Real Time Quote
Chart
Free E-Mail
Raging PCBM Links
< Previous
Respond
Next >
By: viin
Reply To: None
Monday, 18 Oct 1999 at 1:15 PM EDT
Post # of 38209
I got this from another thread. VERY INTERESTING !
viin
*********************************************************
MUST READ THIS!!!
*The Anatomy of A Short Squeeze*
Short selling is the sale of borrowed (legal) or nonexistent (illegal) shares into the market.
When the public or brokerage firms sells borrowed stock in the Nasdaq, the Nasdaq "Short
Interest" reports reflect the public sale of borrowed shares.
The OTCBB market, however, is not required to report "Short Interest".Some small market
makers create nonexistent stock and sell it into the market. Since they often don't receive
major order flows from retail
brokerage firms, they have to sell nonexistent stock in order to participate in the market and
to make money. It's very profitable. It's tax free. The sale of millions of shares of
nonexistent
stock usually
destroys a healthy market order and even destroys any public company. Only the SEC has
the power to end this kind of practice by suing these market makers who are illegal to sell
nonexistent stock or issues a new
regulation requiring all market makers and brokerage firms to report "Short Interest" in the
OTCBB market just like the Nasdaq.
A short squeeze is an attempt to force the sellers of nonexistent stock to buy issued
shares.
When the short seller buys the stock, it's called "covering". Attempts to squeeze the short
sellers is a battle between
David against Goliath. The short squeezers are David. Some market makers are Goliath. It's
a battle involving millions of dollars when the short sellers lose.
Some small market makers are regular sellers. One of the short firms is a public company.
According to its filings with the SEC, their last quarterly 10-Q shows their assets as $800
million. They have a $34 billion, yes that's billion short position. This means that for every
dollar in assets they own, they are short $42.50. If you had the same risk level, you would
be
bankrupt.
To prevent your own shares from borrowed by some market maker or brokerage firm
against
your position on a stock, the easiest way is to put Good Till Canceled (GTC) sell order after
purchasing a stock. Let's say you have
bought 2,000 shares ABC stock at $0.50 per share. Then you place a GTC sell order for
2,000 shares at $2. Thus, your brokerage firm often doesn't lend your shares out. You can
always change the order to sell a price which you wish. To stop the illegal sell of
nonexistent
stock, the
best way is to lobby the SEC for a new regulation on how the OTCBB market would be
operated.
----------------------------------------------------------------------
Copyright 1999, analystgroup.com. All rights reserved. Persons may
reprint or copy any portion of this publication, provided any reprint or
copy is accompanied by our web address (http://www.analystgroup.com). |
