There are several ways to trap a short. To understand how to accomplish this, try to remember how you felt when you had to sell a large position into an illiquid tape. I recall feeling frustrated by an inefficient/corrupt bid/ask system, where I was forced to hit bids below market price to get out.
Now imagine being short a stock spiraling higher–laden with short sellers dying to cover –but keep waiting for a pullback. You can redouble that pain if the stock trending higher is relatively illiquid, measured by average daily trading volume and the size of the float.
The above stocks are nightmare’s to be short into an upward trending tape. Due to the small float size, they have the ability to rip higher without pause, case in point: OSTK.
Out of this bunch, what’s your favorite.
I’ll reveal mine tomorrow.If you enjoy the content at iBankCoin, please like our Facebook page