This is a classic trading post from my investment blog GoodeValue.com. I have added a few more details to the end of this post.
This brought tears to my eyes … never before have I put a limit price on a big order so far below the market price, but alas there were no shares.
Here is how it played out … I caught this on the Scottrade MarketMovers list around $1.50 on the way up, was ready to short as the bid backed down to $1.30, could not find borrows, but hoping that IB could find borrows I placed a limit short for 5,000 shares at 90 cents (yes, 40 cents below market) … no shares became available.
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This is the one-hour chart from 3pm EST to 4pm EST today.
This is a perfect example of what I call “fat-fingered shorts” … stocks with little volume where the price and volume shoot straight up on no news. They are likely caused by traders accidentally placing market orders instead of limit orders. This is one of the easiest charts to short sell. I usually run across one decent one a week. Of course, you need to get in on these quick; because of these constraints this is only a viable trading strategy for people who are already full-time daytraders and the potential profit is limited. As of this re-posting on 7/27/2009, my net profit in 2009 from similar trades is $2,505.99, with an average profit margin of 0.79%.
Disclosure: No position.