>I think I must be the last short out because on those occasions where
>I decided the opportunity cost was just too high it seemed like the stock
>collapsed the next day.
As you may know, the *one* piece of information in the entire realm of stocks that is only revealed on a 2 week or monthly delayed basis is the short interest of a particular stock. It doesn't matter how much money you're willing to pay, nobody in the business will sell you that information on a real-time basis. Nobody. Zero.
There's a reason for that. In the mania, it was *the single* most profitable bit of information, period. Short squeezes and low floats were the lifeblood of worthless stocks everywhere.
Trading desks at some firms trade against their customers, as a regular way of doing business. Morgan or Lehman or Schwab know exactly how short their customers are, and in which stocks. And they know to the penny where margin calls will be triggered and forced buying will occur. Since short positions are fundamentally different from long positions- a customer can be forced out of a short position by price movement- they represent a unique opportunity for wall street to line their pockets.
Just as an aside, I routinely bought massive amounts of puts with a major online brokerage from Feb 1999 through April 2000. As a rule, they usually lost all their value. I was a persistant bastard- i knew it was only a matter of time. I was fortunate in that I started out with a very, very large pile of cash, otherwise I would have been broke many times over. In the last week of March, the firm's "compliance" office called and sent letters saying they were going to be forced to disallow option trades in my account due to the heavy losses I had incurred, even though they could plainly see i still had a massive balance (we're talking high 7 figures) left and even though I never sold a naked option in my life.
I asked them why they cared if I wanted to keep throwing my money away. They actually said "We don't want any of our customers to lose money."
I told them to stuff it, and they contacted me again and told me my positions would have to be closed out when they removed the options trading permissions from my account. In disbelief, I told them I'd sue their asses into the ground if they touched anything.
4 days later the market started cratering, and I made more money in the following 3 weeks than I had made in my entire lifetime. It doesn't take a rocket scientist to guess who was on the other side of my trades. Heaven help the poor soul who sold me those puts, if they were naked.
And on options expiration friday, i closed my account and took my business elsewhere.
If you think these clowns aren't taking positions against their customers, you're just naive. :) |
