Replies to post #2699 on Cyclo Therapeutics Inc (CYTH)

[satelliteguy]

Here's a repost of mine from another board:

To the best of my understanding, 30 to 40 percent short volume in a given day seems to be typical for most stocks. That's because in their normal market making activities (as opposed to when they're trading for their own accounts), MMs usually sell short first and then go high bid to cover, rather than buy first and then try to sell (because they don't generally like to hold inventory). When there are no individual sellers around and it's pure market-making activity, if the total volume for a given day is 100,000, the reported short volume could easily be about half the total volume (short 100,000 first, which gets reported in the intraday "short" volume, and then buy back 100,000 on the bid which does not get reported)

But here's the thing that almost no one understands, and I can confirm this from personal experience with my own orders in thinly traded stocks. Let's say a market maker has a limit order from a large holder to sell 100,000 shares, and sells 10,000, 10,000, 10,000 and 5,000 shares at various times during the day toward that total. Those four trades of 35,000 shares will be reported to FINRA as intraday short sales, and the MM then moves 35,000 shares from the holder's account to the MM's house account at the end of the day to balance his books. Sometimes the journal entry at the end of the day will be reported as a separate "trade" of 35,000, and sometimes it won't be reported at all -- it seems to depend on the MM. I had a market maker working a large sell order for me at the offer recently and my sales accounted for 83% of the day's volume, but 100% of the day's volume was reported as "short sale volume" on the FINRA list.

The takeaway from this, and some other scenarios that I've read about that seem accurate, is that some IHub posters and emailers like PSC and Monsterstox are using these FINRA numbers to suggest that a short squeeze is imminent in the POS stock they're pumping -- but the numbers don't actually mean anything of the kind.