Not quite. When swy_ goes BK ,,,
it IS a 'taxable event' for All ,
as soon as the Brokers close out everyone's 'positions' ,
[ without collecting any commissions ]
and release the cash proceeds ,if there are any.
Shorters, that have not covered , collect 100% profits ,
that could even be LTCG's , if held long enough. But,
that's rare. Most pinky/penny shorters cover within 3 days.
We cover every day that we short, so we are Never short
overnight.
Longs get to take their 100% write-offs , without even
paying a commission ; although , some Brokers pay ~$1 ,
as if they were 'buying' the BK 'shares' from the long.
Similar logical tax rules apply to options holders , as if
all positions were closed out at a 'share' price of $0 ,
on the official day of BK ; or , the day the 'shares' cease
trading , forever.
But, [in answer to Holter], as good as it seems for shorters,
when their favorite goes BK , shorters DO NOT WANT swyv TO
EVER GO BK , because it Ends their stream of profits. And,
the Best situation is a steady string of Reverse-Splits ;
where the shorters 100% cover Before the reverse ; and
re-short right After , when the price crashes fastest , and
the old longs are locked-out of selling any 'shares' , while
they are forced to wait for slow-rolling CEO's , and their
similarly-directed TA's. And, the Brokers add their own
delays , due to the very low 'priority' of reversing stocks ,
and penny/pinky longs , in general , due to their shrinking
account balances.
extra, Sincerely.
P.S. ; While longs have a money-losing 'strategy' of
averaging-down ; shorters multiply their profits by
'doubling-down'. Instead of holding a short position
that is 'in the money' more + more , as the stock keeps
sinking ; they cover , and collect their profits , and
then re-short , ~ twice as many 'shares' , and keep doing
this , if the stock keeps sinking , and there is growing
volume , as the price drops.
For example; If a shorter holds a 1000-share position, long
term , as a stock falls from $1.28 to $0.01 , he only makes
$1,270 in profits [ignoring commissions]. But; if he keeps
covering + re-shorting twice as many shares, every time the
stock sinks 50% ; Here's what happens :
1] 1000 shares drop from $1.28 to $0.64 = $640 profit
2] 2000 shares drop from $0.64 to $0.32 = $640 profit
3] 4000 shares drop from $0.32 to $0.16 = $640 profit
4] 8000 shares drop from $0.16 to $0.08 = $640 profit
5] 16000 shares drop from $0.08 to $0.04 = $640 profit
6] 32000 shares drop from $0.04 to $0.02 = $640 profit
7] 64000 shares drop from $0.02 to $0.01 = $640 profit
So; 7 x $640 = $4,480 in profits for the doubling-down
shorter , instead to just $1,270 , for the same price
sinkage , over the same short time period.
And, the Brokers love it too ; because they collect much
more in commissions , even with the 'best-rates' that they
give to their frequent-fliers. Especially as their accounts
keep profiting + growing.
That's why our short motto is :
" Averaging-Down Is Profitable , For Shorters , ONLY . "
AI
