posted
Okay this is sort of going to be a jumble of questions. This questioning originated from the latest PRs from PLNI. PRs announced the naked short selling of PLNI and indicated a squeeze trigger price of .008.
Okay, first question, Basic selling short in my mind is not holding onto the stock and selling it off in a relatively short duration after buying. If correct what then is the duration threshold that determines a stock is long?
Am I confusing the selling off of a short buy stock with duration? If so, how then does one buy short? If the latter is correct, is a naked short sell the sale of a short buy stock? If this is illegle how can it be performed without repercussions?
Hopefully someone can decipher my line of questioning and give a noobie a hand. Thanks,
-------------------- "It's a head game...climbing a mountain that is, 20% physical:80% mental." Posts: 104 | From: San Diego, CA | Registered: May 2006
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posted
ballyman, hope to shed some light on this for you, so I'll post your q's one at a time...
Basic selling short in my mind is not holding onto the stock and selling it off in a relatively short duration after buying.
This is called short-term trading (not short selling), which is holding a position open for longer than a small price movement (flipping) or more than one or two sessions (daytrading). But, shorter than one year (using IRS distinction). So anything between a few days and one year can be considered short-term trading. Holding a position for more than one year is considered long-term trading (using IRS distiction).
On the major exchanges, you can legally take a short position (sell short) on a stock. You are selling a stock that you don't own because you think the price will go down, and you will hopefully buy to cover your short position later for a nice gain. How long you hold the position open will determine the type of trade (daytrade, short-term, long-term).
If someone says selling short is when you sell at a loss, well... that's called selling at a loss. It has nothing to do with short selling.
Now, on the OTC:BB and pinks, retail traders (you and me) cannot take short positions on stocks. We may buy, and then hopefully sell what we bought for a profit. We cannot sell, wait for the stock to tank, and then buy what we didn't own.
Let's keep this explanation confined to OTCBBs and Pinks, because short-selling on the major exchanges in a legitimate activity.
OTCBBs and Pinks, United States traders cannot sell short. Here's a list of those who can...
1) Market Makers--> MMs 2) Brokers/Dealers 3) Foreign investors <-- really interesting 4) Any individual, group or firm able to run a deal through #1, 2 or 3. <-- not that interesting, completely illegal, but it does happen.
The SEC, a U.S. agency, monitors and mandates for U.S. Market Makers and Broker/Dealers. MMs and B/Ds are allowed to sell short to maintain market liquidity. Their rules are more lenient than what is applied to the major exchanges. They must make an attempt to locate shares to justify their short position, but they are allowed more time to do so, especially on a fast moving stock.
The problems with this snowball because the MMs and B/Ds are after a profit... not a liquid market... and sometimes they make no attempt to locate the shares. Sometimes, they make mistakes... like short and locate restricted shares. If you want more info on the MM/BD status, go to the SEC website and search on 'short-exempt' or 'short-exempt status'.
Hope you follow this. MMs/BDs shorting is a legal activity.
Naked shorting is actually called 'failure to deliver' (FTD). This results when an MM or B/D short-sells a stock and does not locate shares to justify their short position. Remember, they don't necessarily have to locate the shares at the time of the trade. The SEC says they must have reasonable belief that the shares can be located after the trade. Settlement date on trades is usually three days later, which sounds like plenty of time to locate the real shares.
There's a lot to learn about this... The real shares are kept at DTCC, that's another area to cover once you get the basics, and they are electronically/phone/mail accessible. Transfer agents are the doorway between companies and the DTCC.
After 5 days of 'failure to deliver' the stock symbol shows up on the SEC SHO list, which you can see at the SEC website. Here's where it gets interesting --> Only companies that are reporting to the SEC are included on this list. This does not include non-reporting pinks.
Someone may argue this point with me, but I do not see where reporting to PINKSHEETS is achieving the same results as reporting to the SEC.
Naked shorting is illegal, and effectively allows you and me to buy counterfeit shares.
posted
If this is illegle how can it be performed without repercussions?
It would be so easy to simply say... Dunno.
That is a loaded question, and there are loaded answers.
Let's compare...
If you LEGALLY short sell google... don't do it, this is hypothetical... you are constrained by SEC regulations! Which are strictly enforced by your Broker/Dealer! When google continues upward, and you have triggered a margin call or exceeded a certain percentage of your portfolio value, your broker will close your position for you. You lose.
