Shorting Options?

[DallasSteve]

Do typical online brokers allow traders to short stock options in a margin account? I know there are limitations in shorting stocks, but I don't know about stock options. I've opened an account with Interactive Brokers, so if anyone knows the answer specifically for them that would be ideal. And I know it's risky, but I have a strategy to minimize the risk.

Thanks

Steve

 

[jamoola]

ThinkOrSwim has no options levels, it is part of the account.

At other brokers, you'll need to apply for options trading, and they'll give you the appropriate level based on your net liquidating value, experience, etc. If your "strategy" is credit spreads, that requires a lower level than naked shorting but you generally need one year's experience in options to perform them.

 

[DallasSteve]

Shorting Options

ThinkOrSwim has no options levels, it is part of the account.

At other brokers, you'll need to apply for options trading, and they'll give you the appropriate level based on your net liquidating value, experience, etc. If your "strategy" is credit spreads, that requires a lower level than naked shorting but you generally need one year's experience in options to perform them.

Thanks for the feedback. What's the difference between shorting and naked shorting? If you sell short I think you are always naked, aren't you. Anyway, I've got nothing against being naked, especially if it's a pretty woman.

It looks like IB has much lower commissions than ThinkOrSwim. Hopefully IB will stay out of my way and let me trade.

Steve

 

[DallasSteve]

Thanks for the feedback. What's the difference between shorting and naked shorting? If you sell short I think you are always naked, aren't you. Anyway, I've got nothing against being naked, especially if it's a pretty woman.

It looks like IB has much lower commissions than ThinkOrSwim. Hopefully IB will stay out of my way and let me trade.

Steve

I just checked Wikipedia and now I understand. If I haven't arranged to borrow the security before I sell it I'm naked. Well, I've never arranged to borrow a shorted security, but maybe my broker is doing that automatically behind the scenes.

Steve

 

[Rhody Trader]

I think by naked shorting I believe jamoola was actually talking about just selling the options vs. a covered write strategy where you have a short position in the underlying stock.

 

[jamoola]

I think by naked shorting I believe jamoola was actually talking about just selling the options vs. a covered write strategy where you have a short position in the underlying stock.

Or, in case of selling covered calls, a long position in the underlying

 

[DallasSteve]

I asked Interactive Brokers chat help today and they said that margin accounts can write naked puts and calls. That's what I wanted to know.

Steve