Sulja Bros. Building Supplies, Ltd (SLJB)

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$SLJB - Understanding Naked Shorting

Naked shorting takes place when investors sell shorts associated with shares that they do not possess and have not confirmed their ability to possess. If the trade associated with the short needs to take place in order to fulfill the obligations of the position, then the trade may fail to complete within the required clearing time because the seller does not actually have access to the shares. The technique has a very high risk level but has the potential to yield high rewards.

While no exact system of measurement exists, many systems point to the level of trades that fail to deliver from the seller to the buyer within the mandatory three-day stock settlement period as evidence of naked shorting. Naked shorts are believed to represent a major portion of these failed trades.