I’ve made decent money trading tips you guys have shared, so now I guess it’s my turn to return the favor.
There’s a major play going down on CDIV. My buddy has a brother who works at Knight Capital Group, a major market maker for this stock, and he says he has overheard the traders going crazy lately, making the biggest short position they possibly can on this stock.
The whole thing started when a group of investors got together to lock up all the shares in CDIV, forcing the price up, buying shorted shares, and going for the mother of all short squeezes. This is a valid (if dangerous) strategy, and it has worked in the past.
Unfortunately for them, Knight Capital has made a back-room deal with the owner of the company, and he has agreed to sell his own shares into the market at the current inflated prices, driving the price down so that Knight Capital can cover their massive short for a big profit. He has been careful in the past to say that he isn’t selling, but according to their agreement he started quietly selling his shares this week (you can see it happening on the chart).
Apparently the Knight guys are already spending the money they know they will be getting – buying cars and booking fancy vacations. What’s really sad is that they send their people into the various forums and try to encourage more buyers to enter the market so that Knight and the owner can have more people to sell their worthless shares to.
The other market makers are also taking short positions, because they see the massive position that Knight is taking, so they know something is up.
Frankly, I hope they all go to jail for this. What they are doing has GOT to be illegal.
Anyway, my own position on this is a massive short. I actually liquidated my 401k (eating losses and paying early withdrawal fees) so that I could bet it all on the stock falling. My buddy actually got a 2nd mortgage on his house so he could do the same thing.
I’m hoping that by putting this out there, I’ll profit faster, you guys will profit, and the price will hopefully fall quickly enough that Knight and the owner won’t be able to rip anybody else off at these high prices.