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Pastimes : Blue Cheap Stock TRADING -- Ignore unavailable to you. Want to Upgrade?

To: BlueCheap who wrote (1016)	7/10/1998 2:51:00 PM
From: BlueCheap	Read Replies (3) \| Respond to of 1078

How some Market Makers Manipulate Market in small OTC stocks. Assume stock symbol (ABCD) traded up to .24 and many small investors started taking positions in the stock which is a recommendation of some internet news letter or other sources. Trade date plus 3 is settlement day. Market Makers can and do manipulate OTC stocks. When an order is entered to purchase an OTC stock, your firm does not sell you the stock directly, most of the firms are "hardwired" to wholesale firms which contact the smaller market makers who are "coded in" to those particular stocks, these firms, small or wholesalers, CANNOT turn down a trade, EVER. They may can , but if they did, they would never get the call from that firm again. SO, 99% of the time even though they do not have inventory, they will go ahead and fill the order. The only way they can do this is by SHORTING the stock to fill the order. Unlike the individual investor, they do not have to borrow the shares to short, they can just do it. Lets see how a scenario might play out with our (ABCD) stock. The name of the firm is "Will Stick You" the name of the trader is URS (stands for "You Are Stuck") SOME INVESTORS MAKE IT A POINT TO KNOW! and know a number of market makers where they can pick up the phone and ask what is REALLY going on in a number of small stocks. Many also have level two (market maker) quotes so they can watch who does what. Lets say old URS got a call for a few hundred thousand shares that were bought. He filled those orders. By the end of the day URS was "offside"(short), his short cost (when you short you average up rather than down) was likely about .21 so say Wednesday was settlement date for last thursday, and the stock got hammered. If the stock would have been higher than his average short cost on closing Wednesday, he would have been losing money. So here is what he does: Lets say the stock is 21 bid 22 ask. He calls who ever is bid at .21 and says "Yah its URS at "Will Stick You", I got 10 (thousand) for sale at .21" The MM says "OK done on 10" he stays at .21 so URS calls him back 20 minutes later , "Yeah, I got another 40 there at .21" The other MM says "Ok done on 5 at .21" THEN MOVES THE BID DOWN TO .20 30 minutes later "Yea, This is old URS again, hey, I got 50K to go right at your .20." Other MM cusses, fills 5 then goes to .18 Bid. URS sees this then moves his own bid to .165. 30 minutes go by and URS calls him again and says -- you guessed it-- "Hey I got a total of 60 try to go at your .18" The mm buys 10 of it, then moves to .15 bid. Keep IN MIND, URS has JUST BEEN SHORTING TO THIS GUY TO GET HIM OUT OF THE WAY. Remember URS was at .165 himself. NOW John Q Public (That Is You and Me), devoted reader of "BUY Everything I Recommend" News letter. Starts worrying because he just paid .24 Four days ago. " BUY Everything I Recommend" was recommending so he decided to buy it.. After commissions at .165 bid, he is down nearly 50% on his money, he just wants out. He decides to sell and never buy a penny stock again, he places an order to sell it all, 10 minutes later he finds out that only 5,000 of those shares were filled at .165, now its .15 bid, he tries again, 10 more done, finally he puts in a market order to sell. meanwhile old URS has just covered 50,000 shares of his short position at profit of .06 per share. Does THIS sound FAMILIAR ??? KNOWGEDGE =POWER, and if old URS gets in your pocket, then LEARN and GAIN some KNOWLEDGE....However, KNOWLEDGE is worthless unless PUT in PRACTICE.... >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> This is from an article sent to me by a friend, I changed the names and added a few touches of my own. I hope this is beneficial to whom ever...... Regards, Malcolm