In contrast, the MMs/BDs can short sell Plasticon, a non-reporting pink - until recently. If a gross 'failure to deliver' situation occurs, the SEC has decided the best way to handle this is call for a trading halt. Now, the shareholders are victimized again, by the SEC. You lose again. Because of that, many of us have learned to spot gross illegal activity and profit from it, rather than expect the SEC to do it's job and prosecute the lawbreakers. Don't get me wrong, I still file complaints with the SEC when there is enough proof.
More and more traders and small companies are wise to market manipulation, forcing the short-sellers to restock their bag of tricks. I learn new things all the time. Sometimes the short-sellers get forced to cover at whatever price you want, and sometimes their bag of tricks saves them.
On the flip side, more 'questionable' companies are taking advantage of the moment by crying 'naked short-selling'. So take the time to research the company.
posted
ballyman, I hope that was enough to get your wheels spinning. There is so much more, someone should do a thesis on it. Oh yeah, learn to appreciate negativity from others (clue).
I own PLNI, it's been one of my 'TOP 3' long-term darlings.
I don't trust buy ins dot net to accurately calculate short money and squeeze trigger covering. Usually, my own numbers show fewer short dollars and extreme variability on the squeeze trigger prices. Not all shorts fail to cover.
However, in PLNI's case, my numbers are a lot higher than buy ins, with much more marked squeeze trigger points.
I won't say anything more about that, except to say, "Turek, thank you for holding out, staying strong, and please... enjoy the rewards. Just getting started and already reason to celebrate! Imagine that."
I'm hoping all yall (harharhar) jump in here and fix anything I got wrong, add what I missed, etc. There's just too much, and my fingers don't type as fast as my thoughts on this subject.
posted
Thanks TickTrader!! I appreciate the time you took to answer my questions. I had no idea that I had asked such fairly detailed questions. Anyhow I have read through once and I will probably have to read through a few more times to get it all.
It is interesting that a foreigner can sell our stock short but we can't, that is our regulations though I presume.
-------------------- "It's a head game...climbing a mountain that is, 20% physical:80% mental." Posts: 104 | From: San Diego, CA | Registered: May 2006
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posted
Your welcome, ballyman. Just remember, my posts don't even cover the basics, but it should give you something to flesh out. GL
One more for you to think about...
The MM/BD 'game plan' has been to keep the shares out of the public's hands and limit interest in the otc companies in general. They are good at what they do. When they fail, the company graduates to a higher exchange and they lose a meal ticket.
MMs/BDs do not hold short-term, but they go to the bank when the public does. Volume reports are reflecting more public long-term holding on many small companies. Let the war games continue...
posted
Great posts, Tick. Now if someone can come up with a way to defeat the MMs strategy, we can all relax. Anybody got any ideas??
-------------------- If I give you bad information, please feel free to sue me. I have nothing left anyway. Ed Posts: 1772 | From: Oxford, PA, USA | Registered: Oct 2004
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posted
Tick, so who are the MM's/BD's? Companies, organizations? How is it that they can hog up the shares sort of speak before the public can? So what you are also saying is if they (MM's) sell and the public is able to grab up the freed shares, that's when the stock can then go to say the AMEX?
-------------------- "It's a head game...climbing a mountain that is, 20% physical:80% mental." Posts: 104 | From: San Diego, CA | Registered: May 2006
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posted
Hi ed, and thanks. IMO - nothing is going to change until the SEC does a serious overhaul on this system and strictly enforces current regs. Why introduce more rules when the current ones are flaunted? We would need an army of Spitzers working for the public interest at SEC to see improvement in that area.
I have a tiny bag of tricks - sometimes it's just plain fun to poke at the sharks. Not a game for newbies.
For newbies - understand this -
1. You research a company, like what you see - good info, chart, volume, gaining interest from public.
2. Public buys counterfeit shares - which is nearly invisible. (search on 'CEBE' at SEC website)
3. Suddenly (but after public buys), bad info starts to surface - outlandish accusations, web pages that didn't exist when you did your research, some coming from the same sources that convinced you to buy. Intraday pps starts slipping (remember to look at close and weekly chart when this happens).
4. In doubt, newbies sell to save some of their money (which means you lost some, too). The damage to the company occurs when YOU sell your CEBEs into the market. MMs/BDs buy-to-cover, which closes their illegal short position.
