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Are ETF's Toasted by New SEC Emergency Action?

Running_with_scissors posted on 09/23/08 at 12:23 PM
I just saw this when I logged onto TK: "As a consequence of the SEC emergency action, LONG PUT holders will not be allowed to exercise their puts unless they hold the requisite number of shares in the underlying security. SHORT CALL holders, if assigned, will be required to buy in the resulting position immediately." Does this make my ETF positions worthless?
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Posted by Running_with_scissors on 09/23/08 at 12:23 PM

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snowman

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snowman
Posted September 23, 2008 (12:37PM)
No, but from what I understand many are leveraging using the SPY and others against long positions. So shares to buy short are becoming scarce. Some brokers are even warning of a recall. Meaning if you are short and your time is up you may not be able to re-short.
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Running_with_scissors

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Running_with_scissors
Posted September 23, 2008 (12:50PM)

I don't understand.  Do you mean shares to sell short are scarce, or shares to buy to cover are becoming scarce?  Is this a danger to leveraged short ETF position?  Is this a way for the SEC to force long put and short call option holders to buy/sell shares and increase volume?

Does anyone know what the point of this is? 

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snowman

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snowman
Posted September 23, 2008 (02:03PM)
Not sure I really understand either? Couple of large pension funds Calpers and others have pulled their shares from being used in short sales. That and the fact people are getting scared they are leveraging their positions now before they cannot. SO it could be an across the board short squeeze with positive news. I do not feel it is a danger to an ETF with a short position. If shares to short run out they will look to buy the ETF that shorts it for you.
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Running_with_scissors
Posted September 23, 2008 (04:23PM)

The way I have been viewing the bailout actions is that each action is an opportunity for someone nimble and akamai (hawaiian for smart) to make moves.  BS and FNM actions were opportunities to short.  Fed pouring money into money markets was an opportunity to move out of money markets clogged with mortgage backed securities.  Short squeeze from banning shorts was an opportunity for a lot of people to get out of their long positions into cash.  Requiring short calls to purchase shares immediately provides buyers to the market.  Requiring long puts to buy to exercise provides volume and opportunity those who are long shares to sell. 

I feel like I am dancing in a train yard with a bunch of drunk engineers text messaging their friends.

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