Art, sorry if this is too late to help, but imo the key to the message you got is the word "may". I have gotten a fair number of these messages from various brokers, but I have never yet been bought in on short positions held with any domestic broker (non-domestic is a different story).
It might be too late for you this time, but next time I would call the broker and ask what they mean by "if this position is still held short within your account on 11/1/01". If they mean that you have until 11/1 to execute a cover trade on your own timing (which might clear after 11/1), then you may want to watch the stock. If you see a good cover point then go for it; otherwise on 11/1 you can ask your broker whether they still anticipate a buy-in, and make yor decision based on the answer. If, on the other hand, they mean that you must have settled to a flat position by 11/1, then there's not a lot you can do unless you get more than 3 trading days warning (which I never have).
In other words, sometimes on a buy-in you have the option to time the trade yourself and get out of the position before the buy-in date, sometimes you don't. When notices like the one you got are sent out, they are often sent out to some or all short position holders, some of whom will cover, which will reduce the number of shares they need to buy-in and therefore the number that you might get bought in on. One danger is that if you cover without asking the question above, you may end up net long in a POS stock. That's because your cover order won't clear until after the buy-in has to be executed (buy-ins are not subject to 3-day clearing), so your cover order will actually be a buy/long order.
Make sure you get a reference number for your recorded conversation with the broker, so you can rely on what they tell you (I wouldn't trust most many brokers to even understand the question, much less give you the correct answer). Ask to talk to the stock borrow department if you need to.
Most of the time, buy-ins (especially on liquid stocks like WEBX) are done at reasonably fair prices, near end-of day. I realize that's cold comfort if you're under water and expect tankage and can't get a borrow to re-short the next day. One strategy is simply to let the buy-in occur, and if you can't re-short the next morning (or even after hours), buy a put option instead, as I think someone else suggested.
Regards,
Fund |
