Timing on Shorting Nude.
I am in the camp that shorting adds liquidity and is just as fair a trade as going long. The only reason we ever shorted naked is that U.S. brokers won't short OTCBB's. Rarely was it the case that no shares were available. Call me anti-American or whatever you want...fact is, people who try to get shorting (naked or otherwise) outlawed are really out of the know. Short sellers, whether naked or not, do not like to lose money. They cover whenever a stock starts to go up, thereby creating a huge run in stock price. You want to abolish that? That makes no sense!!! The very reason you bought this stock is to profit from the short sellers' "covering" when good news comes out. The way to get short sellers' back is to buy stocks with management that is pro-shareholder. Many many many OTCBB company management are scammers....dilution is the name of their game, AT YOUR EXPENSE!
Do I know what I am talking about? Well, with regards to the shorting, probably a bit more than most...since I have a Canadian account that I opened in 2003 with the express intention of shorting OTCBB garbage. Want to know what else?
1) The law that was put into place about one year ago has virtually halted naked shorting. The only exception is the Market Makers, who are allowed to short and need to be able to short, again for liquidity purposes. How do I know this is the case? Because I am in a circle of people who short, and all of us have to have our Canadian brokers FIND SHARES before we can short them.
2) It is rare for short sellers to short stocks under 30 cents. If I want to short a stock under 30 cents I have to have 150% equity (in cash) in my account because of the risk, which I gurantee not many traders are willing to take.... We like to short pennies that are on the moon anyway.
That is basically it. I am in MLXO for the bounce (if the OTCBB blood bath ends). But the management here seems to have some credibility issues.
Later....Timing
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