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Great post on how the MM's work their shorts:
Market Maker Speaks Out:Ways of a Market Maker
(REPOST)
I was an OTC MM for about 10 years ending in the late 80's. Since then I have been strictly an investor. Since I
have not been that up to date in MM rules I will only make statements that I feel fairly confident are still accurate
regarding these activities. By and large most MM don't have a clue nor do they care to learn, about the fundamentals
of the stocks they trade.
They just try to make orderly markets. When dealing with BB stocks it is very easy for a MM to get trapped into
being short in dealing in a fast moving market. Reason being; most of the MM's in this stock are what are called
"wholesalers" this means they don't have retail brokers "working" the stocks.
So they have to rely on what's known as the "call" from larger retail houses. If a "Big" retail firm like an E-trade calls
up a market maker to purchase say 5,000 shares of a stock, they expect to get an "execution" from that market
maker. If he turns them down, or only gives a partial then the "Big" firm will go to another MM.
If this second MM "fills the order" then that "Big" firm has a moral obligation to continue to give future "business" in
that stock to that MM who performed (his life blood). This will go on until he "fails" to perform and so on.
Contrary to popular opinion the "Big" firms Do NOT necessarily go to the "Low Offer" to fill a buy order (Or high bid
for a sell). They "Go" to who they think will perform to fill the order and expect that MM to "match" the "low offer" in
the case of a buy (bid in the case of a sell). Even though this MM might in fact be the "high bid" and not really want
to sell any more.
As a wholesaler he must perform or he will get a reputation as a "non-performer" with the "Big" houses and will cease
getting "calls" which means he will soon go out of business. I mentioned above that this activity is very significant to
BB stocks. I say this because most of the trades in these BB stocks are "unsolicited" and are done through discount
houses.
With the above groundwork laid, let me try to explain how market makers get short even if they like the Company;
Lets say that a stock (shell) has been lying quietly at $.25 bid $.50 offered. A limit order comes into one of the MM's
to Buy at $.50 for a thousand shares. Prior to this trade that MM may be "flat" (neither long or short any shares). He
fills the order and is now short 1,000 shares. He may raise his bid hoping to find a seller to "flatten" out his position.
But before he realizes it a wave of buyers have come in and cleared out all the $.50 offers. Now the stock is $.50 bid
.75 offered. Here comes that "Big" firm he just sold the 1,000 shares to at .50 with another bid for 1000 at .75. He
makes this print. Now he is short 2,000 at an average of .625. The market keeps moving and now its .75 bid 1.00
offered. Now he has to make a decision.
Just like investors, MM Hate to take a loss. So 9 times out of 10 he will now sell 2000 at 1.00 making him short 4000
but with an average .81. At this time he would love to see a seller at .75 so he can cover his short and make a few
bucks.
But instead the market keeps moving up. Now it is 1.00 to 1.25 and here comes the buyer again at 1.25. He doesn't
want to lose the call so now he needs to sell 4,000 at 1.25 to keep his break even point above the bid. Now he is
short 8,000. Market moves up to 1.25 bid 1.50 offer here comes the buyer now he feels he must sell 8000 here
because "stocks don't go up forever".
Now he is short 16,000. And so on and so on. If the stock keeps moving up, before he realizes it he could be short
50k or 100k shares (depending how big his bank is). _________________________
Finally the market closes for the day and on paper he may look all right in that his "break even" price may be around
the closing price. But now he has to figure out how to entice sellers so he can cover this short. It is important to
note that if this happened to one MM it has probably happened to most all of them.
Some ways MM's entice sellers; Run the stock up with a "tight spread" in a fast market, then "open" up the spread to
slow down the buying interest. After it has "cooled off" for a little while lower the offer below the last trade right
after a small piece trades on the offer then tighten the spread so that the sellers feel they can take a "quick profit"
by "hitting the bid" on the tight spread.
Once the selling starts the MM's will walk it down quickly by only making small prints on the way down with the tight
spread. Another way is by running the stock up in the morning, averaging up their short then use the above
technique to walk it down in the afternoon.
Hopefully after doing this for several days, it will demoralize the buyers. The volume will dry up and the sellers will
materialize thinking that the game is over.
Contrary to popular opinion, MM usually Do Not Cover in Fast moving markets either Up or Down if they are short.
They Short More. They usually try to cover after the frenzy is out of the market. There are many other techniques
they use but the above are the most popular.
