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Message: Re: Shares Comment

Oct 07, 2014 09:20AM

Oct 07, 2014 09:52AM

They can be lent. Your agreement with your broker affords them certain rights to act on your behalf in regard to the management of your holdings. In some cases your broker is listed as the holder of the shares you have bought.

An earlier suggestion to place a limit order on your shares may complicate your brokers ability to lend them however your broker likely wouldn’t appreciate you placing a very distant limit price.

Agoracom's suggestion previously to monitor open short interest may be the path for you. I would suggest that the best defense to short selling is demand for the stock or stick-to-itiveness of current shareholders. Of course, an obvious short strategy is selling it until a healthy portion of long investors/traders get scared or hit stops and join the selling. Guess who's waiting on the bid for those anxious shareholders that are trying to get out and minimize losses? Those short sellers covering with a tidy profit.

I'm certainly no expert on short selling but a recent example may be GoPro (GPRO). I vaguely recall that short interest was reported to exceed 30% of float (corrections welcome). That story lead a bizarre rally in share price which produced the classic short squeeze.

There are some funny rules around short selling that seem to allow for a certain number of days in which they need to cover without borrowing, etc. that a sophisticated trader might be able to game. I think it all just comes down to how loyal your current shareholders are and attracting new ones.

Ultimately the shorts will either get washed out or be right. With demand and rising share price, shorts will need to cover at a loss and further drive demand and price appreciation.

I will concede however that there are unscrupulous activities some traders engage in which I'm sure are beyond what I can imagine as possible. If you suspect that's occurring with the short sellers, I suppose reporting it to the SEC is in order.


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