This question is a followup to a recent and similar question on buying a put: When a long PUT expires in-the-money, whose shares are being sold?.

Suppose I don't have a margin account, and I buy a put to bet against a stock that I do not own (my broker allows me to buy the put as I have enough cash to pay for the premium). The put expires in the money and it is automatically exercised. Responses to the question I linked say that, in this scenario, I would be short 100 shares. But how could I be short any shares if I don't have a margin account? Would the broker open up a margin account over the weekend on my behalf? Wouldn't it be much easier to automatically NOT exercise the option?

  • 3
    Why don't you ask your broker? They'll likely force a sale of the put contracts.
    – quid
    Jul 18, 2018 at 1:52
  • 4
    You must have enough capital or the margin equivalent to successfully open an equity position (long or short) via assignment or exercise. If you lack either or if it's a cash account with a resultant short position then you are in regulatory violation and as per The Options Industry Council, it's up to the broker on how resolve the mess. In most cases, the broker will tend to liquidate the option for you but be advised that you are literally at the mercy of the broker (bad fills). Contact your broker to find out what their procedure is. Jul 18, 2018 at 3:19

1 Answer 1


It is unlikely your broker will allow you to buy such a put unless you have:

(1) a long position in the stock (to cover the put),

(2) an agreement that the broker will sell the option on expiration day if the option falls in-the-money (unlikely) or

(3) that the broker may issue contrary exercise advice at expiration on your behalf, in which case the option will not automatically be exercised.

The reason (2) is unlikely is there may be insufficient liquidity at or approaching the close to be able to sell the option, even if it is in the money.

  • isn't the market marker required to purchase it from you, and wouldn't they have every incentive since they could immediately exercise it themselves? of course, you'll lose a bit of the profit this way...
    – user12515
    Oct 9, 2019 at 17:18
  • Market makers only have an obligation to quote $5 wide 99% of the time and series (or less). Though you can ask your broker to call the exchange to ask the market maker to put up a quote (which can be up to $5 wide).
    – xirt
    Oct 9, 2019 at 17:35
  • @Michael - The market maker is required to post a quote. You get to choose if you are going to trade at his quoted price. If you do and that quoted price is less than parity (you sell at less than the intrinsic value), the market maker would then do a discount arbitrage (offset the underlying and then exercise the option), something you could very well do yourself if you had the cash or margin available, avoiding the haircut). Jun 5, 2020 at 9:28
  • Re (1): Long puts can be bought in a cash account. You do not have to own the stock to do so. Re (2): If you don’t have the buying power to exercise the option, some brokers will sell the contract just before it expires (for example, Robinhood), especially if it's a cash account and you assignment would result in a short equity position. Jan 31, 2021 at 14:02

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .