Just a couple of points to correct you on.
As far as BB stocks a market maker NEVER has to cover the stock. As stupid as that may sound to you, call up market operations at NASDAQ if you don't believe me, but they don't have to cover. This only holds true on BB stocks.
As far as the MM's working with each other you are absolutely correct. Technically, that is called "parking" the stock and is against the rules but it is very hard to prove as you would need to prove someone's state of mind and basically it is left alone.
Going onto Nasdaq also does not force them to cover. Things to not change except the rules of how you short the stock. For example, there is no down tick rule on BB so a MM can short at will. On the national exchanges you need an up tick to legally short the stock although this is not enforced either. With millions of trades everyday and a minimal amount of regulatory staff, it is very difficult to police. Also, remember NASDAQ is a "non profit" self policing organization. I believe that is called the fox watching the chicken coop. The SEC polices the NASD, which poilices the Broker Dealers.
As far as dividends or splits go, that does not force a short either. A split doubles the short if its a 2 for 1 and the short side is responsible for paying the dividend if he chooses to do so. In either case, they do not have to cover. When you hear people doing these types of things they are acts of desperation.
When people short stocks they do it for a reason and some are right and some are wrong. It all boils down to who's pockets are deeper. The longs or the shorts. Morebuyers then sellers, the stock goes up, more sellers than buyers the stock goes down.
Usually, institutions can come into play in these situations so with National stocks it is difficult for shorts to do what people are alleging they are doing here, which do a certain extent I disagree. The additional shares in the float are light a lead weight and gravity takes effect.
Shorts can get hurt but usually in stocks with real fundamentals. A good example is Amazon. AMZN is up almost 50% in the last several days. There is a short squeeze on by some large institutional buyers that have driven the stock up to 100 from the 60's last week. Believe me people are getting wiped out.
Amazon has said they lost money last year, they will lose $1.50 this year and since they are getting into the music business they will lose more money. But guess what, the institutional buyers want to stick it up the shorts a-- and are doing a very good job of it. Whether its worth $100 per share who's to say, but there is one fact of life in the stock market.
The market tells you whether you are right or wrong. By the way, don't look for any instituitional support in here.
As far as the real volume you are correct it is usually 1/2 to 1/3 and when the market is swinging wild and there is alot of day trading it can be as little as 1/4. |
