Short ladder down attacks Imagine that I assume that there are enough shareholders that will be easily shaken out if the price is low enough for an extended period.
Let us call my hand a “strong invisible hand ” and those I am planning to push out weak hands.
Let us assume this one strong invisible hand will take on 20,000 weak hands(weak because of lack of resources, information, experience...). As a strong hand my favourite game is shorting stocks both directly (2 to 5%) and indirectly using put options 95 to 98%) and I have been been playing it for decades squeezing and crushing the weak hands. The game goes like this:
- I dump a large order of 50 million shares for $6 a share
- A few months later I sell short another 30 million shares for $5 a share
- A few months later I sell short 10,000,000 shares for $4 a share
- A few months later I sell short 5,000,000 shares for $3 a share
- A few months later I sell short 3,000,000 shares for $2 a share
- A few months later I sell short 2,000,000 shares for $1 a share
- At the end of this special operation (bear raid) spanning many years my strong hand would have sold short 100 million shares for $513, 000,000 ($5.13 per share on average) bought by some 20,000 retail investors who are now faced with two options :
1- Surrender to my shakeout and sell for $1 and realize their paper loss.
2- Realize I am a financial bully fishing for liquidity and hold the line against my wish until I get squeezed for thinking I could squeeze 20,000 hands.