SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Microcap & Penny Stocks : BANY: Core business growth, exciting affiliations!
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: brad greene who wrote (1499)3/25/1998 11:10:00 PM
From: Roo  Read Replies (2) of 5847
 
Brad -

FWIW, here's my understanding of the naked short process:

In naked shorting there is no registration of shares because the shares shorted are not "borrowed" in the fashion of legal shorting. Rather they are non-existent shares that are "manufactured" by the MM. As the name Naked Short implies, the MM is "exposing" himself by selling non-existent shares. A MM can get caught in a naked short situation if the shareholders cert the float. Any cert requests beyond the float are requests that are being made against the "naked" shares, and in order to satisfy the request, the MM must somehow produce legit shares, either by convincing the company to issue additional treasury stock, or by buying back certificated shares on the open market.

One of the reason naked shorters are successful with their plays is because they are not encumbered by the rules of legal shorting against "borrowed" shares. In naked shorting, the supply of shares is limited only by the level of risk the MM is willing to take to drive the stock price down. It succeeds because investors quickly become frustrated when they see high volumes and no movement, or constant retracements after quick runups (often MM induced "panic selloffs"). After seeing this for several days, many investors will simply give up on the stock and take their losses to get away from the perceived "dog." A victory for the naked shorters as they then buy up the legit shares at deflating prices to cover their positions.

I'm sure there's a lot more complexity to the whole thing than I have described here, but from my understanding, that's it in a nutshell.

-R
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News