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Microcap & Penny Stocks : DCI Telecommunications - DCTC Today
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To: Parker Benchley who wrote (11676)11/26/1998 2:35:00 PM
From: Grantcw  Read Replies (2) of 19331
 
Hello George,

Thanks to you and Steve for your take on naked shorting. I'm familiar with the basics of shorting and have shorted more than a couple stocks in my short investing life. Let me see if I can relay what I think happens and see if anyone can tell me if I'm right or not.

1. Basic Shorting with borrowed shares:

I go to my broker, Etrade, and short AMZN (not a real experience thank goodness). Etrade currently has a lot of shares available to loan for AMZN so he lets me borrow the 5 or so shares I can afford to short. Now, Joe Medesker is long these shares. He calls his certificates in, and I'm forced to buy back my short position.

Well done cert call program, we've forced this type of shorter to buy back his shares. The only question mark I have for this type of shorting is how soon they must buy back their shares after the certs have been called.

2. Naked Shorting

I again want to short AMZN, but I go to a mom and pop broker down the street who refuses to let anyone go long on AMZN because it is an "internut" stock. This broker therefore has no position in AMZN and has no shares to let me borrow. BUT, they let me short AMZN anyway, going naked. Now, Joe Medesker and pals own lots of AMZN and call back in their certs. Why do I care? They can't call my certs in. I'm not borrowing any stock with a cert. Does anyone even know that I'm short AMZN through this mom and pop broker? Can't I just sit here forever on my 5 shares short unless AMZN gets bought out or its CUSIP changes?

I'm sorry if I can't figure this thing out. Some kind of mental block I guess. Am I making sense to anyone?

Grant

P.S. Thanks for the web page compliment George. I haven't updated the stock one in a while. I was a little distraught seeing both of my stocks tank during the market meltdown of recent months. Didn't have the heart to write anymore about DCTC or my other holding.
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