Replies to post #100965 on Health Sciences Group Inc (HESG)

[wardbird]

nite

[JUPITER1963]

How to Short Sell Penny Stocks

By Justin Kuepper · Thursday, April 2nd, 2009

Many OTC companies are either brand new unprofitable companies or larger bankrupt companies that have fallen from centralized exchanges. As a result, there is a great opportunity for traders to short-sell these stocks – or bet on them declining in price – and make a hefty profit. In fact, some notable traders like Timothy Sykes have made a fortune making such bets. However, there are many large risks to making these short trades must consider.

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Getting started shorting penny stock is very simple – just ask your broker if they support this type of activity. Often times, discount brokers will allow clients to short-sell certain popular penny stocks, while only specialized trading firms will allow shorting of almost all penny stocks. However, these specialized firms often have higher commissions and/or a minimum number of trades per month in order to quality. Finally, investors should also make sure they have access to real-time level II screens.

Trading Strategies

Short sellers are simply looking for stocks that are overvalued and betting on their decline. Since the losses are unlimited and profits are limited, it is very important for short sellers to carefully research their prospects and be sure that things are bad. Moreover, it is important to be wary of penny stock promoters that may be trading against short positions and bidding up the prices of the stocks. However, there are many ways to profitably short penny stocks.

Here are a few tips to get started:

Only short penny stocks that are $0.25 or higher (due to margin requirements and the likelihood of manipulation).
Carefully watch past price ranges to determine your expected margin requirements.
Watch for stocks that go up on fluff news or press and wait for the day when it tops out.
Watch level II quote screens to identify where market makers are placing the floors.

Risks of Shorting Penny Stocks

Margin Requirements

Brokers require investors to put up collateral to guarantee against potential losses in the form of margin requirements. Often times, brokers will require OTC investors to have $2.50 of margin per share to short a stock under $2.50, which can make shorting penny stocks very costly. For example, if an investor shorted 2,000 shares of a stock at $0.50, you have to have $5,000 in your account. All along, the maximum profit for this position would only be $1,000, if the stock went to zero.

Execution Risk

Penny stock short sellers must also worry about execution risk with their trades. Short selling involves borrowing shares from someone else and selling their shares, so even if an investor finds a great short selling candidate, they may be out of luck if the broker has no shares to lend. Similarly, the pricing for these short trades may not be favorable due to the often-large disparity between the bid and ask price. As a result, investors must watch these prices carefully before initiating a short position.

Market Manipulation

Market manipulation has always been a problem in the world of penny stocks, but this risk is especially large when shorting penny stocks, since the losses when short selling are unlimited. The best targets for short-selling are often those subject to manipulation or promotion by unscrupulous web sites of funds. However, these manipulators have a distinct advantage over the short seller – they have capital, price and liquidity on their side – which means investors must be very careful.



http://theotcinvestor.com/how-to-short-sell-penny-stocks-121/

[JUPITER1963]

Naked Short Selling Is Killing OTC Companies 0 comments
May 23, 2012 11:15 AM

Shorts are alive and well and, the OTC Markets haven't seen the kind of rampant short pressure that is more and more commonplace today. Small development stage companies, and even profitable companies are being negatively attacked and sucked into a trap of naked short selling, which ultimately sends their stock prices plummeting, and often to the point of no return.

According to OTCShortReport.com a leading data provider of Naked Short Position information, a higher than normal number of companies are contacting them with questions ranging from who is shorting my stock to why are their securities being shorted so heavily. As a data provider, OTCShortReport.com doesn't know who's behind the shorting, but suspicions are it's Market Makers who are operating on a completely different playing field, are taking advantage of the rules.

Market Makers, unlike Brokers, can simply create shares out of thin-air that quite frankly cease to exist under the guise of creating liquidity and keeping markets rolling. The problem is when a Market Maker decides to send your stock in a downward direction, that's it, your company is going down. It doesn't matter whether you try to short squeeze the heck out of them or not, in the end, they always win.

Recently, ISM International (PINKSHEETS ISML), a victim of short selling, was so fed up with the abusive practices taking place with their stock, they contacted OTCShortReport.com regarding the possibility of creating a documentary to expose what is really happening. Only yesterday 73% of ISML was shorted for no apparent reason. Orders come into the stock, and Market Makers simply short against them, and then show up on the bid at much lower prices-waiting like predators. "I spend a great deal of the day explaining to my shareholders that we are being attacked. I have complained to the appropriate authorities, but no one seems to care," says Mario Quenneville, CEO of ISM International.

Naked Short Selling is also a common practice on penny stock promotions. Look at companies like SNPK, POTG, and current promotion GWBU. The short positions in these stocks are huge. Market Makers are building massive short positions in the dollar range, and effectively staying naked-short until these promotions get crushed, and give them the opportunity to cover in the sub-penny range. Of course, these Market Makers face no borrowing fees or lending contracts like regular Brokers, so essentially it's just the wild, wild-west where they know full well they can do whatever they please.

OTCShortReport.com executives say it's not uncommon to see 50% of a stock promotion being shorted. The big traders have lots of money… a lot more than the retail audience, and there is no urgency to cover these positions. Market Makers can't be scared into covering because quite honestly they don't care. A stock can run up 500% and they have proven they will just short more.

We invite investors to take a look at what is happening with this illicit naked short selling practice at www.otcshortreport.com

Feel free to query any OTC Stock you wish, and you'll be surprised at the amount of information you will find.

http://seekingalpha.com/instablog/2406831-shortracker/651241-naked-short-selling-is-killing-otc-companies

[ProCannabis]

sure ya can! over 400 million shorted shares in hesg last week! HESG is gonna burn them soon!

[Nebuchadnezzar]

HESG-Investopedia begs to differ

http://www.investopedia.com/ask/answers/06/otcpinksheetshortselling.asp#axzz2EX5rIn9N

is this wrong?

if this is wrong, please prove it.

can anyone here disprove this?