{"id":1555,"date":"2009-12-19T14:26:20","date_gmt":"2009-12-19T08:56:20","guid":{"rendered":"http:\/\/www.niftylivecharts.com\/blog\/?p=1555"},"modified":"2009-12-19T14:26:20","modified_gmt":"2009-12-19T08:56:20","slug":"ten-short-selling-strategies","status":"publish","type":"post","link":"https:\/\/www.niftylivecharts.com\/blog\/ten-short-selling-strategies\/","title":{"rendered":"Ten Short Selling Strategies"},"content":{"rendered":"
Short Selling Strategies<\/div>\n
here are dozens of ways to sell short a stock.<\/div>\n
1. Traditional Short Sale: Borrow the stock against a fifty percent margin.<\/div>\n
This is the only type of short sale that can be squeezed when the share<\/div>\n
price moves up because the short seller must add money to their margin<\/div>\n
account.<\/div>\n
2. A Market Maker Short Sale: U. S. Market Makers are not required to make<\/div>\n
physical delivery of stock certificates when they sell it. They are assumed<\/div>\n
to be a repository of the company’s shares.<\/div>\n
3. A Brokerage House Short Sale: This is a decision not to execute a buy<\/div>\n
order from a client, but show the stock as owned by the client on their<\/div>\n
monthly brokerage firm account statement.<\/div>\n
4. A Clearing House Short Sale: The Clearing House doesn’t execute the buy<\/div>\n
order, but credits it to the brokerage firm client’s account.<\/div>\n
5. A Naked Short Sale: This is where two brokerage firms agree to trade<\/div>\n
stock in a company with neither brokerage firm requesting physical delivery<\/div>\n
of the share certificates.<\/div>\n
6. An Insider Short Sale: This is when insiders with restricted stock use<\/div>\n
it to sell short their company. It’s illegal. It was a common practice when<\/div>\n
the Regulation S Hold Period was 40 days.<\/div>\n
7. A Ferrari Short Sale: This is where a bloc of stock is purchased. The<\/div>\n
stock is converted to derivatives, thus factoring the stock one hundred<\/div>\n
fold or more. The short sale doesn’t occur in the Stock Market, but the<\/div>\n
derivative owners are holding a short position.<\/div>\n
8. The DTC Short Sale: This is when Depository Trust Companies use the<\/div>\n
stock they hold to sell short that stock.<\/div>\n
9. The International Short Sale: Stock’s created offshore. The company is<\/div>\n
listed to trade outside the United States (usually Canada). However the<\/div>\n
company is trading in the States. The shares are sold into the States. The<\/div>\n
Short Sale is moved to the Primary Country, where the local brokers can<\/div>\n
ensure that the short position will be covered by the listed company, if<\/div>\n
there is ever a successful short squeeze.<\/div>\n
10. The Arbitrage Short Sale: LTV – Scattered Securities is an example of<\/div>\n
this short play. The Court in the LTV reorganization determined the<\/div>\n
exchange rate for new shares for old shares at three cents. The Market<\/div>\n
didn’t read the Court decision. The old shares traded far higher than the<\/div>\n
Court Ordered exchange rate. The short sale was done by selling old shares<\/div>\n
and buying new shares before the Court mandated exchange of share<\/div>\n
certificates.<\/div>\n
11. The Street Stock Short Sale: Sellers who are insiders or who allege to<\/div>\n
be insiders sell counterfeit stock to buyers outside regular market<\/div>\n
channels.<\/div>\n
12. The MIDI Short Sale: Brokers sell stock at prices well above the actual<\/div>\n
trading price of the stock. This has been popular with German OTC stocks<\/div>\n
sold into the Middle East. The gap between the sale price and the trading<\/div>\n
price is an effective short sale.<\/div>\n
13. The Depository Receipt Short Sale: Using counterfeit stock, the seller<\/div>\n
deposits it into an overseas bank. They then sell Depository Receipts<\/div>\n
against the counterfeit shares held by the bank. I’ve seen this done in<\/div>\n
Asia.<\/div>\n
14. The Rockford Short Sale: An investment firm buys shares and takes<\/div>\n
physical delivery of the stock certificates. They replace the real share<\/div>\n
certificates with counterfeit share certificates. Next they sell the real<\/div>\n
shares back into the Market and repeat the process. This practice does<\/div>\n
wonders for their balance sheet. The tactic was popularized in the Rockford<\/div>\n
TV Series. It’s been done in Asia with NYSE shares.<\/div>\n
15. The Tax Haven Bank Short Sale: Small (usually Caribbean) banks act as<\/div>\n
agents for their clients unwilling to reveal their identity. The client<\/div>\n
wants to buy stock. The bank doesn’t buy the stock on behalf of the client.<\/div>\n
They simply show the sale within the bank’s accounting system. This<\/div>\n
practice extends to gold etc.<\/div>\n
16. The Lost Certificate Short Sale: Client requests share certificate.<\/div>\n
Broker sends it certified to the slightly wrong address. It’s returned to<\/div>\n
broker. Using the certified receipt broker claims the client has the share<\/div>\n
certificate. A year is spent in proving it never arrived. Meanwhile the<\/div>\n
broker has the share certificate and can use it to cover other short sales.<\/div>\n
This happened to me in Vancouver.<\/div>\n
17. The Margined Short Sale: Buyer buys stock on margin. They can’t take<\/div>\n
physical delivery of their share certificates. The broker sells the<\/div>\n
margined account non-existent stock (a short sale).<\/div>\n
18. The Takeover Short Sale: Brokers add non-existent stock into a takeover<\/div>\n
with stock transaction. The buyer pays for the non-existent shares. The<\/div>\n
short seller gets cash or stock in the buyers company.<\/div>\n
19. The Attrition Short Sale: For OTC stocks about 3% of the beneficial<\/div>\n
owners of the stock disappear each year. They die, forget they own the<\/div>\n
stock, etc. Brokers can safely sell short 3% of the float each year relying<\/div>\n
on the fact that the beneficial owners will never claim their stock.<\/div>\n
20. Counterfeit Stock: Professionals regularly send counterfeit share<\/div>\n
certificates to Transfer Agents. A surprising percentage are accepted as<\/div>\n
real share certificates. The result is the professional effectively has<\/div>\n
sold short the shares involved in the certificate.<\/div>\n
21. Issue Depository Receipts without holding the stock and sell the<\/div>\n
Depository Receipts.<\/div>\n
22. The Warrant or Option Short Sale. Buyer holds the right to exercise<\/div>\n
warrants or options, but doesn’t do so. Instead, they sell short the stock<\/div>\n
and use the options or warrants as insurance. This was popular among VSE<\/div>\n
underwriters in the 1980s-1990s<\/div>\n
23. Reg S Short Sale. Same format as the Warrant or Option Short sale, but<\/div>\n
using cheap Reg S stock. The short seller is exposed for one year.<\/div>\n
24. The Lending Short Sale. This was used by the guy who introduced me to<\/div>\n
the business. You offer to lend 90% of the face value of the stock to the<\/div>\n
borrower for a long period of time. Your interest rate is better than that<\/div>\n
of a bank. You take in the stock and sell it. You lend 90% of the proceeds<\/div>\n
from the sale. You are now short the stock. You collect your interest<\/div>\n
payments until the borrower defaults on the loan.<\/div>\n

