Jane, there are three levels of software that track the market:
Level I -- real time quotes. We all have access to that on the Net.
Level II -- shows bid and asked price from all market makers in a stock. You can get it, but it typically costs 3-500 per month.
Level III -- shows actual MM trading logs -- who was on what side of a transaction. Only active Market Makers can get this.
If you are skillful, you can read Level II between the lines of Level I. Further, you can deduce a lot of Level III from what you see on Level II.
We know about the Frankel MM short from tracing activity over the last couple of weeks on Level II. We estimate that his short position increased by about 40,000 shares today, since about 125,000 of the shares traded were buys above 1.30, and only 40,000 were sells below 1.30. The difference is 85,000 -- but since almost every trade is counted twice (once when it goes from an MM to you, and another time when the MM's settle among themselves), we figure the short interest increased by about half of 85,000, which is 40,000 shares.
Even on Level I, you can often see the inter-MM trades crossing. Typically, they take place at neither the bid nor the asked price. When you see tiny lots (say 100 shares) crossing at odd prices, you know that MM market-rigging is going on. Ask yourself: what real investor would pay commissions to trade $100 worth of stock?
Another clue to MM activity that you can see on level I is big lots crossing below the bid. This shows MM's helping one another to cover shorts. Sometimes they help each other, sometimes they don't. Frankel is trying to drive down the price of ALYA because he can't get stock from other MM's, and so he's trying to shake it loose from you.
There are many other tricks that MM's use, but it would be too long to talk about them all here. Your broker friend who used to be in the business can tell you all about them, if he feels like it.
MM's must show $2.50 cash capital in their accounts at the end of the month for every share they are short. Frankel is betting on the legendary impatience of Internet investors, and figures that since it's only June 12, he can shake enough shares loose to cover before then. He certainly would not like to keep over 1/4 of a million dollars tied up in July, so if we don't let him shake us, he will just have to bite the bullet and cover his $30-40,000 paper loss by buying shares on the open market, and helping to push the price up some more.
All of these figures are educated guesses. But it will give you some idea of the dynamics involved. Welcome to the wonderful world of the short squeeze.
Best way to defeat shortie MM's is to hold. If weak hands other than yours give in, buy more on dips. Or else, throw in the towel, and go chase Instant Nothing Co. on some other thread. I'll miss Lamar -- I had sort of come to like him, but I guess his wife won the argument. He got his 46% -- by coincidence, exactly what I made on DGIV (net of commissions) when I held it from .50 to .75. As I've said before, I'm not making that mistake again on ALYA. |
