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Microcap & Penny Stocks : ETPI-Military Entertainment Enters Civilian Market
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To: Master Blaster who wrote (4500)6/23/1999 1:39:00 PM
From: Toby Zidle  Read Replies (2) of 4767
 
I don't doubt that Market Makers short stock. No question about that. But what I do question is the exclusivity of this statement: <MM only hold short positions>

Of course, MMs buy stock at the Bid and sell at the Ask. That's how they make their money. The spread is all profit to the MM. But that doesn't mean they are never long.

It's the same profit, in a flat market, whether an MM buys long first and then sells from inventory or sells short first and then covers. But in fact, if the stock is in an uptrend, there is more money to be made by buying a long inventory early in the day and liquidating it throughout the day than there is by selling short and covering throughout the day at ever-rising Bid prices. Yes, the MM does control the Bid and Ask, but he still does business with a price-sensitive investing public. Ignore that and there's no volume and no profit.

A stock in an uptrend means the MM has to be long or he is frittering away his profit while chasing his Bid price upward.
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