Here are Ten ways to sell short a stock.<\/p>\n

1. Traditional Short Sale: Borrow the stock against a fifty percent margin.\u00a0This is the only type of short sale that can be squeezed when the share\u00a0price moves up because the short seller must add money to their margin \u00a0account.<\/p>\n

2. A Market Maker Short Sale: U. S. Market Makers are not required to make \u00a0physical delivery of stock certificates when they sell it. They are assumed\u00a0to be a repository of the company’s shares.<\/p>\n

3. A Brokerage House Short Sale: This is a decision not to execute a buy\u00a0order from a client, but show the stock as owned by the client on their\u00a0monthly brokerage firm account statement.<\/p>\n

4. A Clearing House Short Sale: The Clearing House doesn’t execute the buy\u00a0order, but credits it to the brokerage firm client’s account.<\/p>\n

5. A Naked Short Sale: This is where two brokerage firms agree to trade\u00a0stock in a company with neither brokerage firm requesting physical delivery\u00a0of the share certificates.<\/p>\n

6. An Insider Short Sale: This is when insiders with restricted stock use\u00a0it to sell short their company. It’s illegal. It was a common practice when\u00a0the Regulation S Hold Period was 40 days.<\/p>\n

7. A Ferrari Short Sale: This is where a bloc of stock is purchased. The\u00a0stock is converted to derivatives, thus factoring the stock one hundred\u00a0fold or more. The short sale doesn’t occur in the Stock Market, but the\u00a0derivative owners are holding a short position.<\/p>\n

8. The DTC Short Sale: This is when Depository Trust Companies use the\u00a0stock they hold to sell short that stock.<\/p>\n

9. The International Short Sale: Stock’s created offshore. The company is\u00a0listed to trade outside the United States (usually Canada). However the\u00a0company is trading in the States. The shares are sold into the States. The\u00a0Short Sale is moved to the Primary Country, where the local brokers can\u00a0ensure that the short position will be covered by the listed company, if\u00a0there is ever a successful short squeeze.<\/p>\n

10. The Arbitrage Short Sale: LTV – Scattered Securities is an example of\u00a0this short play. The Court in the LTV reorganization determined the\u00a0exchange rate for new shares for old shares at three cents. The Market\u00a0didn’t read the Court decision. The old shares traded far higher than the\u00a0Court Ordered exchange rate. The short sale was done by selling old shares\u00a0and buying new shares before the Court mandated exchange of share\u00a0certificates.<\/p>\n","protected":false},"excerpt":{"rendered":"

Short Selling Strategies here are dozens of ways to sell short a stock. 1. Traditional Short Sale: Borrow the stock against a fifty percent margin. This is the only type of short sale that can be squeezed when the share price moves up because the short seller must add money to their margin account. 2. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[1],"tags":[4548,732,4549,3483,3802,977,2966,4550,918,917],"class_list":{"0":"post-1555","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-general","7":"tag-analysis","8":"tag-assets","9":"tag-echnical-analysis","10":"tag-finance","11":"tag-financial-planning","12":"tag-fundamental-analysis","13":"tag-money","14":"tag-oranisational-structure","15":"tag-stock-market","16":"tag-stocks","17":"entry"},"_links":{"self":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/1555","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/comments?post=1555"}],"version-history":[{"count":0,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/1555\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/media?parent=1555"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/categories?post=1555"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/tags?post=1555"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}