Penny Stocks?

vgeek

vgeek

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Mar 16, 2009
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Browsing through my spam folder, I keep seeing these 1000% return claims, so I start browsing older emails. The sample size is insignificant, but the results are what I would assume- every penny stock ends up being nearly worthless.

It seems pretty obvious, but why isn't everyone just doing naked shorts? If you look at the most recently touted stock AMWI, the market capitalization is $325MM, while the company's 8-K makes it look like revenues are right around $500k, with an operating loss of $160k. So you can see the company isn't that attractive.


Who is directly involved? I know it is a pump and dump scheme, but is the business involved, or is it just the penny stock peddlers?

What would typically happen if you did the naked short in anticipation to the stock's value converging to zero? Would the peddlers simply keep pumping the stock hoping to force margin calls?
 


I thought of this a long time ago. But I don't think you can short them A) for a significant amount of money as they are thinly traded and your selling of the shares would drop the price too much (and if OTC:BB would you even get matched?) and B) you need someone to lend the shares to you to short and I don't think the peddlers are going to do that.

Also when you come to buy the shares back when they reach 0 then you will probably push the share price way up to what you borrowed at as you will be the only one buying at that point and vol will be close to zero.

These shares are usually very tightly controlled, so I don't think you would have much luck. Most of them are not proper free trading market stock and are only "listed" on the OTC:BB and Pink Sheets which involve a match buyer.

I could be wrong but that's my thinking.
 
Well, following him on Twitter and reading some of his material, I think pump & dumps are the main one's that he goes after. Sorry, should have clarified that.
 
I spent a lot of time looking into this, signed up for every affiliate offer, checked out all the stocks they were pumping, paper traded them all and saw easy 50% returns. But paper trading is not real life.

I'll quote this old response to my similar question from a year ago:
johnysc430 said:
a lot of these stocks are thinly traded, making it harder to short. Shorting it on paper might be good but when you actually try to sell the stock in the open market. The market maker can dictate the price and basically fuck you up the ass.

I've seen this happen quite a few times.

you say ohh yea boy I'm going to short this stock for .25 10000 shares

the market maker says o really mother fucker we're going to buy 10000 shares in the open market for .50 cents, you get margin called forcing you to close your position. You lose your investment and then some.

when you try to make substantial money doing this, that is what happens. Market makers have a lot more experience than you.

Also what is happening on paper is not going to happen in real life.
Click to expand...
 
I knew a guy that used to get paid by companies to send spam (I mean bulk email) certain pink sheets. He was just as shady as their claims. LMAO
 
cardine said:
I spent a lot of time looking into this, signed up for every affiliate offer, checked out all the stocks they were pumping, paper traded them all and saw easy 50% returns. But paper trading is not real life.

I'll quote this old response to my similar question from a year ago:
Click to expand...

Yeah, exactly.
 
cardine said:
I spent a lot of time looking into this, signed up for every affiliate offer, checked out all the stocks they were pumping, paper traded them all and saw easy 50% returns. But paper trading is not real life.

I'll quote this old response to my similar question from a year ago:
Click to expand...

Exactly and I stated the same thing when this was brought up before

You will NOT get rich off trading penny stocks... use some common sense. How many billionaires do you know that have invested into real companies vs just OTC companies?
 
There is huge money in penny junior mining stocks, if you're an insider and understand warrants and options.

Casual traders get taken to the cleaners in most industries.
 
cardine said:
paper traded them all and saw easy 50% returns. But paper trading is not real life.
Click to expand...
Paper trading a penny stock has zero bearing on real life.

I used to trade pink sheets for a white shoe investment bank - on an agency basis. This means, because of the value of our business, the rinky dink market makers would give us the very best quotes - and even still our customers were raked over the coals execution-wise, no way around that.

No one else will make a market in such lousy securities, the regulatory oversight in such obscure undercapitalized securities is spotty and inconsistent and the market makers in these stocks can pretty much make up whatever price they want to bid and ask these stocks.

I can only imagine the circuitous route a small retail player in this market has to go to buy and sell this junk. Almost guarantee the only way to make money in pink sheets will also risk you jail time.

The fundamentals in blue chip stocks don't even make sense anymore. I think a craps table offers better returns than anyone thinking about penny stocks.

Sykes is not a trader, he's a marketer. And a damn good one.
 
infoslob said:
Sykes is not a trader, he's a marketer. And a damn good one.
Click to expand...

That's just what I was thinking. You could easily convince a load of people of your guru status by "predicting" a lot of share price drops. But not sure how much money you or them could actually make. But you would have a lot of drooling mouths waiting for your next monster pick, which is money in the bank!
 
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