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Apple Inc. Message Board

  • atangolover atangolover May 2, 2013 9:06 PM Flag

    Apple Longs -- Prevent Your Apple Shares from Being Sold Short

    If you hold a long position in Apple and have no intention of selling it unless the stock price was significantly higher, one thing to do to prevent your shares from being sold short is to place a very high sale limit order. For example, if I place at limit order at $1000 a share, the shares cannot be sold short because there is a pending order to sell the shares. If more and more Apple shareholders would implement this strategy, the tradable float is essentially lowered. Now I realize that Apple has approx. 950 million shares (and that number is going down every day to the buyback), but it would make it harder to sell Apple shares short, or any stock, for that matter, with a similar strategy. Just food for thought. If my analysis in incorrect, please post why it is.

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    • Tango, there's maybe 15 or 20 posters on this board controlling at the most 20000 shares giving them the benefit of the doubt. It wouldn't do any good to put those shares up for sale. With over 930 Million shares floating around, there's always going to be some to short. Thanks anyway.

      Sentiment: Buy

    • Only if you have a margin account

    • I always do this. I'm glad to see a couple of people understand the pressure this COULD put on short sellers if everyone holding the stock for a long period of time would do this.
      HOOV

      Sentiment: Strong Buy

    • The short position in Apple is relatively small. But to answer your question (i.e., avoid having your shares borrowed by short sellers), I believe you have to maintain a cash only account as most brokerages require you to sign a loan consent agreement if you hold a margin account. See the below two posts that apply to a Schwab account.

      • 1 Reply to tdplswm
      • Section 11 of the Schwab One Brokerage Acccount agreement in its entirety is as follows (and there is no other reference to consenting to stock lending elsewhere in the agreement):
        "Section 11: Loan Consent. You agree that property held in your Margin Account, now or in the future, may be borrowed (either separately or together with the property of others) by us (acting as principal) or by others. You agree that Schwab may receive and retain certain benefits (including, but not limited to, interest on collateral posted for such loans) to which you will not be entitled. You acknowledge that, in certain circumstances, such borrowings could limit your ability to exercise voting rights or receive dividends, in whole or in part, with respect to the property lent. You understand that for property that is lent by Schwab, the dividends paid on such property will go to the borrower. No compensation or other reimburse- ments will be due to you in connection with such borrowings. However, if you are allocated a substitute payment in lieu of dividends, you understand that such a payment may not be entitled to the same tax treatment as may have been applied to the receipt of a dividend. You agree that Schwab is not required to compensate you for any differential tax treatment between dividends and payments in lieu of dividends. Schwab may allocate payments in lieu of dividends by any mechanism permitted by law, including by using a lottery allocation system."

        Because Schwab explicitly includes this provision that the account holder must agree to and because this is the only reference made to loan consent in the agreement, I would conclude that for Scwab cash only accounts, your stock cannot be loaned out. You just want to be certain that you specifically checked the box in the Schwab agreement that indicates the account is not to include margin (see Section 3, next post due to number of letters limitation on msg board.

    • I've heard different theories on this particular matter. When a stock is shorted, its merely being borrowed from the shareholder, not having a negative impact on the price because its not being sold. However, when a short covers, the shares are being bought back from the broker, not the open market, therefor not having an impact on the actual price. Correct me if i'm wrong on this.

      • 2 Replies to arao25
      • When a stock is shorted, it is being borrowed and at some point subsequently sold in the open market which does negatively impact the pps. A short seller covers by buying back the shares in the open market which exerts upward pressure on the price. Other than providing liquidity to the overall market for the security, selling short does not benefit the longs when the stock is initially sold, but does favorably impact the pps when it is bought back (covered) by increasing the number of bids.

      • Correct except the shares are bought back on the open market and when a number of shorts cover all at once it can cause what is called a short squeeze and cause the pps to go up. Selling short actually benefits longs.

    • Why are posting pump and dump scam advice here?

 
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