Options Update to the Short Trade Prohibitions

The US SEC (Securities and Exchange Commission) and the UK FSA (Financial Services Authority) have recently prohibited short trades on a large number of stock markets. If you were not aware of this, full details about the prohibition (including the lists of affected stock markets) are available my original short trade prohibition blog entry.

The UK FSA prohibition already included restrictions on options trades that were equivalent to a short trade. The US SEC has now updated their prohibition on short trades to exclude and include the following options trades:

Allowed Options Trades

• Purchase of call options and exercise of long call positions
• Sale of call options against an existing long stock position in a ratio less than or equal to 1 call per 100 shares
• Purchase and sale of put options
• Purchase of single stock futures

Disallowed Options Trades

• Exercise of puts that would lead to a short stock position
• Sale of uncovered calls or uncovered single stock futures (covered by stock)
• Sale of long stock position if so doing will expose an uncovered short call position

I will post any further updates to the US SEC and UK FSA prohibitions as I receive them.