Let’s say you are a large holder of stocks like a broker, billionaire, financial firm, institution or other market maker and you want to get into a position but the price is too high to make a quick million or two. Trading is volatile and your target acquisition is moving up. What should you do?
Slap that stock!
What is Stock Slapping?
Well, it is a term I made up this morning on my commute to work after one of my stocks, DLR (Digital Realty), went down 2.5% two days before the ex-dividend date for absolutely no reason ( high earnings, a 5.5% dividend with solid track record) . Beating share prices down is a more common term, but is not as accurate a term as “Stock Slapping” in the example I am about to show you.
Stock Slapping is selling out of a position while it’s price is on the rise or flat in effort to make price drop, allowing you re-purchase at a lower cost. The sharp drop in price “slaps” the other position holders in the face, scaring them into selling their position, which drops prices further, causing more panic, selling, causing stop-loss orders to execute (sell), and ultimately even lower prices.
How to Slap Stocks for Profit
Lucky for you, you have a fat wad of cash in your trading account, so, when the stock starts bottom out, you deploy that capital to buy the stock at 1-3% lower than it opened that day. It’s raining money for you and your associates because not only did you get your stock back/bought more for less money, but you also went short on the same stock. Niiice!
What about the people that got scared and sold out of their position – can’t they just buy a the low price too?
Some can, but most have to wait 3 days for the sale to settle to get their cash to buy back in. A good faith violation can have your money locked up like Bernie Madoff, unable to initiate the trade. Even those accounts with cash available for trading or good faith violation free are reluctant to get back into the same position due to pride. Call it human nature, son!
Let me show you it in action:
“Well that is just the market”
No it is not – why would anyone ever want to sell hours before they are about to lock in their dividends? Fear of major a major sell off!