basing the stop on the bid/ask is really stupid if its a really thin stock, they can easily move the ask higher, then what, all the buy stops get executed? suckers
True enough. Liquidity definitely comes into play here. I wouldn't do it on any stock where spreads regularly exceed 0.1% of value during the thin lunch hours. And of course you pay to get out in a hurry on a quick (news driven) move. But the alternative is blowing through you stop-limit and riding the whole adverse move or trying to manually exit in a panic. I use this only on appropriate, highly liquid instruments, and I factor the cost into the trade. I also place it at levels (with the stop just above or below) that are likely to see reversals...the area where volume spikes, liquidity dries up, spreads widen and straddle my "stop", and the hammer completes, often with it's tail above my stop. A true stop would have bailed you out right at the top (in a move I have little doubt is programmed into market making algos). And if the move continues, the stop gets you out at the right time when your reversal fails. I consider this extra cost to be very fair since replicating this with a real or even hidden stop means you would need to move your stop further away. In practice, I usually get filled within the 1 or 2 penny spread....the worst recently was .07 on FDX. Basically, this is me saying, "I don't want to get stopped out of my short position because some market maker is willing to sell up here. I want out when some market maker is willing to buy up here." I'll grant you the NYT likely walks that line of sufficiently liquid based on its average volume (I'm not familiar with its daytime price action). Edit: also, I look through the level 2 to make sure there are resting orders that minimize the risk of me getting swallowed by a whale....if you're genuinely worried about this situation, you could place a wide limit on it just to keep you protected. Personally, when I'm sending a marketable order (which are usually only on stops, not entries or targets), I prefer market to limit...I do know that this is a benefit of small size not available to traders who are moving significant volume.
When you short sell a stock, you are borrowing the actual stocks to sell and promise to buy them back later to return to the owner. The disclaimer always states that the borrowed stocks can be called back anytime. Basically, you have no control of your short sold stocks. How can one argue with the broker about one’s short sold stocks being prematurely stopped out/bought back? They can be simply called back.