5. To hide from prying eyes - accusations fly about the company diluting, when it was YOU selling and MMs/BDs swapping with each other to raise volume. More experienced traders begin selling with news of dilution, and now there are plenty of shares on record at DTC. Hence, there isn't enough public interest to support this scam of a company.
6. The company, which you really liked, loses market cap, can't get needed funding, but magically sees it's stock pps RISE again at the worst of times.
What can I say? It's worked for more years than I can remember. There's always newbies. You just have to trust yourself. I sell when I get what I want, some to remove original investment and some when I think a fair value has been reached. My original $500 has seeded investments in (not sure on this) 120+ stocks in multiple accounts. I don't mind taking a loss (twice on micros) on a mistake (a real scam company).
ballyman , before you invest another penny, learn about who wants to take it from you. Go to OTC Bulletin Board site, SEC site, and if you must - go to pinksheets site. Search allstocks, too - MM, Market Maker, Broker, Dealer, etc. Take notes as you go, it helps.
Believe it or not, there are just as many, maybe more, AMEX and NASDAQ companies moving to otc as there are companies graduating. Lately, AMEX feels like dictating when a company should reverse split (not enough price movement). Take a look at DSLN (otcbb) - they said 'no'. Imagine that!
-------------------- "It's a head game...climbing a mountain that is, 20% physical:80% mental." Posts: 104 | From: San Diego, CA | Registered: May 2006
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posted
This was posted by bond006 in the PBLS thread. I'm adding it here, germain to the discussion, for those wanting to understand the process involved. I don't know how to post a link to another thread, but I can copy and thank bond for bringing this info to allstocks. Good stuff, accurate flow, ignore ticker symbol and learn the mechanics. -----------------
Message list | Reply to msg. | Post new msg. « Older | Newer » By: PNEW122 13 May 2006, 10:43 PM EDT Msg. 49287 of 49288 Jump to msg. # My Version
I changed the ticker to PBLS.
About The CUSIP# and PBLS...
I believe that the Market Makers (MMs), while trying to keep an orderly market, have sold a substantial amount of shares in PBLS. The shares sold are believed to be shares that did not exist. This is thought to have been the cause for the decline in share price of PBLS becoming suppressed.
For those not knowing, a Transfer Agent is the Bookkeeper for a company and the middleman who monitors the bookkeeping process of a company’s shares. The Transfer Agent must square the books between its company, the Brokers, the Market Makers, and the SEC. If the company is its own Transfer Agent, then those responsibilities of the Transfer Agent resides with the company. Transfer Agents are not mandatory, but highly recommended to facilitate the bookkeeping process of a company's shares. This is important to know for later.
In taking this concept another step further for understanding, let’s imagine that you bought 500,000 shares of PBLS and the Float was gone. For what’s being insinuated by me, the Market Makers do not have shares to sell you because the Float is gone. What is thought by many to happen is that the Market Makers would sell you those nonexistent shares thus crediting your brokerage account the 500,000 shares you had requested, especially if this was a good client for that particular Market Maker.
Whenever a share is bought and credited to ones brokerage account, those same shares are not debited from the same computer system as the company’s Treasury. There are just too many companies out there to make all companies align to one electronic system right now. So the brokerage system is in a position to be manipulated.
The Brokerage Company you use for trading would be the one that has the electronic credit for those 500,000 shares. The money you placed in your brokerage account will be accounted for and wired as a credit from the Depository Trust Company (DTC) to the Market Makers. In-turn, then the DTC would disseminate those shares into your account. (I’ll talk about the DTC a bit later.)
When this happen, now there are 500,000 “nonexistent” shares that now “exist” to be circulated into the market because of all of this being done electronically. This result is what PBLS states as naked shorting or the selling of shares that had never “originally” existed from the company’s Treasury. This results in the price decline or low level price stabilization of PBLS from dilution of shares (that now exist) getting sold into the Float.
When the Market Makers do something in this nature, they pocket huge amount of gains from selling those shares that never originally existed. Something has to happen to force them to account for those shares. That’s why the CUSIP# must change. The new CUSIP# will be linked with the old CUSIP# by the name of the company first, the address second, and everything else third.
