Shortsellers Still Control this Market
April 08, 2010
– Comments (5) |
RELATED TICKERS: FAZ
, TZA
, SDS
Where have all the bears gone? It seems to me that they have been targeting the 3x bear funds lately. Countless fools have preached that these are only to be used as short term trading vehicles; well it also seems they are great shorts (as long as you're on the right side of the trade).
Take a look at FAZ . Since it's peak at around 2,000 (remember it had a reverse split that worked oh so well) it now trades for about 12 bucks. Despite the volatility collapse, on the short side, that is still some return. Now take a look at the volume, on average it trades 60+ million shares a day. Its total outstanding is 91.4 million shares. Do you really think that this daily flow is legit? To legally short, you have to get a borrow first. There is no way institutions are "borrowing" the stock before when 65%+ of it changes hands every day! The time you call someone who owns it to get a borrow, they probably already traded it. After all, what better way to pound out your bear frustrations on an etf that has no support from anything or anyone. Just like BSC and LEH, these things are truly defenseless and also have no government backstop, political backing, or popular support. The only difference is that the exchanges will keep them around to rack up high frequency commissions. I have a feeling these bear etfs will be shorted to 0 or close to 0 because you do need to cover eventually.
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