*Really* bad week for SCO

Gary Layng glayng-rieW9WUcm8FFJ04o6PK0Fg at public.gmane.org
Tue Dec 9 04:45:10 UTC 2003


To short a stock, first you need to find a broker with shares you can
borrow.  You don't just go up to the broker and say, "I want to sell shares
I don't even own!"  (You theoretically CAN do a "naked short", that is,
short without having the shares, but that is for truly sophisticated
investors who are essentially their own brokers.  I strongly suspect the
typical investor in this mailing list doesn't fit that description - I know
I don't.)

Now, many people on the SCOX board on Yahoo have been indicating they're
finding it tough to get SCOX shares to short.  Part of the reason is that
short interest on this sucker is very high already, at around 22%.

Another thing to consider is the danger of a "short squeeze", where the
stock is pumped up to the skies in an effort to force shorts to cover at a
high price (forcing the stock price even higher).  This is a low-volume,
easily manipulated stock, which makes the risks of a short squeeze very
high.  It is a wonderful stock to STAY THE H*LL AWAY FROM.

His Lordship Mayhem
-----Original Message-----
From: owner-tlug-lxSQFCZeNF4 at public.gmane.org [mailto:owner-tlug at ss.org] On Behalf Of Ian Goldberg
Sent: Monday, December 08, 2003 7:12 PM
To: tlug-lxSQFCZeNF4 at public.gmane.org
Subject: Re: [TLUG]: *Really* bad week for SCO

On Mon, Dec 08, 2003 at 05:33:16PM -0500, David J Patrick wrote:
> That begs the question; are there any investment wizards in the group
> who know how to "short" a stock and, thus" reap the reward for
> predicting SCOs (and soon enough M$s) swan dive ?

Shorting a stock is trivially easy.  Just go to your friendly online
broker website, and sell some.  [Note: not all stocks are allowed to be
shorted, but I don't think SCOX is one of them.]

Shorting is nothing more than owning a negative number of shares of a
stock.  [Technically, owing a number of shares of a stock to some
unspecified person, but you don't care who that person is.]  When you
sell 100 shares of SCOX at $15, you end up with $1500 and -100 shares of
SCOX.  If SCOX drops to $5, you buy back 100 shares of it for $500, and
you've made a $1000 profit (and now have 0 shares of SCOX).

But if instead, unbeknownst to everyone, SCOX has been using the lawsuit
as a smokescreen to hide its super-secret research efforts into
real-time widget operating systems, and announces the Best Thing Ever (TM),
its stock price may jump to $50, and if you hold -100 of them, you'll
now have to pay $5000 to close out your position, and you're in the hole big
time.

   - Ian
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