By: pattreko0 24 Jul 2004, 12:39 PM EDT Msg. 50706 of 50706 Jump to msg. # ***How The MMs are Covering (Revised)***
~The MMs have X amount of naked shorted shares (NSS) which need to be covered from the past ~ The MMs will do everything in their power to resolve the NSS issue without digging into their old profits ~ The MMs will try and do two things: (a) cover their old NSS, and (b) make new profits ~ In order for the MMs to do (a) and (b) they will need to naked short new shares ~ MMs will raise the PPS and sell new naked shorted shares to investors, or new shares which don't exist ~ When the MMs are ready they will drop the PPS ~ Some investors will sell their shares, while the PPS is dropping, to lock in profit or out of fear of losing money ~ While the PPS is dropping the MMs will do two things which include (a) and (b) ~ The MMs will use many tactics to convince people to sell ~ One method is to increase the spread of the bid/ask (ex: bid .0003 / ask .0005) ~ The bigger the spread means the more profitable it is for the MMs, but the less likely for people to sell ~ In the example .0003/.0005 the MMs would be profiting by 66.6% because they are buying shares from investors for .0003, but selling to investors for .0005. ~ Remember, all along the way the MMs will use the profits to cover NSS and profit a little ~ The MMs will continue this process at many price levels ~ The MMs will work around a certain price level until they are satisfied with the results from that price level ~ The MMs will continue to evaluate the market sentiment for CMKX and determine future strategy based on that ~ The MMs will continue this process until they reach a level where they are comfortable with the NSS they have covered ~ The MMs will correct their NSS problem gradually ~ Some investors will hold and profit in the long-term ~ Other investors will be buy in as the price rises, expect small profits, and then sell ~ The MMs will create a rollercoaster of emotions along the way to scare people into selling when they shouldn't, and buying shares when they shouldn't ~ Everytime the MMs are ready to raise the PPS, the bashers will quiet down and the pumpers will emerge ~ Everytime the MMs are ready to drop the PPS, the bashers will emerge and the pumpers will quiet down ~ As the PPS rises the spread between the bid/ask will become a smaller % of profits for the MMs ~ Ex: bid .0003 / ask .0005, profit 66.6% ~ Ex: bid .0075 / ask .01, profit 33.3% ~ With the current PPS it is easier for the MMs to profit and cover their NSS because the spread is huge ~ As the PPS rises the float will shrink little by little because NSS are being removed from the market ~ This will result in lower trading volume each day, which is a direct signal of what is taking place ~ There will come many points where the MMs will hit a wall and people will not want to sell at the current PPS ~ This will happen when investors are expecting greater things and decide to hold for longer ~ The MMs, at this point, can choose to raise the price ~ However, it may be extremely difficult to convince people to sell ~ One way to resolve the NSS issue completely at this point is to make a tender offer ~ With a tender offer all the real shares and NSS would be completely removed from the market ~ CMKM would pay the tender offer price for real shares, and the MMs would have to pay the tender offer price for the NSS ~ This would be one method to solve this NSS issue and move onto greater things ~ Until then expect a rollercoaster ride which is strategically created to trick you into selling your shares ~ Don't be scared of the MMs maneuvers, it is inevitable that it will happen, so expect it
Once again, feel free to correct me on any of the above...have a nice day...
Market Data 
Markets 
AI
