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Naked Short Selling

--

Cellar Boxing

Disclaimer

� Stock speculation is very risky and may not be

suitable for you

� 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.

Short Selling

Short selling --selling the

stock first hoping that it will

go down and you can buy it

cheaper

Sell at $10, buy back at $2

= $8 profit

Naked Short Selling

Short sellers have sold the

stock and need to deliver

stock to the buyer

They borrow this stock

If a short does not borrow

stock, he is “naked”

Predatory Short Selling

Companies with negative cash flow

need to sell new stock to survive

Predatory short sellers can drive the

price down and stop the company

from raising money

Predatory Naked Short Selling

Naked short sellers can sell

an unlimited amount of

stock and will have huge

profits if the stock is down

Taxing Short Sellers

When the short seller buys

the stock back, he has

recognized a profit and

has to pay tax

Keeping the trade open

If the short seller keeps the

trade open, the broker lets

him use his profits, but

the short pays no tax and

can use all the profits

Cellar Boxing

Thus, the short wants the

stock to stay “in the cellar”

He sells more stock to keep

it down

The Pattern

The cellar boxed stock may

trade at zero bid, $0.0001

offered – the minimum quote

allowed – or at $0.0001 bid

offered at $0.0002

Market Maker Profits

If the market maker buys

stock at $0.0001 from

disheartened shareholder

and sells at $0.0002, he has a

100% profit

Cellar Boxing

As cellar boxing is a form of

predatory naked short

selling and as the short

wants the company to stay

down for no good reason,

cellar boxing is wrong

Learn More

Buy “How the

Shorts Raid Your

Stock, Destroy

Your Company

and What to Do

About It

Professional Traders Always

Want to Learn More

They know the value of

information if you want to

swim with the Wall Street

Sharks

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John Lux

Trader, investment banker,

former OTC market maker

and attorney

Lux.Investor@ gmail.com

Copyright ©John Lux 2011