Fred, It is going to be very hard for me to zero in your specific incident without knowing more, but I will provide you with some general tips and suggestions. 1) You must understand that in many cases, the clearing firm you're dealing with (in you're case Southwest Securities) may not have available the stock you wish to short. Under this scenario, you will simply not be able to take advantage of the downside you foresee. This will be designed with a "delete" in your OEM section. 2) Secondly, keep in mind that you will need an uptick to occur before you are ABLE to get short a stock. This uptick, which is nothing more than a transaction higher then the last one in its most simplistic form,is not a guarantee that you will get short. It just makes you..well...eligible to get short. 3) As far as execution vehicles are concerned, I prefer to use ISLD if the stock is actively traded. In the case of ISLD you would want to post an offer 1/16 or more above the current bid. If the stock is already on an uptick and an ISLD bid is present, you can hit the bid (ISLD to ISLD). The other vehicle I like for shorting is TNTO, which gives the trader more flexibility when hitting the bid to get short. Remember, if the stock is currently trading on an uptick, you will be able to get short by hitting the bid. In the case of ISLD, you would only be able to sell to the bid if another ISLD post was present on the bid. In the case of TNTO, a sell order at the bid price would be worked in TNTO's normal fashion. First TNTO would check internally for any matches, then it would route to any other ECN. If no trade occurred via those two methods, TNTO would then utilize Selectnet to preference a selected market maker currently on the bid. If the bid disappeared before getting short, TNTO would convert to a Nasdaq Level 2 post at that price which would most likely by the offer at that point. I hope this does not seem too confusing, but understanding the steps utilized by the execution vehicle you are using is crucial when trading short term. Let me know if this helps.
Your teacher,
Oliver L. Velez |
