Let's look at this example -- which in the past week I have seen.
Bid 0.52. Ask 0.545
One of the inaccurate Level 2's showed something approximately like this:
0.48 bid, for about 20,000 shares
0.47 bid, for about 30,000 shares.
Now let's say someone had put in a stop-loss order for 20,000 shares at .43.
It is going to be very hard for someone to plunge the stock price down to take those stop-loss shares away from the ignorant person who put that stop-loss in (that person presumably not knowing that the order was visible to market makers, hedge funds, etc., and that it would be a target to be taken out.)
To take the stock down there, the market makers would have to sell (probably via shorting since the current ask is at .545) 50k shares at 0.47 and 0.48. That would be an expensive proposition.
Now let's say that those 50k lowball bids were not in there.
The market makers could walk the price down on a couple of 50 or 100 share trades, or maybe that 3 share trade we saw the other day that moved the price down.
Then having taken the price down, they could grab that 20k shares at .43, then let the price come back up, and sell those 20,000 shares to someone for that .52. Nice little profit for a few minutes work, at the expense of the ignorant shareholder.
But those 50k share lowball bids protected that person.
There is no downside for shareholders in those lowball bids, but there is plenty of help in supporting the stock price.
If you think that market makers don't swoop down and run the stops of unwary investors, you haven't seen what I and many others have seen. In one incredibly egregious case, a friend of mine had a stop-loss on 1000 IBM shares. Incredibly, the market makers dropped the price SIX POINTS, grabbed his stock, and then the stock went right back up. All this happened in the space of less than two seconds. And IBM went up several more points in the next few minutes, and closed the day much higher.
If they can do it with a stock like IBM, they can certainly do it with small-cap stocks like IPIX.
EDIT: here's another example.
As I keep mentioning, DNDN closed one day at 7 and opened the next morning at 21. It closed that day at about 24.
But about 2 hours into the trading day, the stock price plunged from about 22 to slightly below 7, and then went back up to 22. This was in the space of less than 30 seconds.
A whole lot of people got their stops run on that one.
Bid 0.52. Ask 0.545
One of the inaccurate Level 2's showed something approximately like this:
0.48 bid, for about 20,000 shares
0.47 bid, for about 30,000 shares.
Now let's say someone had put in a stop-loss order for 20,000 shares at .43.
It is going to be very hard for someone to plunge the stock price down to take those stop-loss shares away from the ignorant person who put that stop-loss in (that person presumably not knowing that the order was visible to market makers, hedge funds, etc., and that it would be a target to be taken out.)
To take the stock down there, the market makers would have to sell (probably via shorting since the current ask is at .545) 50k shares at 0.47 and 0.48. That would be an expensive proposition.
Now let's say that those 50k lowball bids were not in there.
The market makers could walk the price down on a couple of 50 or 100 share trades, or maybe that 3 share trade we saw the other day that moved the price down.
Then having taken the price down, they could grab that 20k shares at .43, then let the price come back up, and sell those 20,000 shares to someone for that .52. Nice little profit for a few minutes work, at the expense of the ignorant shareholder.
But those 50k share lowball bids protected that person.
There is no downside for shareholders in those lowball bids, but there is plenty of help in supporting the stock price.
If you think that market makers don't swoop down and run the stops of unwary investors, you haven't seen what I and many others have seen. In one incredibly egregious case, a friend of mine had a stop-loss on 1000 IBM shares. Incredibly, the market makers dropped the price SIX POINTS, grabbed his stock, and then the stock went right back up. All this happened in the space of less than two seconds. And IBM went up several more points in the next few minutes, and closed the day much higher.
If they can do it with a stock like IBM, they can certainly do it with small-cap stocks like IPIX.
EDIT: here's another example.
As I keep mentioning, DNDN closed one day at 7 and opened the next morning at 21. It closed that day at about 24.
But about 2 hours into the trading day, the stock price plunged from about 22 to slightly below 7, and then went back up to 22. This was in the space of less than 30 seconds.
A whole lot of people got their stops run on that one.
3
