Hi Mike,

I was part of the first edition of SMB DNA and I am a consistently profitable trader now.
I just read your article about the low float reversal trade.
It is also a favorite trade of mine.
The difficulty I sometimes have with these plays is to get borrows to short the stock. (I have one IB account and one ETC clearing account).
I couldn’t short MGT the last few days because it was restricted at ETC clearing and CLRB had huge costs to locate at Quantex.
How is this situation for the traders at your prop firm?
Are you able to short pretty much everything or do you also face sometimes the problem of lack of borrows?

Best regards,
Martin

@MikeBellafiore

I will share a scene from our trading desk, many minutes before MGT plummeted.

I called our Floor Manager into my office around 9:45AM and asked him if all options for locating additional shorts in MGT had been exhausted. We did have a decent amount of shorts that we had located, but we wanted more.  We badly wanted more!

Here is what MGT looked like at the time (hovering around the 5.20 area):

We reviewed all of our options at the firm to locate more shorts.  There were no more options to locate MGT shorts…legally.  Legally is the key variable here.  We communicated this to our traders.  Some were disappointed, but all of our guys understood.

And then MGT plummeted from 5.25 to 2.25.

We were hearing on this day in real-time, where some others were locating more shorts in MGT.  As a firm, we knew that we couldn’t do business with this other option.  This other option was taking our chances taking locates from Sketchy Locate Firm.  It was frustrating not to gain access to more short locates.  It was frustrating to know that others were getting locates from Sketchy Locate Firm, with whom we are just not willing to do business.

There are rules and laws that govern our markets.  As a trader, we must accept this.  This is not the Wild Wild West where we can just do what can be done.  At least our firm chooses not to be run that way.  We suspected that Sketchy Locate Firm was offering locates probably not in concert with market rules.  And we decided we would just have to miss this opportunity with additional shorts.

Fast forward a few days, and we are hearing that Sketchy Locate Firm is in trouble again.  We are hearing there are large buy ins for some who received short locates that they should not have.  This causes trouble for trader and firm.

So yes, we had a decent amount of shorts and scored solid profits in this opportunity.  And yes, we wanted to be bigger.  But also yes, there was nothing else we could have legally done as a firm to locate more shorts for our traders.

*no relevant positions