But you don't give him enough credit.
You give far too much credit to the prescience of the shorter who not all the time will target the weak, at his peril.
Think about it for one minute. How many stocks , in your world, are being shorted?
Lots?....Some?......Few?
Is EVERY ONE of those stocks going to fail? (hint; VW didn't).
If every 'shorted' stock doesn't fail, do 'shorters' still make any money?
Of course they do. They do because they are smart enough to know what they are doing.
If you decided to be a shorter (naked or otherwise) and you shorted a stock (say RCCH). Let's say you have an open position of one billion shares at an average sale price of a penny.) You have realized $10 Million dollars but you have an open position of a billion shares. It will cost you $100K to close the position and cover. If you do it now you will realize a profit of $9,900,000.
So this is your decision. You currently have an at risk open position of one billion shares. Every increase in pps of .0001 costs you $100K. You can eliminate your risk by closing out your position or you can extend your risk indefinitely by holding it open. You know that not all shorted fail and you can see that this one doesn't appear to be in any danger. Your risk increases every day that the company doesn't fail and every time there is a blip in the pps you risk losing hundreds of thousands of dollars. So do you close it out and realize your profit, or do you hold it open at risk and hope and pray that you won't have to pay the $100K, or do you (and this is absurd) keep shorting indefinitely, keep multiplying your risk, losing money in a perpetual attempt to keep it down?
You're a smart man bag8ger, what would you do?
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