what happens to the futures market when something horrible happens and everyone starts selling and shorting at the same time? it's simply amazing we don't crash once a month. the market swings from one extreme to the other and will balance itself out when value or lack of value is perceived...
Nothing is going to happen next week, for any of the firms mentioned, unless the SEC gives an 11th hour reprieve thur night. A forward conversion is a married put strategy with a longer time horizon. The problem is that unless there is some risk in the options strategy (different strikes) , which can be costly..... they essentially are the same thing and will not be allowed. I think that the best hope for shorting with a downtick is when they get rid of the uptick rule in liquid stocks and make NYSE more like NAZ. Banker
Ah, but shorting a derivative is just writing a contract! That is different than selling something you don't own. If the contract is exercised and at *that* point you need to sell something you don't own (to make delivery according to the terms of the contract) then you must borrow or buy it. If I am buying puts all day long and building a massive "short" position then the market maker is building a massive "long" position in those puts by writing them. The MM will want to lay of that risk by shorting stock, but guess what? With a real time stock loan market his ability to do that will be limited. That will result in a higher premium which will reduce my incentive as a put buyer. So we see that real time stock loan corrects unwarranted dumps in derivative markets too.
i suppose there are markets somewhere in world but are they liquid? what kind of responses did you get? thx charles
Bear raids? How about bull raids? Naz 5k Dow 12k? so mom and pop buying junk on that level. Get rid of Up tick rules. Beleive me there wont be more selling or shorting on a reasonablelevel on the indexes. NAZ 500 DOW 5000- at that level i wont short i might get long.
Very true, because "bear market raids" will fail if you are selling below the fundamental value of the company. In other words, if the company is good, and you are causing it to be oversold, then eventually you will get crushed. That is what short selling is for, to make the market fair, keep a check on it, and prevent it from becoming a pyramid scheme. Of course, daytraders also don't have the power to make these temporary "raids" except possibly in the absolutely utmost thinnest stocks, and probably not even then. Even stocks that do almost no volume will suddenly have a few huge prints one day depending on what some people or institutions value the company at, and if some powerful daytrader were short 30,000 shares, he'd be crushed in no time. If the market collapses, lets just all blame Jesse Livermore.
Hard to borrow is not relevant for a day trade since borrowing is not relevant for a day trade. That is the loophole that the uptick rule closes (in a bad, too restrictive way). If you short and then cover huge amounts of a hard or impossible to borrow stock that is *locatable* then nobody will be the wiser. Of course some trading firms probably don't allow this even though it is legal. Location is much different from "hard to borrow". Trust me, at least the huge traders are playing the short side of hard to borrow stocks constantly. If you become a member of a service like www.stock-borrow.com then you can see which hard to borrow stocks are locatable. MANY of them are, even if only for a few thousand shares. Even if those stocks can't be borrowed, they can be legally day traded on the short side.