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VirnetX Holding Corp Message Board

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  • jeremysikessr jeremysikessr Apr 7, 2011 2:19 AM Flag

    Forced Buy To Cover Starts Tomorrow Afternoon

    I was actually a broker there and series 7 licensed and a margin sales broker about 11 years ago before the dot com boom-bust and they layed off about 900 of us...even though I got my bonus the month before...I digress..hehehe...seemed bad at the time, but ended up a blessing. I have not been in the industry since, but learned some great trading mechanics, so a great experience. I wish them the best and feel they have one of the best platforms in the industry for the money and a great management team. I used to live in Omaha and that is their HQ.

    Anyway, I do not know exactly all their current requirements, you should check with them. Call the Apex team to get the best service.

    There are fed requirements across all houses, exchange requirements that usually mirror fed. And then there are house requirements.

    Ameritrade, as well as many brokerage houses can set whatever they want based on their rules. Normally, these requirements are in place to protect the broker and do not favor longs or shorts so requirements are usually by security, not a particular side.

    When volume and price and market cap begins to stabilize a security over the long term, their management may decide to change this. Some times it is objective, sometimes subjective.

    Some times when large numbers of long shareholders move their positions to a cash account or request shares be mailed to their house, this can make fewer shares available to short. A brokerage firm can run out of shares to short, but that does not mean all firms are out. Also, if you hold a put position overnight, it can be "put to you" or exercised. This can happen at any time, but is more frequest the 10 days leading to option expiration, which we are.

    Long options are a good alternative to a long margin position for those that understand the risks and have the funds. Not suitable for all investors, but may provide an above average return and risk.

    Anyway...I think a short squeeze is due tomorrow or friday.

    Best wishes to both sides and trade well.

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    • I really appreciate the detailed answer, not sure my qustion warranted it, but thanks (and I am being serious). My question is, if Ameritrade would be even more likely than usual to squeeze my long position because of higher margin standards, wouldn't shorts get the same treatment?

      In the late '90s my shorts got squeezed during Thanksgiving week. It wasn't fun to watch. CNBC hyped the be-juses out of a stock that had an agreement with MSFT for $100,000 and a potential of, like $100 mil. My average price was $17 and my broker bought to cover my short at $51. I would very much hate to be short on VHC when I read, "trading halted for news". The only way to stop the bleeding is "buy to cover at market" and "at market" is volunteering to get screwed by your broker and the market makers. Trying to set your own price to cover is going to screw you so bad you will wish you had bought to cover at market.

      When the "trading halted for news" hits it will bring to mind the line from the movie Hell Raisers, "your suffering will be legendary, even in Hell!". OUCH!!!!

      • 1 Reply to jeffswaterworks
      • please understand, legally, it would not be wise for me to comment on what a specific firm will currently do.

        Since I did work there in the past, I can comment on what my experience I saw.

        Yes, I saw equal treatment on both sides. In fact things can tilt in the bulls favor for reasons other than just percentage margin requirements, as outlined in my previous post.

        Depending on if an account is unsecured or well below margin requirements a broker can sell out a client without notification in most cases. This is most common in the morning and is a common spike in the morning or what you would call pump and dump by some. You see a gap up and a lot of activity in the morning and then it returns to previous levels over the day and fills the gap.

        The other time that is interesting is when they are in a call that has to be covered by day end, but their is plenty of security. Many brokers will give the client until the last 10-30 minutes of the day. Combine that with market makers balancing their books and next day speculation, this explains many different stocks violent moves both directions and high volume at open or close.

        Of course this does not take into account all other market factors, news or speculation. This is just one part of it.

        So, I expect a small run up near close, not a monster one like monday.

        You are right, if you put in market order instead of limit you expose yourself to some dangerous spreads on lightly traded stocks if you are moving volume.

        Yes, halted would probably mean bull news for this one.

        Stay strong and trade smart!

        J

 
VHC
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