Stock trading tips on hot stocks to buy now, stock market strategy, picking hot stocks, picking penny stocks, and how to buy cheap stocks. From “How to Find a Home Run Stock” and “How to Pick Hot Reverse Merger Penny Stocks” and also “How the Shorts Raid Your Stock, Destroy Your Company and What to Do About It” all by John Lux.

1. www.short-stoppers.com
Naked Short Selling

2. Disclaimer
Stock speculation is very risky
Do not trade with more than you can afford to
lose.
Seek professional investment advice.
This is not investment advice.
No warranties, you are on your own.
This is not suitable for all investors

3. Naked Short Selling Defined
Short sellers are supposed to
borrow the stock they sold and
deliver it to the buyer
When the shorts do not bother to
borrow the stock, they are “naked”

4. Why go naked?
Naked short selling is now prohibited
I am going to explain why it was so
lucrative
(Note – legitimate short selling serves a
good function)

5. Negative Cash Flow Companies
If a company has a negative cash flow, it needs to
sell stock to raise money to survive
Legitimate development stage and biotech
companies often have negative cash flow
If the shorts can push the stock down, the
company cannot raise money and dies, giving the
shorts a large profit

6. Naked Short Selling
Naked shorts can push a company to zero stock
price because they can sell unlimited amounts of
stock
If there are 10 million shares outstanding and the
stock trades 50,000 shares per day, at a price of
$10, the naked shorts can sell a million shares,
driving the stock down, down, down
If that isn't enough stock, more, more, more can
be sold

7. The Naked Short Printing Press
Naked shorts can sell MORE than the outstanding
stock!
Imagine a naked short selling 30 million shares of
our hypothetical company that has 10 million
shares outstanding
If the short sells the 30 million shares at an
average price of $5 and drives the stock to one
cent, he has a profit of almost $150 million!

8. The Naked Short Printing Press
If the short sells the 30 million shares at an average
price of $5 and drives the stock to one cent, he has
a profit of almost $150 million!
But the market value of the entire company to begin
with was only $100 million!

9. Taxes
The naked short has an incentive to stay short –
taxes
When he closes the trade by buying back the
stock, he has to pay about 1/3 of the gain in taxes.
But if he keeps the trade open, his friendly broker
will let him play with the almost all the profits –
on margin
So on his $150 million profit, he can trade abpout
$300 million in stock

10. Pyramiding
In this way, a naked short could pyramid his
profits
Take profits in the first stock and sell another
$300 million short, etc.
After a few trades like this, the profits are
humongous

11. Naked Shorts Exposed
If a naked short does not close out the trade, he
definitely does not want the company to come
back from the living dead, especially if he is using
the money to destroy some other company
If the stock comes back, he will lose heavily and
the broker will ask him for more money to cover
the margin on his short
Thus, he will stop at nothing to hold the company
down

12. Shorting the World
Naked shorts were eventually outlawed
If they pyramided their profits, they made
huge gains in the 2008-9 market meltdown
They would have had the money to attack
large institutions, and eventually short
whole countries
All of this is hypothetical, naturally

13. Hypothetically Speaking
Hypothetically speaking, there have been
reports of stockholders being able to buy
more than the outstanding common stock.
Naked shorts were eventually outlawed
I am investigating now one company that is
alleging there is a short position of many
times the outstanding stock

14. Learn More
Subscribe to my YouTube videos
Go to www. Short-stoppers.com
Subscribe to my blog
www. investing-performance.com

15. Read My Book on Amazon.com
How to the Shorts Raid
Your Stock, Destroy
Your Company, and
What to Do About It
Amazon.com

16. John Lux
Trader, investment banker, former
OTC Market Maker and attorney –
he is a former and possibly current
short seller – but not naked
Lux.Investor@ gmail.com
Copyright ©John Lux 2011