Short seling: The T+3 Close-Out Requirement

[patchie]

Quote from luckybastard:

And wouldn't it be possible that in this huge bear market, the stock would have tanked 10% without the whole scam ?

You miss the point, the shorts covered for profit. The tanking was a coordinated effort done by short sellers. Any long investor would have read the story and known it was bogus but the short sellers had already made the headline appear true by the massive and instantaneous selloff.

All Airline stocks dropped at EXACTLY the same time, the spike was instantaneous and the bottom was reached in less than 5 minutes. The hitting occurred before investors who held these stocks blinked. The short covering started while investors were still bailing out in a panic. That is what big guys do.

BTW...What defined the valuation in these markets? What news other than bogus news woudl have created the 10% loss? Certainly nothing that was reported publicly.

 

[psytrade]

patchie-

I think you are a believer in too much of that overstock, dendreon flytiger conspiracy theory nonsense.

SAC was up only 1% ytd last I read about a week ago - I doubt very much they are getting rich shorting naked in this environment.

 

[patchie]

Quote from luckybastard:

I'm not under that impression. Compared to a hedgefund, any daytrader is noise. But I wasn't comparing myself or any daytrader to a hedgefund, I was merely saying that the basics of daytrading are the same, regardless of your BP: whether you short a hundred, thousand, a million or 100 million shares, if you cover them the same day, the total net market impact = 0.

Wrong. do you think your orders are executed the same as the big guys? Your selling, is it done by sophisticated computers that likewise monitor the stock trends?

The big guys use program trading and they use algorithms that search for key news on the wire. The reactions to certain buzz words is instantaneous. As a day trader you are just getting in after they have been in and are starting to get out.

When you day trade, do you go short, start covering, re-short to control/reverse momentum, begin the recover, etc.... or do you short and cover whole lots for the most part? Big firms can manage markets. They also gain insight into order flow that you won't see.

I am not a short seller but a long investor. I realize that I can not trade like teh big long investors despite the same basics.

 

[patchie]

Quote from psytrade:

patchie-

I think you are a believer in too much of that overstock, dendreon flytiger conspiracy theory nonsense.

SAC was up only 1% ytd last I read about a week ago - I doubt very much they are getting rich shorting naked in this environment.

Funny, I have talked to a former administrator to Cohen and worked for some time with a former fund manager of SAC. I think in my contacts with these people I learned a little about how they operate.

Stevie making 1% in a year - never. Better check again. SAC has averaged over 25% returns for the past decade plus.

 

[luckybastard]

Quote from patchie:

Wrong. do you think your orders are executed the same as the big guys? Your selling, is it done by sophisticated computers that likewise monitor the stock trends?

The big guys use program trading and they use algorithms that search for key news on the wire. The reactions to certain buzz words is instantaneous. As a day trader you are just getting in after they have been in and are starting to get out.

Not sure how all this relates to my statement that, regardless of your volume, starting flat and ending flat = 0 net market impact.

 

[patchie]

psytrade, I thought this was a rather good dialogue. Was there a need to come in and muddy it with your unnecessary attacks?

 

[patchie]

Quote from luckybastard:

Not sure how all this relates to my statement that, regardless of your volume, flattening out the day = 0 net market impact.

Very simple, if you raid a stock hard on unlimited shares because you re-use the same locate over and over, create a panic in the market that pulls investors out in fear, and cover in that fear; net out or not, you are manipulating the market.

Do you have a problem with a pump and dump? Run a stock up on false rumors and early buying to support the rumor and then sell out in the buy side euphoria to collect your profit? You shouldn't based on how I described the big funds that day trade and your acceptance to that.

day traders creating liquidity in the natural price discovery of a market is vastly different that a day trader that overwhelms a market bid intent on driving away demand so that a market will fall under a panic selloff; Regardless of closing net zero.

 

[luckybastard]

Quote from patchie:

Very simple, if you raid a stock hard on unlimited shares because you re-use the same locate over and over, create a panic in the market that pulls investors out in fear, and cover in that fear; net out or not, you are manipulating the market.

Of course. But If i sell a million on some illiquid stock and you as a investor, use that to your advantage and pick it up cheap, I'll end up losing because I'll have to cover at higher prices since you as an investor took shares out of the market.

Patchie, my point is simply that you fail to see that daytrading is TOTALLY different than inter day trading. The SEC was worried about the sole fact that in this climate, if you keep on selling day after day, a company will chapter 11, sooner or later. The hedgefund doesn't have to cover, the stock is just gone. THAT is what the SEC wants to prevent. (and btw, this is even not true, since if a stock holds value, there will ALWAYS be another hedge fund that buys the stock at the insane low prices the 'manipulating' hedge fund is shorting at)

You can't cause chapter 11 in one day. If your focus in trading is purely 1 day and you cover the same size you shorted, same day, net market impact is 0.

 

[luckybastard]

And btw, what people like you fail to see, Patchie, is that if FNM and FRE would have had some value, the whole tank would never have happened, smart people would have stood up and would have started to fight the shorters and squeeze them. In the end, it's all about value. If you keep on selling something that's worth $10, at $1, you'll end up losing. No matter how big your pockets are, you'll lose.

 

[patchie]

luckybastard, You now sound like an apologist for the predators.

These Credit Default Swaps - who were the investors in such? why are investors now suing anks and hedge funds for their investments in these vehicles that crashed.

The fact of the matter is, an accelerated free fall enacted by predatory short selling made it IMPOSSIBLE to let these companies dig themselves out. the free fall in market, along with rumors that drove panic, fear, and a run on the bank created a situation where there would only be one outcome.

Bear Stearns had adequate liquidity until the run started. Lehman could have survived, until the run started. If the runs were not raids, they would have raised capital to cover debt the way Merrill did. But they ran out of time as teh collapse was meteoric.

This is a chicken and egg scenario we have here. By your comments it seems evident that you firmly believe that short sellers should be able to drive any company out of business. Apparently there is no social responsibility in the short seller.

I never did see your response to the pump and dump. In reality, teh stock would eventually return to equilibrium so who cares if a few short sellers are squeezed out in the pump correct. It is their fault for selling out. Do you have issue with a manufactured short squeeze of is the manufactured raid the only one you accept because you are on that side of the trade?

For decades the predatory short seller has been given a free pass. regulators only went after teh P&d, now they are looking at the counter-act and suddenly those on that end of the stick are whining. Funny how that works.