The Shorting of Frauds, Overhyped and Bankrupt Stocks Journal

Quote from jb514:

So what happens to the options if they halt NQ for a long period of time? I like the short put idea. I think the odds of a squeeze are decent and the vol looks pretty good
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Let me put a correction here, it looks like Cutten is right, some people might exercise their puts even with the stock halted and the last trade putting the option OTM because they would be speculating the stock would open down 80-90% in the grey sheets (which is a likely outcome IF the SEC suspends the stock). So it might not pay to short the puts if you think there will be action the in the next few weeks, but I don't think it is likely that there will be.
FSIN was a quite similar fraud, they did a tiny fraction of the claimed business revenues. NQ is like a $400-$500M market cap company, it wouldn't be that expensive for the Chinese to pretty much RIP the shorts and Muddy Watters by buying this thing out at $15-$20, not saying that they will but they have shown willingness to save frauds as a form of 'investment' to keep their IPOs and reverse mergers scams going (FMCN was a multi billion dollar buyout)

Just trying to stimulate some thinking so people don't get caught in the short momentum trade hoping for government help
 
Too late now, NQ is now pumping its stock with PRs. Stock is squeezing. Could be a good buy on M&A rumors if they come out at some point
 
What are you thinking about NQ? Hearing some pretty negative stuff today making me think everyone is shorting. I think I have a slight bias to the upside at the moment just on the premises of a squeeze once all these rumors settle. I wasn't really paying attention during FMCN so I don't really have anything to compare this to.
 
Its harder to make a call here, the premium has gone down so there is not a ton of juice to take risk shorting puts. At the same time it seems that the market is seeing through the BS of the company and some research firms. Too crowded to short to, I don't want to get squeezed then hope for a SEC bailout. I don't have a good trade. If it implodes some more there might be a bounce play
 
Quote from Chuck Krug:

Short USNA
WRLD
GLD
CHE
HLF
DDD
QCOR
IOC
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This is a very dangerous environment to be short popular names, this market seems that it might go 1999 before it all blows up. The high short interest names will be the first ones marching forward. I had to completely stop using this strategy when I saw the ridiculousness of stocks like Z and QCOR making large comebacks. The fundamentals don't matter. As a daytrade they can be a great play, specially with news but for short and hold I rather wait for confirmation that sanity has returned
 
Quote from Daal:

This is a very dangerous environment to be short popular names, this market seems that it might go 1999 before it all blows up. The high short interest names will be the first ones marching forward. I had to completely stop using this strategy when I saw the ridiculousness of stocks like Z and QCOR making large comebacks. The fundamentals don't matter. As a daytrade they can be a great play, specially with news but for short and hold I rather wait for confirmation that sanity has returned
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Thanks for your input Daal.

It seems like Hugh Hendry shares your view:
http://www.zerohedge.com/news/2013-12-06/hugh-hendry-throws-bearish-towel-his-full-must-read-letter

By "popular names" - do you mean momentum stocks like Z, QCOR, DDD and so on?

Does your definition "popular names" include stocks like IOC (and maybe also HLF and WRLD) where there are fraud concerns?
 
IOC provides a good example, it tortured shorts for years with squeezes, if somehow they survived all of that, they still had to pay borrow fees the whole time. All of that to blow up in one day. If the trader had cutback the position given the recent run to $90, then he probably lost money even though the stock plunged (specially with borrow fees).

NQ was similar too, it tortured shorts for months to give it all back in a few hours. The only way to stay in it is to short and hope for the best

But one of the strongest parts of the markets have been high short interest stocks. If stocks still got a 5-15% rally left in the tank as I suspect they do, high short interest stocks might put a 20-30% rally upward. In this HFT driven low liquidity environment, this can turn into major blow off tops in high short interest names, 20-30% it is an average, it could mean 50-100% in individual names. This is the worst short selling environment in years (maybe ever?), it pays to stay defensive and avoid going against the momentum train.

Yesterday was incredible, the jobs report was strong, Hilsenrath said we could be within weeks of a taper and yet somehow stocks leaped 1%. Fundamentals don't matter, I can always short when they start to matter again, the markets will always be there
 
Quote from m22au:

Thanks for your input Daal.

It seems like Hugh Hendry shares your view:
http://www.zerohedge.com/news/2013-12-06/hugh-hendry-throws-bearish-towel-his-full-must-read-letter

By "popular names" - do you mean momentum stocks like Z, QCOR, DDD and so on?

Does your definition "popular names" include stocks like IOC (and maybe also HLF and WRLD) where there are fraud concerns?
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My definition is high short interest stocks, ZH has provided good stats on this being one of the hottest sectors of the market
 
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