This technique works about 9 times out of 10 particularly in a BB market. However that is because 9 out of 10 BB
stocks are BS. Remember what I said above. Most MM's don't have a clue as to the value of a Company until they
get trapped. If the Company has solid fundamentals and a bright future. Then the stock will do very well. And the
activity that caused the situation will prove to even help the future stock activity because it created an audience."
Thanks for the post-I'm adding to the filter and turning it on.
OWD3-e.Digital (EDIG is a stock) is NOT in the business of having products out to market. It offers its designs to various companies who introduce product to the market place. What makes you THINK that e.Digital has not already delivered its designs and prototypes? Do you have any FACTS or just more rank speculation?
Interesting that certain of our more infamous posters have not been heard from today - I wonder if they can explain why we have had the decreases and then the sudden increase in PPS?
Anyone care to give it a go? It's all short term anyway and I'm still looking for real earnings and growth in the next year or so. Like always, only time will really tell
In the meantime, enjoy and good luck to you all.
.33-.34
We were posting what we hoped would happen[future], not what we all know happened [past].
EDIG's chart
one day soon
http://finance.yahoo.com/q/bc?s=AVA&t=1y&l=on&z=m&q=l&c=
Thank you for your e-mail. Our web hosting services is having technical difficulties. They expect to resolve them shortly. In the interim, please access our website through www.edig.com.
Best regards,
Robert Putnam
Senior Vice President
e.Digital Corporation
13114 Evening Creek Dr. S.
San Diego, CA 92128
http://www.edigital.com
Phone: (858) 679-3168
Fax: (858) 486-3922
rputnam@edigital.com
Believe what you will - do you have facts or simply that feeling in the pit of your stomach?
You may follow your feelings, but don't expect anyone else to accept them. I don't know you and your feelings have no objective value to me.
I like and consider facts and then I can make my own informed decisions.
I don't bother with fluff or rumors except to recognize they exist. I do not make my investment decisions on fluff or rumor. No one should! Let people post opinion when it is clearly labeled opinion. What is wrong is when people post opinion and claim it's fact.
What is also wrong is when people post and twist simply to denegrate a company or its stock. That should not be permitted.
I sent you a PM.
It said:
In some respects and for some issues, of course. However, that is a overbroad question and must be considered in light of numerous duties and obligations the directors, officers and employees have to the company, each other and regarding any number of issues.
Also, fiduciary obligations are only for some issues and relate to specific circumstances facts.
For a more through reading and by way of example, only [there are classes taughts and treatises written on this subject], consider: http://articles.corporate.findlaw.com/articles/file/00295/008474
and-
GAB Business Services, Inc. v. Lindsey & Newsom Claim Services, Inc. (2000) 83 Cal.App.4th 409 , 99 Cal.Rptr.2d 665
[No. G021350. Fourth Dist., Div. Three. Aug. 29, 2000.]http://login.findlaw.com/scripts/callaw?dest=ca/caapp4th/83/409.html
Not an "obligation," but perhaps a duty. Obligation is very different than duty.
As previously posted - depending on the cirmcumstances, sometimes yes and sometimes no. And, you must use the correct definition of "fiduciary duty", too.
Read the article and the case I cited for you for a futher explanation.
CASSIE: RE EDIG-HELL NO WE WONT GO!
The old page, www.edig.com, is still up.
Not likely-probably being updated.
Fred-perhaps you should read the following:
Defamatory Internet postings are libel under Civil Code Sec. 45, not slander under Sec. 46. Plaintiffs may collect presumed damages for them and need not establish special damages. Internet postings are not by their nature so lacking in credibility that no reasonable person would regard them as true, nor need such postings be regarded as true to be defamatory. Failure of special verdict forms to require that jurors identify specific postings found to be defamatory did not require reversal where many of messages introduced into evidence could have been deemed libelous under trial court’s instructions. Publicly traded company and its executives were not limited purpose public figures where they did not inject themselves into any particular public controversy. Provision of injunction barring defendants from making future defamatory statements of a specified nature was unconstitutional prior restraint on free speech. Provision of injunction barring defendants from posting financial information about libeled company’s executives or employees, along with their residence addresses or the names or locations of their family members, was valid content-neutral speech restriction. Court lacked power to grant injunctive relief to individuals not joined as parties to the lawsuit. Pendency of appeal of trial court’s denial of anti-SLAPP motion did not automatically stay action under Code of Civil Procedure Sec. 916(a).
Varian Medical Systems, Inc. v. Delfino - filed November 13, 2003, Sixth District
Cite as 2003 SOS 5807
Full text http://www.metnews.com/sos.cgi?1103%2FH024214
Absolutely correct!
