<<< My issue is this: If I leave my shares of stock in a margin account with a broker,am I helping MM's or other brokers to drive the price down by shorting the stock.
Should I only have cash accounts for BB stocks?
Should I hold the certificates myself?
Have an opinion?
thanks and later, leroyt >>>
Leroy,
You should ABSOLUTELY hold your own stock certificates if you feel a stock is being shorted. I know, I know, people say that you can only short a stock in a margin account, but I have heard otherwise. I have been told that some brokers will borrow stock certs from a cash account to cover a short. Yes, this is illegal, but a lot of people do illegal things, and this is one of them.
*** So, everyone should call their broker and request their stock certificates. ***
As you probably know (but maybe some people don't), if you request your stock certificates after your broker "loaned" them to someone who sold short, then your broker will have to do as you ask and mail you your certificates. If the broker has access to other stock certificates (i.e., someone else's certs that are being held by the broker), then it is no big deal since there will be enough inventory for the broker to borrow from someone else. Now, what happens when a whole lot of people (like everyone on SI) requests their stock certificates? Well, the brokers run out of inventory in a hurry, and when the inventory runs out and people are still calling and requesting their certs, then the broker goes to the person or institution who sold short and makes them cover in 3 business days. That means you get a whole hell of a lot of buyers in a few days that MUST purchase the stock on the open market to cover their short position. This is called putting the squeeze on the shorts. How does this affect the price? Usually, the price goes WAY up. This is part of the reason KTEL went through the roof - shorts were covering. Now, on some occasions (very rarely) when a big brokerage house is forced to cover, they will lower the price trying to shake the tree and get people to panic sell. In general, however, short squeezes are very good things for shareholders.
I'll say it again:
*** Everyone should call their broker and request their stock certificates. ***
Who has done this? Post when you have.
I'll start, I have my certs! All I need to do is mail them back to my broker when I want to sell (which won't be anytime soon). That is a small price to pay for the benefits you get. If you are afraid of losing your certs, then rent a safe deposit box at your bank, and keep them there.
I hope this helps.
-Dave |
