Short selling involves borrowing and selling stocks hoping the price will decrease for a profit. Naked short selling does not borrow the stock, allowing unlimited shares to be sold and driving prices down. Cellar boxing is a predatory naked short selling tactic where short sellers work to keep a stock's price low by continued shorting to maximize their profits while avoiding taxes. The document recommends learning more about these tactics and how to protect companies and investors from predatory short selling strategies.

1. www.investing-performance.com
Naked Short Selling
--
Cellar Boxing

2. 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.

3. 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

4. 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”

5. 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

6. Predatory Naked Short Selling
Naked short sellers can sell
an unlimited amount of
stock and will have huge
profits if the stock is down

7. Taxing Short Sellers
When the short seller buys
the stock back, he has
recognized a profit and
has to pay tax

8. 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

9. Cellar Boxing
Thus, the short wants the
stock to stay “in the cellar”
He sells more stock to keep
it down

10. 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

11. 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

12. 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

13. Learn More
Buy “How the
Shorts Raid Your
Stock, Destroy
Your Company
and What to Do
About It

14. Professional Traders Always
Want to Learn More
They know the value of
information if you want to
swim with the Wall Street
Sharks

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