IF he did not tell the truth!
Do you or anyone else on this board know the answer to that very question?
No one yet seems to know, despite the rampant unsupported speculation.
Do you know, yes or no, if the Fujitsu units were not in production? Do you know if any units were produced? Yes or no.
Please fully state the facutal basis of your answer.
Otherwise, please stop the speculating.
If you believe that those words were false and a material mis-statement, consult with your corporate counsel.
I simply do not have the FACTS to know IF that was untrue or material.
I have no opinion on that subject.
Write to the SEC and say what?
Are you soliciting for an attorney who is contemplaing an action?
Are you soliciting for the SEC?
Are you soliciting for a competitor of e.Digital?
Are you soliciting for a broker or house?
Just what are you recommending past and current shareholders of e.Digital actually do besides "complain" that the pps is not what they would like it to be and that not everyone of the company's products has made it to the market in the way the officers and employees would have liked or preferred?
Are you stating that there has been a violation(s) of any specific SEC rule or applicable federal or state statute?
If so, which and what facts are you suggesting establish same?
Please be specific and do not assume anything. Assumptions have no value.
HH: You certainly have the right to seek change whether or not it is or is not warranted objectively. As you already know, the best way to do that is vote at the SH meetings. Also as you know, show up at the meetings and voice your concerns. You may want to enlist as many co-shareholders as you can find who share your beliefs. Numbers do count.
But, IMHO, you needs facts, not the twisted nonsense we see from others who post here.
Good luck with your efforts and let us know what you accomplish within the proper parameters of shareholder rights.
Is that your "legal" opinion?
The use of the word "assumptions" is mandated is it not? So why are you using it to attack the company?
Show us ONE tech company that would release this information to to post on a chat board. Who are you kidding?
A few days ago, we mentioned that a new storage format had been announced by UTMA. Now we know that it's called FISH memory. FISH stands for Flash Internal Semiconductor Hard-drives. It works using the USB 2.0 communication standard. Data transfers will occur at speeds up to d60 MB/sec (480Mb/sec).
The cards will be small - just over 3 cm by just over 1 cm by about .50 cm. And a 'Baby Fish' format promises to be even smaller. But they will apparently be very rugged in their water-resistant metal cases.
Capacity will start at 2GB today but go up to 4GB by the end of the year. UTMA expects to hit 16GB next year!
We haven't seen any pricing information yet and it remains to be seen whether the market is ready for yet another format. Expect the FISH in stores in the first half of 2004 with devices such as cameras and audio equipment around Christmas 2004.
SimpleTech releases 8GB CompactFlash card
SimpleTech has announced some new additions to its Pro X CompactFlash line-up which includes a 8GB CompactFlash type II card. The Company also announced 2, 4 and 5 GB Type I cards and a significant increase to the write speed of its entire ProX line of CompactFlash cards.
IBM will be releasing a 4GB CompactFlash II Microdrive near the end of February. You might remember that last year Hitachi took over IBM's storage business unit and they are the ones that manufacture this Microdrive for IBM. The 4 GB Microdrive will be available for $499 USD and is expected to compete with similar products from SimpleTech which earlier this week announced 2, 4, 5 and 8GB CompactFlash storage cards.
Friday should be interesting when the SEC cracks down on the Naked Shorts. I would'nt sell any OTC untill we see the outcome. Any comments??
Simply because it is alleged does not make it true.
I've seen my share of false allegations. That is why we have the tort of malicious prosecution.
Time will tell the truth.
Top 10 20GB MP3 players
The Gateway's DMP-X20 is one of many 20GB iPod rivals. See how it ranks among the competition.
Apple iPod
Rio Karma
Iriver iHP-120
Dell DJ
Samsung Napster Player Yepp YP-910 GS
Gateway DMP-X20
Creative Nomad Jukebox
Philips HDD100 Recording Audio Jukebox
Archos Jukebox Recorder
e.Digital Odyssey 1000
http://www.techtv.com/freshgear/shownotes/story/0,23008,3608269,00.html
The good-sounding Gateway DMP-X20 offers cool features as reviewed on TechTV:
http://www.techtv.com/freshgear/products/story/0,23008,3611560,00.html
Market is down - red across the board ;-(
Sure-wouldn't you pay $5 to watch the news or a program of your choosing? I would, for example, on a short haul to LV or SF (both 1 hr +/- flights for me).
DigEPlayer with wireless satellite TV would make sense even for shorter fligts - you could watch CNBC, MSNBC or soaps while on a 1 or 2 hour flight or a TV program or two.
