First, there is no significant shorting in penny and sub-penny stocks. And I define significant as “enough to make a difference in the PPS one way or another.”
The reason is, trading rules dictate that in order to short a stock worth less than $2.50 per share, you need to put up $2.50 per share of margin for each share you short. So to even short 1,000,000 shares, you would need to have $2,500,000 in margin to make it happen.
And even then, 1,000,000 shares would barely move the needle on a stock that’s been trading 30,000,000 a day.
You also have to pay margin interest the longer you hold, so unless you’re in and out in a day, you’ll be losing a percentage of the $2,500,000 you had to put on ice.
And the MOST you’d ever hope to make is 100% if the stock goes to 0.000 and your LOSS potential is UNLIMITED if it rockets upward, which is a risk no one with $2,500,000 would make.