We all know naked short selling is illegal so anyone who does that will go to jail. So how do we stop the other short sellers from taking down the stock market. Well, as with most things in life, the answer is easy once we know how the system works.
Most investors do not realize that their stocks can be lent out to short sellers if it is a margin (type two) account. A cash (type one) account cannot be lent out.
There are two types of trading accounts…
Type one accounts cannot be used by short sellers to borrow against to short stocks as none of the stocks in that account are on margin.
Type two trading accounts are margin accounts and even if the stocks are not margined, they can be loaned out by brokerage houses to short sellers.
Therefore, I am calling on all stock traders who do not want their stocks to be used by brokerage houses to loan to short sellers to transfer their accounts over to non-margin accounts. This way short sellers will have to cover their positions as they will not be able to borrow any stocks to short, as most margin accounts will be closed.
It seems the government will not help the people, so the people need to help themselves. The small investor may only be one small drop in a large ocean, however, when we all act together we can make a difference in the ebb and flow of how stocks are traded.