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Subj: Re: Shorting rules
Date: 98-03-19 14:25:50 EST
From: ggray@xxxxxxxxx (gary gray)
Sender: owner-realtraders@xxxxxxxxxxxxxx
Reply-to: ggray@xxxxxxxxx
To: realtraders@xxxxxxxxxxxxxx (RealTraders Discussion Group)
You will love this!!! (rules don't mean squat)
Example: Let's say xyz company goes public at $10.00
and issues 1,000 shares.
You buy all 1,000 shares from abc Brokers.
I sell short 1,000 shares of xyz through abc brokers.
Voila!! YOU are long and responsible for 1,000 shares.
I am short and responsible for 1,000 shares.
Theorectically, If someone wants to short another say
100 shares, their broker is supposed to locate and borrow said shares
to sell. Rules??
A "Short squeeze" happens when someone wants to buy
100 shares of abc, and you hold the entire 1,000 share float. My
broker is going to call me and force me to
"cover" by buying back 100 of the 1,000 shares I have borrowed (those
1,000 shares have been sold elsewhere creating 1,000 shares of "fake
stock" that is floating
but not part of the companies' "authorized" (got that SEC loophole!!)
float.
So the answer to your question is that the total float
can expand to 200% of the authorized float do to shorting.
When pro's act in unison (collusion) they get a bunch of ballyhoo
going (rumors) that starts the short ball rolling. The short interest
starts to expand big time.
Then share holders (hmmmm) call their brokers and request delivery of
their certificate, (((you can do this at any time, most brokers, when
you sign an acct. ap. have a little box you check so the broker can
"keep securities in safe keeping on your behalf" (and loan for
shorting>> more commish!!))). When enough shareholders request
delivery of their certs., it forces the brokers to "Call in stock"
because they need the physical certs. to deliver to the share holders
who have requested physical possesion of their certificates. That
forces the shorts to cover at ever increasing prices because they MUST
deliver the stock,
and the original share holders aren't selling, they just want their
certificates to put under the mattress!
The best case I have seen of this happened in the mid 1980's with a
company called Copytelle (COPY). It went from $18.00 per share to
around $60.00 in a week. Split 2 for 1 (now the shorts are short twice
as much) that had the stock at $30.00. It went to $120.00 in the next
three weeks (yeah the SEC was watching, but nothing happened) and then
it slowly fell to $3.5 where it is today!
I haven't played a real short squeeze since COPY and it was something.
When the newsletter writers pointed out COPY as a bona-fide squeeze I
bought shares at $22.00
A couple days later I sold at $34.00. Next thing I knew it was at
$60.00 and splitting!!
Regards,
Gary
P.S. If you buy GSA and it is a real (planned) squeeze
hold on.... TIGHT!! :)
---Ruth Alexander <harlequin.stone@xxxxxxxxxxxxxxxx> wrote:
>
> To anyone who knows the intricate rules of shorting...
> is it possible for more shares to be shorted than a company actually
has
> issued or is currently outstanding? Big Charts' site seems to
indicate
> that 189% of GSA's shares are shorted. I thought that in order to
> short, a broker had to sell actual shares of stock that were either in
> their inventory, or borrowed inventory from another broker.
> Thanks in advance for your information.
> Best regards,
> Ruth
>
Mark, I hope this is what you're looking for.
Good Trading,
Wayne
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