Wednesday, October 14, 2009

Market makers and naked short sellers.

Do market makers play games? In my opinion, they game they play is more like poker than the three card Monte some theorists believe. It’s funny to read the term big boys when it comes to OTCBB stocks. I am not sure if the term even refers to the MMs or the intuitions, but There ARE no big boys in BB stocks. Hedge funds and pension plans and mutual funds DO NOT BUY BB STOCKS. Pension plans and hedge funds do not buy them EVER, that is a fact. And not just because they are risky, illiquid, and too small to make a return on the scale needed – they are not allowed to invest in stocks less than 5 dollars. As for hedge funds, they will invest in anything worthwhile but they look for big returns, it’s nearly impossible to make more than a million dollars on a company valued at less than 25m especially when most of the shares outstanding are tied up with insiders. Now, back to the price of chickens… MM’s DO play poker style games. They can use low volumes around whole numbers where they know stop losses are set and they can just do little things that any expert in any industry knows to do better than the rookie or dilettante. HOWEVER. MM’s cannot keep the stock price down artificially for too long. If they put an offer below the market price, it will get taken and they HAVE TO SELL THOSE SHARES. You cannot “bluff” in this market simply with quotes. That would take extreme coordination with other mms and even then you actually have to sell the stock, not just quote that you “would” sell the stock. Actions speak way louder than words. They have to put their money where their mouths are… NOW. The coordination and conspiracy brings me to the next point, NAKED SHORT SELLING. Short lists and regulations have been updated in the past years, but as far as I know, the only way for a NAKED SHORT SELLER to really “win” is if they actually put the entire company out of business… otherwise they have to cover those shares eventually.

Thursday, October 1, 2009

Hidden Orders

B or BS?

Flash Orders

Bullish on them or Bullshit on them? Obviously no short term/long term dynamic here, just B or BS and an explanation why.