Subject: one more post about f-10
From LawyerLong
PostID 314547 On Friday, February 13, 2004 (EST) at 10:48:27 AM
----------------------------------------------------------------
Re credibility.
It would appear to me that the company is between a rock and a hard place. You are edig - you have a potentially large deal with f-10 - it's not going the way you want it to but you have no control over it.
f-10 basically keeps changing the game, screwing you around, not doing what they say they are going to do after leading you to believe otherwise. You have, in good faith, tried to keep your shareholder in the loop.
The f-10 almost pulls the rug from under you but leave the door open to the possibility that they will continue the deal. They are also experiencing financial difficulties.
You are edig. You want to inform your shareholders that things are not as you had led them to believe based on info that f-10 provided you previously. Yet, you don't want to offend f-10 and close the door completely.
So, do you say ''f-10 has screwed us over?'' - ''f-10 said one thing but did another?'' - no, you are a business, not a sorority member gossiping about a sister. So you put the best face on it and paint a neutral picture that allows people to draw whatever conclusion they want - that edig was misleading or, that f-10 was misleading. The door is still open, the possibility still exists, and the swhareholders can believe what they wish.
The latter road is the one I would have taken. I don't think rp or ff can say all this, but I believe this to be the case. I also have very little faith, as I have said before, that f-10 will come to fruition. Last, I think it matters not in the overall scheme of things. BL's analogy about a lot of eggs in the air was a good one.
LL
From EDIGlong
PostID 314363 On Thursday, February 12, 2004 (EST) at 9:44:18 PM
--------------------------------------------------------------------------------
The Fijutsu 10 units that were in full production was in regard to the initial order of 4000 units.
The 4000 units were in full production.
The 4000 units were all that were ordered.
A good read:
Subject: WOW!!! Is this thing on???
From mguru
PostID 314268 On Thursday, February 12, 2004 (EST) at 6:35:14 PM
----------------------------------------------------------------
Investing never ceases to amaze me. After 14 years as a proffesional(stock broker.), you would think that nothing shocks me anymore. But, I have always believed that a fool and his money will soon be parted. To be clear, I am talking about the number of people on this board that just don't get it, and probably never will. These people trying to invest on their own, that don't know livestock from common stock, let alone what a GOOD investment is(my clients excluded.)Anyone that just heard the full webcast, and heard 1 million units forcasted by TGE group(only 1 customer), using edig technology this year(double digit royalties 1 mil x 10.00= 10,000,000.), as well as IFE(digeplayer)interest being MAJOR!!!, and the official word that edig will be announcing customer(s) that are using edig's tech inside of the next HOT product, set top boxes. If you heard all that and you are whinning instead of elated, you are here purely by luck(someone told you about edig.), and you should grab your baba and blanky, sell your shares tommorrow, donate the money to charity, and that way you can insure you've done something good with it. Thanks for the laugh! I believe that if there were new investors/brokers listening to the cast they are very impressed and we could see buying similar to the spike after the alaska news. mguru
Next time read the return policy before you buy-what is "illegal" about a restocking fee?
IMHO, by the way, it's highly unethical/illegal to "buy" a unit for "review" purposes and then return it. You used it for purposes of promoting your web site (as you did AGAIN in your post). How much to you get for each hit on your site? Did you tell Gateway that you were "buying" only for review purposes or did you simply hide your true intentions? Fraud is "the misrepresentation or concealment with reference to some fact material to a transaction that is made with knowledge of its falsity or in reckless disregard of its truth or falsity." Did you conceal your true purpose when you first "bought" the unit?
CF cards are expanding and are cheap:
For example: Magicstor Microdrive by GS Magicstor Inc.
You can never have too much memory for your device. Large GPS maps, music files, movies--all require significant amounts of storage space. This drive delivers lots of storage space and is very reliable. It is available in 2.2 GB and soon 4.2 GB capacities, and requires a Type II CompactFlash slot on your device. The drive spins at 4200 rpm and has an average read-seek time of 10 milliseconds with a data transfer rate of 3.3-6.5 MB/sec. It uses approximately 18 milliamps when idle and 275 milliamps when active. This drive is available now and only a little more expensive than a 1 GB drive. You will wonder how you ever lived without it once you buy it!
Use With: Windows Mobile devices equipped with Type II CF slot
Price: GS1022C-$215.95" [bold added]
You can carry a lot of music on a 4.2GB card
Drudge's close up
http://www.drudgereport.com/mattjj.htm