Forced Short Covering

Well, what a pain.

I just received a call from my broker telling me that I have to cover my SFG position because they have a buyer and they are short short inventory...at least they called instead of just closing my trade. I have heard of that happening in the past with other brokers.

This is the first time I have run into any issue with selling short and I had done a fair amount of it a while back, in fact it has been my favorite trade type.

So I have until 1400h to cover my 50 share position...at some loss.

I just placed a VTSO for 10 cents which gets me a better price than the high today at least.

I will track it as if I held the trade through...actually, they mentioned 1400h when I asked what the deadline was...perhaps they will just cover it at that time regardless of what I do. If that is the case I am best to leave the VTSO run and just let it go. I probably won't though as if I close it myself I might get an extra $5 on the trade...no big deal really but a buck is a buck better in my pocket.

This brings into question the efficacy of short selling as a trading strategy for some stocks. Obviously SFG is off my list for shorting now. I would have preferred had they bounced my initial short sell though... I would have just selected another stock to trade instead of SFG.

I think there may be a list ora method of finding out how thick the inventory is for shorting for future reference. I didn't think to ask the CSR at the time, I was just trying to wrap my head around having to cover a trade in a negative position...I was even giving some thought to adding to the position in the vein of the scaling in method earlier... glad I didn't do that.

Jeff.