Despite my rather long list of potential plays I posted this morning, I had two clear favorites—LGDI and VRML—two sketchy and failing, respectively, penny stocks that were up in excess of 100% over the past few days on fluffy news, a contract and a poorly researched NBC video claiming this near bankrupt company was gonna cure Ovarian Cancer (seriously, I can’t make this junk up), respectively again. So, at 7am (early bird gets the worm), I dutifully reserved 2,000 shares of each stock to short—as both were hard-to-borrow—putting my limit orders waaaaay above (or as high as my buying power would let me) their current price, LGDI at $5.49 and VRML at $3.99, intent on ratcheting the down if and when I wanted to short.
Fearful of a large VRML price surge, I commented on my blog post at 9:36am “cancelled my VRML order, not enough buying power to worry about it executing” and focused on LGDI—as it was weak the day before. Tried shorting my 2,000 shares right near its weak open at $4.35, but didn’t get executed…it quickly dropped to $4.10ish, but I didn’t want to chase it…fearful of a morning fakeout (proven correct over the rest of the day—good avoidance)
Next up was VRML, which was spiking from $3 to $4.75…I posted “VRML sooo thinly traded, let it run, I still have my shares borrowed for the day, just in no rush to use em” Whew, glad I canceled my short at $3.99, as I celebrated in a post at 10:05am. Still, at $4.25, everybody is talking about shorting it, so I post THESE rules about patience
But now at 11am, I figure it’d be good to re-enter my short, so I login…wait a minute—WTF, my short had executed at $3.99?!?!?! I posted my disbelief as I chatted with Thinkorswim to see if there was anything that could be done about this error.
Apparently, I’d canceled my LGDI short instead of the VRML one—the same bush league mistake I’d made just last week on MXC, made more painful this time around by the fact that I was telling everyone else to have patience and wait for the potential short squeeze. And at 11:30am, with the stock squeezing early shorts JUST AS I ANTICIPATED, I added 1,000 more shares short at $4.90 for a total of 2,500 shares at a pathetic average of $4.36. At $5, I was risking waaay too much—down $1,750, but this was a great midget holding up a basketball player failing biotech play in the same vein as REED, VION and PSTI, each of which I’d successfully shorted—so I had to have faith. And then, the wall of sellers showed up…
At $5, then $4.90, then $4.80, $4.70, $4.55—with the stock in freefall, I couldn’t help but exhale, covering 1,500 at $4.45 and 1,000 at $4.35—total loss, $180 after $30 comissions. Whewwwwwwwwwww. Whewwwwwwwwwww.
Over the next hour, my celebration turned to regret as the stock dropped another $1/share…no way would I have held 2,500 shares for that big a gain, but the possibilities are endless, probly missed out on a $500-$750 gain on an ideal trade shorting 1,500 shares AFTER the wall of sellers in the $4.60-$4.70 range, covering just above $4—as sooo many of you readers did (and more, Davey, not coincidentally the TIMbucks leader, made $1+/share on 3,000 shares!)(sissy value investors ain’t got nothin’, it’d take them 3-5 years to match these % gains)
This was both my best and worst trade of the year and the good news is that thanks to lessons I’ve learned over the past decade, this outcome was pretty much the worst case scenario and there are far worse things than a missed opportunity and a 1%-ish loss.
For me, my emotions run the gambit:
Experienced Trader
I screwed up, but it was an honest mistake—nothing I can do about that, more importantly, thanks to my cool head, I escaped with just a scratch, coulda been a lot worse. I can even take some great satisfaction in knowing how great a feeling it is for my readers to profit so definitively and quickly, especially since any of them are finally posting about their gains! Nothing else like it, welcome to why trading is so great!
Former Greedy Jew Hedge Fund Manager
I probly just helped make my readers in excess of $10,000-$20,000, I want my 20%!
Ambitious Blogger / Publisher
This is great, if my readers can continually profit like this, they’ll have to talk about it, can you say viralllll…book sales…DVD sales…national speaking tour!
Philanthropist
Doesn’t even matter if I made money or not, the key is helping others profit, this is good, in time, it’ll be like donating millions of dollars to charity, except I’ll have taught my readers to fish for themselves and they’ll be able to teach others too!
Revolutionary
So short selling penny stocks into parabolic runups is crazy, huh? All you random BSers out there who’ve never done much themselves focusing on company fundamentals—how you like these apples?
Immature Prick
Suck on that Elitetrader Elitests, Traitor Monthly Traitors, Dealbreaker Drones and everyone else who’s never really bothered giving my strategy a chance! I can say whatever the f$#@ I want—like buy my DVD cuz you gotta learn form the hundreds of charts and variables I cover in it you dumbf$&#s! Or buy my book cuz it’s gonna inspire and caution you as to ALL the risks and rewards of this kind of trading. And no matter how tired people get of me promoting those and future products, they’ll have to check in cuz—for now—there’s nobody else out there with my experience, openness, thick skin, work ethic and determination to open this game up to everyone!
And Ultimately Rational Businessman
This is just the start, but don’t get ahead of yourself, take it one pump at a time, teach one reader at a time, answer all questions even if you get days/weeks behind, this is gonna be huuuge cuz I got nothing to hide and no life / family whatsoever and that makes me better than every other “financial guru” around
Posted in Breakdowns, Decent Trades, Patterns To Short, Short Selling, Short Squeezes