The Shorting of Frauds, Overhyped and Bankrupt Stocks Journal

Oh goodie, didn't even see that the post was a year ago so I get to find out whehter my instinctive suspicions of this guy being a moron are correct:

1) FSIN bought out at above 52 week highs.
2) FMCN seems to be going strong... if you shorted at the bottom chasing muddywaters and held to today you are down 25% + margin interest

Embarrassing...

Quote from Daal:

In this journal I would like to discuss, share and construct trade ideas revolving stocks that are likely to
-Go to $0 for a variety of reasons(Assuming this will be a big move)
-Be delisted from main US exchanges
-Have enforcement action taken by the SEC or another regulatory agency that is likely to tank the stock
-File for bankruptcy

Currently 2 stocks that I'm short(through Oct and Sep puts) are FMCN and FSIN. These 2 are chinese frauds that are highly likely to be delisted within 1 year. The question is whether I was correct in constructing my trade through puts and whether I will have the patience to keep rolling over them. So far these stocks are defying gravity. Jim Chanos is short FMCN.

Here are the reports that lead me to put the trades on
FMCN
http://www.muddywatersresearch.com/research/fmcn/initiating-coverage-fmcn/
FSIN
http://www.zerohedge.com/news/muddy...hi-copperweld-fsin-represents-high-risk-fraud

Please post ideas that meet the criteria I set, overvalued/momentum stocks do not meet that criteria. FB, AMZN, etc they might be overvalued but are pretty darn unlikely to tank to the extend that stocks I want to focus on are likely to
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Quote from FrankSlaughtery:

two questions (i'm seriously not being critical or trying to start an internet fight i'm curious b/c i employ a similar strategy of shorting broken momentum stocks).

1. how do you "know" a stock will miss earnings? and even if you did the stock can still rally after that?

2. re Z, do you use stops like when it rebounded all the way back up to 40?
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1) you can't know for sure but sometimes you might be able to tell through fundamental analysis that the market or analysts are missing something and that makes it more likely than not the stock will miss

2) my stop was the standard 'garbage index' 100% stop. In volatile stocks I cover when they go against me by 100%. Nothing special about that number, could be 90% or 100%
 
Quote from SeventhCereal:

Oh goodie, didn't even see that the post was a year ago so I get to find out whehter my instinctive suspicions of this guy being a moron are correct:

1) FSIN bought out at above 52 week highs.
2) FMCN seems to be going strong... if you shorted at the bottom chasing muddywaters and held to today you are down 25% + margin interest

Embarrassing...
More...

If you want to point out losses these are not even good examples because my losses were limited by the buyout price. I wish all my short losses were like this ones. I've shorted stocks that went up four fold in 2 weeks against me, but I also shorted ones that collapsed 80% in less than a week (GNIN)

Thats why I write about how the position size should be kept small and with a 100% stop (plus a stop when you don't like the news)
 
are you not aware of Tim Sykes? This is essentially what he does in a nut shell. you might as well join his chat room so you get the picks in advance to short. He shorted GNIN and made a killing. same with ECAU. Also if you really want to make money just short all the APS picks.
 
I closed my STP short when they got extension of debt maturies, thought the stock would squeeze as shorts covered and retail buyers pile in. Normally it probably would, I suspect lots of debt holders are shorting the stock as a hedge
 
STP filled for BK. I covered in the BS about deferring the bond maturities at 1.24 a while back. The chinese are the worst, they try pretty much everything to hurt the shorts before they let it go

I try to avoid shorting chinese stocks like a plague these days
 
I don't think any US company would have tried to pull that off since the laywers advising them would have told them it wouldn't work. I should have known more about these bond contracts, lesson learned
 
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