, you can't exploit the drop in price by short-selling, as you would be owing the dividend to the person lending you the stock for the short sale. Finally, the price of the stock at the ex-dividend will also be affected by the supply and demand, such that you can't be precisely sure of the drop in price of the security. For every seller, there's a buyer. Buyers may have any reason for wanting to buy (bargain shopping, foolish belief in a crazy business, etc).  The party (brokerage, market maker, individual) owning the stock at the time the company goes out of business is the loser . But in a general panic, not every company is going to go out of business. So the party owning those stocks can expect to recover some, or all, of the value at some point in the future. Brokerages all reserve the right to limit margin trading (required for short selling), and during a panic would likely not allow you to short a stock they feel is a high risk for them. No. You shorted the stock so you are not a shareholder. If you covered your short, again you are not a shareholder as you statement of account must show. You cannot participate in the net settlement fund. If you had an agreement with your friend such that you could bring back a substantially similar car, you could sell the car and return a different one to him.  The nature of shares of stock is that, within the specified class, they are the same.  It's a fungible commodity like one pound of sand or a dollar bill.  The owner doesn't care which share is returned as long as a share is returned.   I'm sure there's a paragraph in your brokerage account terms of service eluding to the possibility of your shares being included in short sale transactions. It's not quite identical, due to fees, stock rights, and reporting & tax obligations.  But the primary difference is that a person could have voting rights in a company while maintaining zero economic exposure to the company, sometimes known as empty voting. As an abstract matter, it's identical in that you reduce your financial exposure whether you sell your stock or short it.  So the essence of your question is fundamentally true.  But the details make it different.  Of course there are fee differences in how your broker will handle it, and also margin requirements for shorting.  Somebody playing games with overlapping features of ownership, sales, and purchases, may have tax and reporting obligations for straddles, wash sales, and related issues.  A straight sale is generally less complicated for tax reporting purposes, and a loss is more likely to be respected than someone playing games with sales and purchases. But the empty voting issue is an important difference.  You could buy stock with rights such as voting, engage in other behavior such as forwards, shorts, or options to negate your economic exposure to the stock, while maintaining the right to vote.  Of course in some cases this may have to be disclosed or may be covered by contract, and most people engaging in stock trades are unlikely to have meaningful voting power in a public company.  But the principle is still there. As explained in the article by Henry Hu and Bernie Black: Hedge funds have been especially creative in decoupling voting rights from economic ownership. Sometimes they hold more votes than economic ownership - a pattern we call empty voting. In an extreme situation, a vote holder can have a negative economic interest and, thus, an incentive to vote in ways that reduce the company's share price. Sometimes investors hold more economic ownership than votes, though often with morphable voting rights - the de facto ability to acquire the votes if needed. We call this situation hidden (morphable) ownership because the economic ownership and (de facto) voting ownership are often not disclosed.