My grandparents in Canada transact with Questrade and fancy shorting the FTSE SmallCap Index.

  1. EWU (iShares MSCI United Kingdom ETF) and EWUS (iShares MSCI United Kingdom Small-Cap ETF) don't support options, but they would've liked to buy Put Options.

Options No.

  1. They shun short selling without hedging with a protective call, as your loss is potentially unlimited. "Never did any floor trader I knew sell any stock short without owning calls as their hedge".

  2. UK small caps aren't cross-listed or have Depository Receipts on any North American exchange.

How else can they short these ETFs? Doubtless it's too unproductive to short singly the small-cap UK stocks in the ETFs, even if I open an account with another brokerage.

As you’ve discovered, the most popular online brokerages in Canada allow you to trade on Canadian and U.S. exchanges only. If you want to trade in London or Frankfurt, you’ll need to open accounts with one of the few brokerages offering access to global markets and allowing you to trade in foreign currencies, such as HSBC InvestDirect and Interactive Brokers.


1 Answer 1


I have some issues about the short selling article in your link.

A very small potatoes issue is that the author is doing a synthetic straddle by buying 100 calls to hedge 5,000 short shares. It might not make much of a difference on the slippage (100 contracts and 5,000 shares versus only 100 contracts) but call it what it is. It's a long straddle not hedged short stock.

The author paints this picture of "Golly Gee Gomer, all you have to do to make a sh*tload of money on an earnings play is to buy 2 ATM calls for every 100 shares short just before the EA. The reality is that implied volatility expands before the EA and you ' overpay (relative to normal IV levels) for the option position. Post EA, the IV collapses and without a large move in the underlying, it's a hefty loss.

Where the author really snows you is:

Consider this fitting and real example of the above: During my first year (1983 -- of what would become 10 years) in the trading pit I shorted 5,000 shares of Waste Management (WM) at $44 and immediately bought 100 WM calls, the $45 strike price, for 1.0 point.

Net loss on our long calls was $0.50. That loss was two times basis the stock sold short. Thus, I lost $0.50 on 100 long calls, or -$5000. Big deal. I just made five points on the short stock times 5000 shares, or +$25,000 (shorted 5000 at $44 and covered 5000 at $39). Cha ching. Net gain was: $20,000.

I remember Waste Management in the 80's, in particular because I knew someone who was playing it in size with 100's of long calls. It was a mover and a shaker which always had significant IV expansion before earnings.

There is absolutely no way that these calls cost a dollar and then after an earnings announcement with large implied volatility contraction and a $5 drop in the stock, then the call had a salvage value of 50 cents. This is total BS.

Sorry, can't help you with the rest of the question since I'm not Canadian.

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