Emblem Corp EMMBF

Great post Orbital....

[ledrog]

However I would add in one small point.......and that is the risks of going short versus going long.

Let's say someone took out a long position at $3,.50 buying 5,000 shares costing $17,500.....the PPS falls to $2.50 meaning the bull is looking at a $5,000 loss on paper.  He can sell, turning that paper loss into a capital loss, sit tight, or add more.  The only way he'll be forced to sell is if he bought the shares on margin and doesn't have sufficient $$$ in the margin account, then he could be hit by a margin call and be forced to sell.  If the PPS climbs he can possibly sell for a profit.  How much or how little profit a long makes depends on how many buyers are looking to purchase the 5,000 shares the long is selling when he decides to part with his shares.

Things are different for a short player.

A short player selling 5,000 shares at $3.50 though....there is no avoiding the margin requirements. The borrowing and selling of 5,000 shares results in proceeds of $17,500, which remains in the margin account, and then there's a maintenance requirement, typically about 50%. So the short seller has to keep an additional $8,750 in the margin account on top of the $17,500 from the sale.

If the PPS falls to $2.50 the short has a paper gain of $5,000 and his margin requirement will drop, allowing him to remove $5,000 from his margin account.  If he decides to buy back the 5,000 shares he borrowed (the cover) the amount of profit will depend on how many shares are avaialbe to be bought and at what price.

But if the PPS climbs to $4.50 then the short will be required to deposit more money into his margin account to maintain his short position, if he is unable his broker can then use the money in the margin to buy back the shares, that's the reason for the "maintainence requirement" and can lead to a short seller being SQUEEZED if he's unable to deposit further funds into the account with a rising price.  The higher the PPS goes the more money that will be required to maintain the short position.

Now a note of caution for longs dreaming of a short squeeze. 

Obviously the risks of going short are massive...while a stock can't fall below $0.00 there is no theoretical limit to how high it can go.  As such Bears are typically very well capitalized, think of Hedge Funds with hundreds of millions and in some cases Billions under management.  

That is why bashers in social media can become quite nasty......the risks and the potential for losses are huge, Hedge Funds have gone bust making the wrong play.  There are all kinds of game that are played to try and affect investor sentiment, to create a fiction to influence buying and selling decisions.

Jim Cramer explains it far better than I can....if you're still reading check out this Cramer interview on The Street back about 10 years ago, talking about the games he employed when managing his Hedge Fund.  

[Smarthoney]

This post has been removed in accordance with Community Policy

[ledrog]

Paid pumpers, paid bashers.....myth, legend, reality....make up your own mind.   In that video I linked of Carmer's Street Interview he outlined some of the manipulations Hedgies engage in, I doubt message boards would be left alone.  

[Smarthoney]

This post has been removed in accordance with Community Policy

[ledrog]

Basement dwellers living pay cheque to pay check (covers both US and Canada) who have brokerage accounts???  Interesting concept.  Anyway....Merry Christmas.