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To: Gator II who wrote (3183)	7/9/1998 3:33:00 PM
From: Ditchdigger	Respond to of 5504

Gator here is an excellent description of how one shorts(locking in profits) against the box .NOTE this is a Reg S but the principle is the same.Note especially the punishment (cease and desist<LOL!!!!!) sec.gov DD (I know there are no similarities,except the "floor-less") " The relevant strategy involved (i) purchasing for cash securities overseas which had been issued at substantial discounts and without registration pursuant to Regulation S,<(4)> (ii) hedging some or all of those securities through short selling in the United States before and/or during the 40-day restricted period under Regulation S (as discussed below), and (iii) unwinding the short positions, which involved covering the short positions using the Regulation S shares or selling the Regulation S shares in the open market in the United States after the 40-day restricted period had expired. This strategy resulted in a profit for the Fund when the Fund unwound its positions. Indeed, when the Fund took offsetting long and short positions, its profits were locked in, except in the unlikely event that conditions made it impossible for the Fund to" ---snip---- "unwind its hedged positions. Shortly after the 40-day restricted period expired, the Fund would deposit the Regulation S shares in a brokerage account and begin unwinding the positions. Initially, in a number of instances, the Regulation S shares purchased overseas were used to cover the short positions. Subsequently, the positions were unwound by selling the Regulation S shares into the United States markets and purchasing shares on the United States markets to cover the short positions. The unwinding process would continue until completion, which generally took several months."

To: Gator II who wrote (3183)	7/9/1998 3:45:00 PM
From: Ditchdigger	Read Replies (1) \| Respond to of 5504

Another example from that document " GFL Ultra Fund Ltd.'s trading in the securities of Zitel Corporation ("Zitel") is an example of how the strategy operated. The Fund purchased 300,000 Regulation S shares from Zitel on December 12, 1994 at a discount of approximately 15% to the freely tradeable share price. The Fund partially hedged these Regulation S shares by selling short 279,800 shares in five brokerage accounts between November 14, 1994, and January 19, 1995, in connection with this purchase of Regulation S shares. The Fund locked in a profit (the differential between the price at which the 279,800 shares were sold short net of commissions and the price at which the 279,800 Regulation S shares were purchased) of $816,430.75.<(5)> By February 7, 1995, the Fund had distributed all of its Zitel Regulation S shares into the United States markets and had closed out all of its Zitel short positions with purchases in the open market." DD