www.investing-performance.com 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

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John Lux Trader, investment banker, former OTC market maker and attorney Lux.Investor@ gmail.com Copyright ©John Lux 2011