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Netlist Inc. Message Board

  • cwtripps cwtripps Dec 7, 2009 11:26 PM Flag

    Are they naked shorting NLST?

    something doesn't seem right here

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    • It is highly speculative because no one knows for sure if NLST has naked shorts on it. But this is the scenerio.

      A market maker gets requests from a broker to purchase NLST. The market maker gives the broker what he wants (even though the market maker does not have enough shares). That means the market maker has taken a naked short position.

      If the stock continues to climb, the market maker would be forced to buy shares at a higher price (and lose money in the deal). Instead, the market maker will slow down the rise by shorting more. Eventually, the market maker will gain control of the stock and drive it lower with naked shorts. When this happens, he can buy back the naked short shares for a profit.

      Market makers have to supply shares to brokerages on demand. If not, they would lose the business. So, they sometimes have to naked short sell shares (if they do not have enough inventory) so they can give shares to the broker. Often times in a run like this, many market makers will be caught naking shorting.

      BTW- Market makers are the only ones supposedly able to naked short sell. But as we all know, if there is money to be made, somehow, someone other than market makers will find a way to naked short sell the market.

      Doesn't matter though............shorts, naked shorts............they will cover on the next run.

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