Short-selling costs and bans affect option prices significantly. The study provides a dynamic analysis of option prices with costly short-selling and marketmakers. Short-sellers pay fees to borrow stock shares, leading to unique option bid and ask prices. Bid-ask spreads, put option implied volatilities, and put-call parity violations increase with shorting fees. Option bid-ask spreads decrease with partial lending and are more pronounced for illiquid options. Corporate bonds show similar patterns.