Silicon Investor (SI) -- The First Internet Community

STOCKTALK

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.

Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Saulamanca who wrote (3319)	8/27/1999 4:47:00 PM
From: Bilow	Read Replies (4) \| Respond to of 18137

Hi Jim Bryan; Regarding the number of shares traded in a company exceeding the float... When a stock gets into play, a bunch of daytraders will move into it and play it. If it cannot be shorted, then the daytraders will only be able to have long positions. Scalping involves waiting for short term opportunities, and taking advantage of them as quickly as possible, then getting out of the position as quickly as possible. When BNBN went public, I bought and sold the stock a couple of dozen times on the first day. The advantage of a Nasdaq workstation is that you can arbitrage ISLD prices versus INCA prices, for instance. To do this, you need the visiblity and speed of execution that direct connection gives you. Anyway, over all it was quite profitable. I never owned more than 200 shares at a time, but my contribution to the number of shares traded that day was twenty times that. So huge trading volume does not imply illegal shorting on such a stock. If a daytrader wants to play a stock like GRIN, which I presume is shortable, he asks for shares to borrow. The "24" then responds with an amount, if any. The trader can then short up to that amount, and then cover. The trader does this over and over during the day, also sometimes being long, typically. The result is that the trader contributes a lot to the volume, but not much to the amount of stock that has to be borrowed. I believe that the vast majority of daytraders have to play by the rules. Back when AMZN had a much smaller float, it was sometimes very hard to find shares to borrow. The funny thing was that those times when it was hard to borrow tended to correspond to those times when the stock price was moving rapidly, either up or down. I believe that the reason for the difficulty borrowing during those times, was that daytraders were borrowing shares in order to scalp the market. The end result of daytrading activity is to take borrowable shares off the market, but without increasing the net number of shares short. That is, once you borrow the shares, no one else can borrow them, and if you are only using the borrowed shares for 5 minutes at a time, it really isn't going to effect the total float much. On the other hand, when daytraders aren't eating up the float, longer term traders can borrow the shares, and this will increase the float until they cover. For these reasons, the overall effect of scalping is to make it more difficult for long term bears to go short volatile stocks, so the long term effect on stock prices is to slightly increase the peaks, probably, which presumably also increases the valleys. -- Carl