What about naked shorts? We can't do that, only a market maker can do so, and it is strictly illegal. Again, we, as traders, cannot short trip zero stocks, because we use brokerages, and they have rules against it. Look up your own brokerage rules.
And, if you are prepared to test the system, be prepared to put up $2.50 PER SHORTED SHARE as reserve (collateral). That is in addition to the shares themselves. Then, when you have put up your $25,000 to short 10000 shares, plus the price of the shares, (let's say $.0005) which is another $5, you have invested $25,005 to short 10K shares of this stock. Now let's assume you expect it to drop 20% (to $0.0004). So now you have made $.0001 X 10K or exactly $1 if you finish the transaction. How much was that transaction fee again? Oh, right, probably at least $4.95. So, even though your short process was successful, you lost money.
The point is that if you have $25K to spend, why would you not be buying a valid blue chip stock instead of dinking around shorting trip zero stocks? Answer, no one would. That is why I say no one shorts trip zero stock, and very few below $.01 either.
But of course, MM's operate by shorting. They don't actually buy the stock, they facilitate a trade between a buyer and seller and scoop up a reward in the process.
And no, there is not some guy in a tinfoil hat in his mom's basement trying to chisel you to get beer money - it is all high speed computers, and the fastest ones make the most money. NO ONE sees any individual stock - they just keep the machines going at top speed.
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