Each share located at a stock’s Transfer Agent (or the company with PBLS here) is tracked electronically by a CUSIP#. The stock certificate is a thing of the past. Whenever a CUSIP# changes, the Market Makers are required to match each share with the old CUSIP# with the new shares of the new CUSIP# for accountability purposes.
The DTC is the one who collects and disseminates the shares into your brokerage account. The information to make such happen is given to them by either the Transfer Agent or the company. In this case here, again, Transfer Agent have the responsibility to do such. So once Transfer Agent receives the new CUSIP# from the SEC for an already coordinated amount of shares indicated, they will send that info to the DTC.
Your Brokerage Company ultimately has the responsibility for squaring the amount of shares to come up with in your account with the MMs. If they have been shorted, then it’s up to your Brokerage Company and the MMs to figure this out for you to resolve any share discrepancies that exist.
Ultimately, with the assignment of a new CUSIP#, all of PBLS shares will be collected and redistributed under the new CUSIP# from the DTC to the Brokerage Companies. They must be accounted for. All of the old shares with the old CUSIP# will be swapped out for the new shares with the new CUSIP#. The MMs will have some serious problems, as they are aware of, if there are still some old shares with the old CUSIP# out there in people’s brokerage accounts awaiting to be swapped out for new shares with the new CUSIP#.
Here’s when it should start to get good. When demand is generated and there is not enough supply to fulfill that demand, then the Market Makers will be forced to entice selling by increasing the bid to create more selling than buying to keep from having an unbalanced share account for PBLS. It’s up to the company to generate demand and I trust that PBLS have done so and will continue to do so.
If buying is outweighing the selling then they must raise the bid high enough to force them to cover their short positions. This causes the Market Makers to chase the stockholders as opposed to the norm of the stockholders chasing the Market Makers. Personally, I don’t have anything against Market Makers because I under stand that they can sell shares of a stock they don’t own in order to make an orderly market. I think they have a limit for each issue of up to 10% of the stock’s Outstanding Shares. While some view this as Market Makers facilitating the market, many view such actions as manipulation and robbing from innocent investors.
As somewhat discussed earlier, the result would be investors complaining to their Brokerage Company. Then their Brokerage Company would be the one complaining to the DTC since the DTC was the one responsible for taking the investor’s money to give to the Market Makers to buy the shares with the old CUSIP# in the first place. The DTC will also have the same responsibility for making sure the same coordination take place for exchanging those shares electronically with the new CUSIP# with the Market Makers and placing those shares into investor’s brokerage accounts. Questions like, “Where are my shares?”
That’s why so many companies are so disappointed with the DTC today. Since the MMs are not forced to cover, the situation had never gotten corrected with many stocks. The OTCBB or OTC governing authorities can’t tell if a company’s stock have been shorted or not, since its all done electronically. The Market Makers and the Brokers are aware of these short positions though. Some companies are too.
They will only cover when they are forced to warrant accountability of those short positions. The responsibility of the monitoring of a company’s stock and making sure such short positions are resolved ultimately resides within the company first. If a company doesn’t take action to remedy their situation, nobody else probably will either.
I’m not saying that PBLS should be trading at $1.00+ or so, but I am just saying that this thing should be trading much higher than its .03 to .032 cents level that it’s at now.
With the situation at hand, I think that PBLS is about ready for movement. Most companies only talk about doing what PBLS has done. The information above is PBLS according to how I view what is happening as an opportunity. They are only my views that I was asked to share to help people see what I see and because I really do like PBLS. I hope we all become prosperous.
Most often, to entice sellers, the pps will dramatically drop. Many shareholders will sell to try to salvage some of their money. Only after several attempts fail, will the pps rise. Even then, most that survived the drop without selling will sell once they are at, or close to, breakeven. Finally, if more positions need to be covered, the pps will rise to entice sellers for a gain.
Chartists will recognize this pattern as a large 'W' on daily or monthly charts. Intraday, it means nothing. WS Analysts say 'W' = Winner. If the last upward trend continues, you will make bank. To say they are all winners is silly. You can probably guess what a large 'M' stands for.
Look for that pattern on a PINK historical chart, then search on old bulletin board posts (news, filings, too) for that stock to match dates with the pps activity.
omg, running out of secrets (not). Try this with a few historicals, and you will know who, what, when and why.
-------------------- "It's a head game...climbing a mountain that is, 20% physical:80% mental." Posts: 104 | From: San Diego, CA | Registered: May 2006
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