Operation Short Sell - Trade with air?


• Rule Uptick. Its essence is this: if a trader has applied for Short Sell, even on the stock exchange this order must be registered as an order for the sale of "bare". Broker on the stock exchange is against the law its enforcement until the price increase. For example, if the last execution of the selected asset's bid was $ 20, the broker can not sell these shares at Short Sell orders for as long as the rate does not go up and not fix a new bid of $ 20.12 or higher. In this case, we say that the broker sells under increased selling price (Uptick).

As an exception to this rule, there is a possibility of a broker and sell for $ 20, that is, with zero growth rates (zero - plus tick), if only the last teak price change went in the direction of growth. For example, some previous sales realized $ 20, then the best bid was put on the market for $ 19.72 or a little less, and then the next tick prices again showed bid to $ 20.

It should be noted that the Uptick rule exists only on major exchanges. In the OTC market Short Sell order can be executed at any time, including a falling market.

50,000 - to get to the light

To the rapid growth in the number of day traders on the NYSE, more than half of all sales of "bare" conducted by market makers. They did it in order to regulate the market of those shares, the prices of which responded to the exchange. For example, the broker receives an order with the option to Short Sell IOC (Immediate or Cancel - «immediate or cancel"), but at this point he has no orders to buy (or have, but put up their prices ask is not happy.) In this case, the market maker may offer a lower rate, even if they have to store this type of securities not. Commodity dealers, as well as Day Trader often pursue sale transaction "bare." The thing is that their goal - to make a transaction of $ 10 or even $ 0.05 per share, and they are gaining at the expense of a large number of executed transactions on purchase and sale of securities. NYSE, AMEX and NASDAQ each month published an important indicator of the stock market - Short Interest (total sales of "bare").

This indicator includes those securities in respect of which an order has been executed Short Sell, but Offset deal had not been made (the position is not closed).

Information for readers to get to the indicator Short Interest, on the NASDAQ to be announced 50 thousand monthly Short Sell orders for the selected asset (or a change from the previous month should be at least 25,000). For NYSE and AMEX these numbers, respectively, twice.

Among traders are of the opinion that the increase in Short Interest shows up near the turn of the market. The logic is simple: as the number of open positions on Short Sell in capacity increases and the volume of bids, since the offset of the transaction to commit in the future to buy these securities. Having mastered the individual business margin for the purchase and sale of "bare" shares, you can go to the assessment of the prospects of building a portfolio of securities with a simultaneous purchase and sale of "uncovered" a number of different actions.