Replies to post #98 on Stock Ethics and Philosophy 101

[Huggy Bear]

BigBake has it right as usual. I might add that one counter to the shorting theory of penny stocks is plain reality. Interactive Brokers has the most selection of any penny stocks to short, but to do so you have to have some serious margin power. For each share shorted through IB it requires 2.50/sh in margin. Therefore, the lower the price of the penny security the less shares you can take short. Unless you have a million in margin available it is practically impossible to short any sub penny effectively and make any real coin. Plus, I have never seen IB even have a sub penny available to short. You can short other POS penny stocks, but the lower the pps is the more your capability as a retailer is hampered to do it to any financial benefit to you when it crashes. At some point it becomes impractical to tie up your margin power just to make a few bucks off shorting a POS that has become too cheap to even bother with.

I am also fairly certain you cannot even short any penny stock via IB if it is not SEC reporting.

The OTC pink market retail short theory is just another shuck and jive attempt by the pumpers to justify a falling pps.

We have all heard rumors of boutique hedge funds shorting OTC stocks, but I do not know if this is possible or not. A retail investor is not going to find a brokerage to short OTC pink stocks, period. Perhaps Brad you could clarify that one for us, the rumor of penny hedge funds having more flexibility and power to short OTC pink stocks. And welcome to the board by the way you are highly respected in my book.

[newpontiac]

Brad, thanks for giving that excellent example, going backwards through the links trying to decode it into something that a newb could comprehend in a limited post is still escaping me. The Riskless part means "Riskless", correct? The way I am seeing it is the Market Maker never holds or takes ownership of the shares, so therefore the market maker could never make or lose money on the transaction, is that correct? If a market maker can never hold or make money on a transaction then they would never short the stock or go long, they simply move the shares to the buyers/sellers broker. Still fluid on the above translation, hoping BigBake will stop by and break it down like he has the DTC chills/freezes.

That quote on the bottom of your post, is that your belief on newbs entering the penny stock arena? Thanks to malc we can expound on that here.