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Buy-in

A forced market purchase executed by a broker or clearing house to close a position that cannot be delivered, charged to the account that failed.

Buy-ins arise from two situations: a share-recall the borrower could not replace, and a fail-to-deliver that has aged past its mandatory close-out deadline. The executing firm has no obligation to get a good price; it has an obligation to deliver, so buy-ins routinely print at the worst level of the session.

There is no notice requirement that gives you time to trade out on your own terms. For a short seller, the practical defence is to avoid holding size in names with tight borrow and high utilization.

Example: 30,000 shares are bought in during a squeeze. The stock ranged $22 to $31 that day and the buy-in filled at $30.40, roughly $250,000 worse than the day's low would have been.

Related: share-recall, fail-to-deliver, threshold-securities-list, short-squeeze, regulation-sho

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Bollinger bands squeezing and then expandingA price line between three curves: an average in the middle and a band above and below it that pinch together in the centre of the chart and then spread apart as the price runs higher.PRICE WITH BOLLINGER BANDS (20, 2)SQUEEZEupper bandpricemiddle band20-day averagelower bandbands widen asvolatility risesIllustrative prices. The bands sit two standard deviations from the average.
Bollinger bands: squeeze and expansion. The middle line is a 20-day average and the outer bands sit a set number of standard deviations away, so they measure how far price has recently been straying. When moves are small the bands pinch together; when moves grow they spread apart.

Educational only, not advice. Spotted an error? Post in Site Feedback.