@Crash: Thanks for making comment.
The two equity dividend paying funds that I have been buying (during the market swoon) are IDIVX with a yield of 4.0% and INUTX with a yield of 3.2%. And, yes they have been hit hard during this stock market sell-off. On Friday's stock market rebound, I have the S&P
500 Index being up for the day 9.27% while IDIVX was up 7.4
5% and INUTX was up 8.80%. And, in comparison, VEIRX with a 3% yield was up for the day 9.18%. And, so it goes. With this, they will recover as the market recovers and I will collect coupons and dividends while I wait.
In the stock market, investors have the trade day plus two days to settle their trades. This gives those shorting the trade day plu two days to cover and secure borrowed shares that cover their short positions. Otherwise, they would become a naked short position and a buy-in takes place thus keeping it form becoming illegal. The stock market is the only place that I know of where you can sell something that you don't own and not go to jail. Below is how shorting is supose to work.
When a trader or speculator engages in a practice known as short selling—or shorting a stock—they are essentially borrowing the shares. The short trader borrows shares from an existing owner through their brokerage account. They will then sell those borrowed shares at the current market price. Here, the objective is that they believe the share's market price will decrease before they are forced to pay back the borrowed shares allowing the trader to pocket the difference in the two share prices.
With this, I removed the word naked from my above script. But, there again, investors have trade plus two days to settle their accounts (Trade plus 2 days, aka T+2).
Now here is another take on how shorting is actually working in the markets. The below script comes from the Naked Short Site.
What is Naked Short Selling?
Before we get into Naked Short Selling let’s understand the basic premises around short selling.
Short selling is the sale of a security that is not owned by the seller.
The motivation for short selling is an investor's belief that a stock's price will decline, enabling the short seller to buy the stock back in the future at a lower price and make a profit.
Normally, when one short sells a stock, their broker will lend them the shares to sell. The loaned stock will come from the broker's own inventory, from another one of the firm's customers, or from another brokerage firm. The shares are sold and the proceeds are credited to the short seller's account. As payment for borrowing the shares, the short seller is charged a fee, quoted as an annualized percentage of the value of the loaned securities - i.e. a borrower of a stock with a
5% stock borrow rate will be charged $
5 per year for every $100 of stock borrowed. Stock borrow rates change daily based in large part on the supply and demand to borrow that particular stock.
If the number of shares available to borrow is in short supply and/or great demand (which is often the case in highly shorted stocks), finding shares to borrow can be difficult and expensive.
A frequently asked question and outlined in our FAQ’s but let’s look at naked short selling from various perspectives.
How does naked short selling effect the stock market?
When a seller "naked short sells a stock" they do not own the shares they are selling and therefore are selling artificial shares. This is like counterfeiting a stock. This process creates an obvious unfair advantage to the seller and an imbalance in the market as the sell side is now increased with more shares – many of which are counterfeit. There is a time limit on how long the seller can sell these shares and be naked on the trade and the time limit is 3 days. This is where the RegSho rules come in and the data we track. If the sellers broker-dealer has not located a borrow to cover this short trade within 3 days they will need to purchase back the shares they have sold on the open market. This process is referred to as a "Buy In".
"When it comes to illicit short selling, the shorts win over 90% of the time"Naked Short – A license to steal?
Naked short selling is yet another creation of the securities industry and is in essence nothing more than a license to create counterfeit shares. When you are inflating the amount of stock that is outstanding in a company, this is considered counterfeiting. The rules justify the practice by saying it helps create smooth, efficient and orderly markets. Same stuff we have heard countless times around high-frequency trading, but in reality we believe this practice leads to shady characters creating unlimited supplies of counterfeit stocks which in turn results in your investment continuing to decline and you wondering why?
I am sure you here because you are a shareholder in a company that just continues to go down, and you have no idea why. Nothing material has happened but the trading doesn’t make any sense. We hear it all the times. Most CEO’s don’t even understand, and are baffled. The worst part is, good luck getting anyone to listen! There is a major epidemic going on right now with naked short selling right now.
It's funny when we hear CEO's say , I will just buy all the shares up and own the whole O/S and they wont be able to short me anymore. Really?
Read about: Global Links Corporation and see what happened when Robert Simpson purchased 100% of Global Link’s 1,1
58,064 shares. Then you will truly understand how the system is rigged. Back to counterfeiting…
I'm now thinking that one can come to a better understanding of how shorting is working in this high frequency trading market and why the short volume was elevated for the past couple of weeks.
