sorry i meant to ask how to find out if there are shares to borrow for a stock?
If you have a prime broker you would call or email them. A few have automated lookups on the client login portal. If you are a retail investor it is usually a pain in the butt and you have to call your broker and get transferred to a special desk that handles shorts. Sometimes you can short over the online trading platform but I seem to always want to short hard to borrow stocks in my PA which requires a special call. If you want to short AAPL or something you would have no problem, but if you want to short a sub-$5 stock you will probably need to get shares specially tagged for your account by a special desk at your brokerage.
This is kind of surprising in 2014 but it can be much harder to short stocks than you would expect. For example, there are over 80 million shares of this stock not held by the guy committing the fraud. Why so hard to borrow? I don’t know. Securities lending is very profitable and very opaque. You would think this info could very easily be obtained by even with a decent prime at the institutional level they often have to call around and locate shares for you. There are lots of stocks I would like to short right now if I could get a locate but can’t, and this includes many low short interest stocks that just aren’t available for some reason (or aren’t available to me – I would probably have more luck with GS or MS as my prime but my fund isn’t big enough for that).
Shorting is also hard because by the time a lot of shares become available and the trade is very obvious, it will become expensive. This has happened recently on UNIS which now has around a 40% rebate (annual) to borrow the shares. I closed my position with a nice ~45%, it’s too hard to stay short something like that because you can be right and still lose money. A few of my stocks have gone that way recently.
They’re talking about cynk on bloomberg radio right now. Pretty hilarious
But what is that tied to? Every trading platform is different. Some may not even have the shares at all.
^i agree. i need to finda good broker
Fidelity or IB are pretty good (at least relative to the choices like Charles Schwab, etc.). CenterPoint is supposed to have good locates for day trading but I’ve never used them.
I love your posts Bromion.
Best poster on AF by a mile IMO.
Cynk Technology shares suspended by SEC for concerns over shady trades 10:07 AM ET 7/11/14 | MarketWatch
NEW YORK (MarketWatch) – The Securities and Exchange Commission on Friday has suspended trading in shares of Cynk Technology (CYNK), citing concerns regarding the “accuracy and adequacy” of information in the marketplace and “potentially manipulative transactions” in the stock. Shares of the company, which operates a social network, closed Thursday at $13.90, or up about 23,000% since June 16, when it closed at 6 cents. Despite the gains, the Belize-based company had reported no revenue or assets, and just one employee. The SEC said the trading suspension will be lifted at 11:59 p.m. Eastern time on July 24.
hey bro how do u close a short position when something is halted, lets say u sold at 15?
You can’t.
thx!
That’s right, you can’t close until it gets unhalted which can often take months. It depends on the nature of the halt. If it is a minor trading suspension it could unhalt same day or within a week. If it is a major fraud like the Chinese audit fraud scandals a few years ago, it would take month (some took 9 months). When it unhalts the stock will basically be at zero and you can slowly cover it but you are stuck until then and it’s a pain to cover when it unhalts. I think if the shares get outright cancelled then the short position automatically closes at zero but I’m not 100% sure about that and there is probably some hassle one would need to go through at their brokerage. We’ll see with this one but it seems like an open and shut case of fraud so hopefully the SEC is quick.
I will say one thing about the SEC – it is a totally incompetent organization, but when it is embarrassed on Bloomberg and the WSJ, it moves like lightning to avoid looking stupid. An epic pump and dump fraud running for weeks? No biggie. But WOAAAAHHHHH it’s major media news now, we better do something about it!!!
This article is really interesting. I find frauds all day long (I found one last night in under an hour that has a 150 million cap). Interesting story here about kickbacks and FBI involvement. Most frauds leave traces that you can find if you know what to look for but kickbacks are hard to see so that was especially interesting to me.
ZERO
lol
We run into the same problem due to our size - we custody with GS but our prime is just an affiliate. We were trying to get locates on CYNK starting two weeks ago and never had any luck. We have an SMA with BNP and couldn’t get any there either.
Without fail - if it’s not available to short, it’s about to go down and we’re not important enough to get shares; if the borrow rate is -60% you have a shot of making money; and if the borrow rate is the standard GS rate you’re about to get bent over.
We probably use the same prime.
You guys short stocks with 60% rebates? I don’t. I’d love to short ONVO over the next 2+ years and just wait for it to implode when the market turns but there’s no way I’m paying that much.
I’ve had a different experience with low rebate names though, a lot of my best shorts this year have cost me <10% annualized.
I was being slightly facetious with that last remark. We rarely short anything with rates like that - tough to make money paying that kind of premium unless you know something that you probably shouldn’t.
Our better ideas seem to be in that 3-8% range, it just seems like when they’re willling to lend it to us at 0.5% it ends up being something I wish I didn’t short.
Oops I missed the sarcasm. I don’t seem to find a lot of 0.5% names either. 3-8% sounds about right though I am short a couple in the 10-15% range as well. I usually close once it hits 40% which seems to happen very rapidly on a big leg down and the rebate will go from 10+ to 40% almost overnight in some cases.
http://seekingalpha.com/article/2309115-cynk-technology-is-the-new-scheme-in-town
This was a pretty good writeup. Paulo does good work and is worth following on SA (no this is not me) if you are interested in fraud shorts and short selling in general.
Yo you looked at ZERO?