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11/16/10 11:44 AM

#13694 RE: Vordain #13689

Some penny stock investors, however, believe dividends can serve another function. If the stock has a large short, or 'naked short' position, it is often rumored that issuing a dividend can force the shorts to cover their 'short sale'. The resulting buying can then create a rapidly rising stock price AKA a 'Short Squeeze'. While this may very well be true, the question that needs to be answered is whether or not a short position even exists. Traders are often seen on message boards screaming "Short, Short, burn the Shorts!" - While the company plays along with them by declaring a dividend, a 'NOBO list', or filing for a new symbol. The hype of the possible short squeeze creates rapid buying itself, possibly resulting in a run. If the short actually exists, one can see some of the fastest percent increases in share price, and very high volume. If there is no short, it will normally result in a quick pop followed by an even faster drop as the "orchestrators" and pumpers sell out. These situations may be profitable for seasoned penny stock traders, but they are not recommended for beginners.

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