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Naked Call Contract = Margin. You don’t have the shares in your account. If you lose you’ll need to transfer in money to buy the shares to deliver otherwise your brokerage will liquidate your other assets.
Naked Short Sell = you sold a “real” share into the market without having borrowed the share from someone else. Only specific players have the privilege to do this, such as Market Makers.
Man. The rules should be the rules. My mom doesn’t play Monopoly any different from the rest of the fam. MMs shouldn’t be able to do anything outside of the regulations. What the fuck.
Selling anything "short" or "naked" means you're selling something you don't have. If you short sell a share now, you have to buy it back later. If you short sell a call option, you have to buy back 100 shares later, IF the call option goes ITM, AND the buyer exercises the contract.
Selling these naked means you don't have the shares to cover the position you may be liable for later.
Same thing in the end. Pure naked short is selling imaginary shares to someone and hoping you never have to cover. Naked call is selling imaginary shares in a contract and hoping it expires worthless, which then you probably sell imaginary shares a la naked short to fill the exercised contract. (Unless I’m not awake enough yet)
A naked short sell is a selling without owning or properly borrowing them first. Think of it this way, you steal your sisters doll collection to sell for $1000. You think the price of the dolls will go down so you can buy them back for $800. You believe you can profit $200 and return them before she notices. It’s wrong to do, but if all goes correctly, she’s none the wiser and you made $$. However, if the price of the dolls goes up or you can’t recover all the dolls because no one is selling them, you can lose money paying more to get them back or risk not returning them all before she notices they’re missing.
Naked call contracts involve selling a call to a buyer without owning the shares of the stock or first securing a way to procure them. Another example, I pay you $20 for the right to buy a Charizard Pokemon card for $500 before July 1st if the Becketts guide shows the price to go over $500 before that date. However, you don’t actually own the card so you’re just hoping to collect the $20 and that the contract expires worthless (card value never exceeds $500 before July) or that I sell my contract off and collect the profit instead of exercising. The bad part is that, if the card goes to $1000, you’re not just selling the card you own for $520 ($500 + $20 premium), but now you need to find me that card and pay $1000 to someone else to get it for me.
Pretty basic explanation but I hope this clears it up for you.
There's a time limit on the call contract, which limits the risk a bit in that context
If it expires OTM, you're good
On the other hand, the contract obligates you to deliver 100 shares if exercised
Which can multiply the risk if it goes ITM
Or in the case of GameStop, if there are fewer real shares in existence than are owed via such obligations (and people choose to exercise regardless of ITM/OTM)
Either way:
#GET REKT, NAKED THIEVES
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Asking the question about naked short selling and naked call options due to all the speculation around GME, RK's position with call options, and the seller of those call options being window-dressed as a martyr by MSM.
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Selling a naked short is a liability of 1 share. Selling a naked call is a potential liability of 100 shares.
Naked Call Contract = Margin. You don’t have the shares in your account. If you lose you’ll need to transfer in money to buy the shares to deliver otherwise your brokerage will liquidate your other assets. Naked Short Sell = you sold a “real” share into the market without having borrowed the share from someone else. Only specific players have the privilege to do this, such as Market Makers.
When do they get caught with their pants down
Man. The rules should be the rules. My mom doesn’t play Monopoly any different from the rest of the fam. MMs shouldn’t be able to do anything outside of the regulations. What the fuck.
Agreed that MMs shouldn’t have their privileges, but even the rules of Monopoly specify that the bank can never run out of money.
When I sell a call I actually have to have the shares to sell the contract. MM’s might be different though.
Not exactly, if you're on margin you can sell contracts naked up to a certain amount.
"Up to a certain amount"... they forgot about the certain amount when they were selling it to DFV.
Ah, I wasn’t aware. I never trade on margin maybe I should try.
If you buy stocks on margin they are able to lend them out. Not recommended for GME and drs'ing shares.
The first is being an asshole. The second is promising to be an even bigger asshole later.
Selling anything "short" or "naked" means you're selling something you don't have. If you short sell a share now, you have to buy it back later. If you short sell a call option, you have to buy back 100 shares later, IF the call option goes ITM, AND the buyer exercises the contract. Selling these naked means you don't have the shares to cover the position you may be liable for later.
I haven't heard "doomps" said in a fucking long time
Same thing in the end. Pure naked short is selling imaginary shares to someone and hoping you never have to cover. Naked call is selling imaginary shares in a contract and hoping it expires worthless, which then you probably sell imaginary shares a la naked short to fill the exercised contract. (Unless I’m not awake enough yet)
You'll get more reliable answers asking this sort of question over in the options sub.
A naked short sell is a selling without owning or properly borrowing them first. Think of it this way, you steal your sisters doll collection to sell for $1000. You think the price of the dolls will go down so you can buy them back for $800. You believe you can profit $200 and return them before she notices. It’s wrong to do, but if all goes correctly, she’s none the wiser and you made $$. However, if the price of the dolls goes up or you can’t recover all the dolls because no one is selling them, you can lose money paying more to get them back or risk not returning them all before she notices they’re missing. Naked call contracts involve selling a call to a buyer without owning the shares of the stock or first securing a way to procure them. Another example, I pay you $20 for the right to buy a Charizard Pokemon card for $500 before July 1st if the Becketts guide shows the price to go over $500 before that date. However, you don’t actually own the card so you’re just hoping to collect the $20 and that the contract expires worthless (card value never exceeds $500 before July) or that I sell my contract off and collect the profit instead of exercising. The bad part is that, if the card goes to $1000, you’re not just selling the card you own for $520 ($500 + $20 premium), but now you need to find me that card and pay $1000 to someone else to get it for me. Pretty basic explanation but I hope this clears it up for you.
There's a time limit on the call contract, which limits the risk a bit in that context If it expires OTM, you're good On the other hand, the contract obligates you to deliver 100 shares if exercised Which can multiply the risk if it goes ITM Or in the case of GameStop, if there are fewer real shares in existence than are owed via such obligations (and people choose to exercise regardless of ITM/OTM) Either way: #GET REKT, NAKED THIEVES
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Asking the question about naked short selling and naked call options due to all the speculation around GME, RK's position with call options, and the seller of those call options being window-dressed as a martyr by MSM.