The Shorting of Frauds, Overhyped and Bankrupt Stocks Journal

Quote from m22au:

Daal,

Here is another Brazil idea:

OGX Petroleo e Gas Participacoes SA
http://www.bloomberg.com/quote/OGXP3:BZ
http://finance.yahoo.com/q?s=OGXP3.SA&ql=1

The very negative:
"Batista’s OGX Plunges to Record on Oil Well Shutdowns: Rio Mover"
April 17 (Bloomberg) -- OGX Petroleo e Gas Participacoes SA stocks and bonds slumped to record lows after Brazilian billionaire Eike Batista’s oil company shut two of the three wells at its only producing field.

OGX’s 8.5 percent bonds due in 2018 dropped 12.77 cents to 57.19 cents on the dollar at 1:30 p.m. in Sao Paulo, sending yields to a record 23 percent. Shares sank 5.7 percent to 1.32 reais, after falling as much 13 percent to a record 1.22 reais.

However the risk for shorting it is that:

http://www.foxbusiness.com/news/201...ptions-shrink-amid-output-financial-troubles/

n October 2012, Mr. Batista granted OGX the right to demand the subscription of new OGX shares at a price of 6.30 Brazilian reais ($3.15), almost five times the current share price after the latest production figures sent shares sinking to a fresh all-time low of BRL1.22 Wednesday.
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Eike is getting destroyed in the media every week. I'm skeptical of shorting situations like this because with so much pessimism usually the asset trades bellow its fair value, he also employs a lot of people, no idea if he will get bailed out or not but its a risk. I was actually thinking of buying one of his stocks because there is probably one good company that is getting dragged down in the media hate. But only 2 or 3 trades in NY and I don't have a brazilian broker because it hurts my US buying power
 
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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Off the cuff, and not having read anything except the first post, I'd like to comment. First, it should never matter to you who "else" is short (or long) or neutral. More pertinent to this post, in shorting you should always leave yourself an out, no matter how bad the company looks (bad meaning there are a lot of strong reasons the price may drop). There are larger companies always looking to buy a company on the cheap, even if they want just a part or even intellectual property of the "dying" company. Acquisitions typically raise the stock price of the company being purchased.

Of course, none of this is as important as sticking to your rules for closing out a position.

I have not opened a position long since 2005, except some of the ultra short etfs.
 
Quote from newwurldmn:

Borrow is expensive, but why not sell the combo in the options market and then buy stock as you wish to cover?
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As I understand the borrow rates after the options prices (due higher delta hedging costs) so one way or the other you pay up
 
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