{"id":43670,"date":"2016-05-25T18:28:43","date_gmt":"2016-05-25T22:28:43","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=43670"},"modified":"2023-08-03T22:28:58","modified_gmt":"2023-08-04T02:28:58","slug":"a-test-of-conscience-at-a-trading-firm","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/a-test-of-conscience-at-a-trading-firm","title":{"rendered":"A test of conscience at a trading firm"},"content":{"rendered":"<blockquote><p>Hi Mike,<\/p>\n<p>I was part of the first edition of SMB DNA and I am a consistently profitable trader now.<br \/>\nI just read your article about the <a href=\"http:\/\/www.smbtraining.com\/blog\/a-favorite-trade-of-successful-traders\">low float reversal trade<\/a>.<br \/>\nIt is also a favorite trade of mine.<br \/>\nThe 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).<br \/>\nI couldn&#8217;t short MGT the last few days because it was restricted at ETC clearing and CLRB had huge costs to locate at Quantex.<br \/>\nHow is this situation for the traders at your prop firm?<br \/>\nAre you able to short pretty much everything or do you also face sometimes the problem of lack of borrows?<\/p>\n<p>Best regards,<br \/>\nMartin<\/p><\/blockquote>\n<p><strong>@MikeBellafiore<\/strong><\/p>\n<p>I will share a scene from our trading desk, many minutes before MGT plummeted.<\/p>\n<p>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.\u00a0 We<em> badly<\/em> wanted more!<\/p>\n<p>Here is what MGT looked like at the time (hovering around the 5.20 area):<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-43672\" src=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2016\/05\/MGT-shorts-1024x736.png\" alt=\"MGT shorts\" width=\"600\" height=\"431\" srcset=\"\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2016\/05\/MGT-shorts-1024x736.png 1024w, \/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2016\/05\/MGT-shorts-300x215.png 300w, \/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2016\/05\/MGT-shorts-768x552.png 768w, \/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2016\/05\/MGT-shorts.png 1072w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><\/p>\n<p>We reviewed all of our options at the firm to locate more shorts.\u00a0 There were no more options to locate MGT shorts&#8230;legally.\u00a0 Legally is the key variable here.\u00a0 We communicated this to our traders.\u00a0 Some were disappointed, but all of our guys understood.<\/p>\n<p>And then MGT plummeted from 5.25 to 2.25.<\/p>\n<p>We were hearing on this day in real-time, where some others were locating more shorts in MGT.\u00a0 As a firm, we knew that we couldn&#8217;t do business with this other option.\u00a0 This other option was taking our chances taking locates from Sketchy Locate Firm.\u00a0 It was frustrating not to gain access to more short locates.\u00a0 It was frustrating to know that others were getting locates from Sketchy Locate Firm, with whom we are just not willing to do business.<\/p>\n<p>There are rules and laws that govern our markets.\u00a0 As a trader, we must accept this.\u00a0 This is not the Wild Wild West where we can just do what can be done.\u00a0 At least our firm chooses not to be run that way.\u00a0 We suspected that Sketchy Locate Firm was offering locates probably not in concert with market rules.\u00a0 And we decided we would just have to miss this opportunity with additional shorts.<\/p>\n<p>Fast forward a few days, and we are hearing that Sketchy Locate Firm is in trouble again.\u00a0 We are hearing there are large buy ins for some who received short locates that they should not have.\u00a0 This causes trouble for trader and firm.<\/p>\n<p>So yes, we had a decent amount of shorts and scored solid profits in this opportunity.\u00a0 And yes, we wanted to be bigger.\u00a0 But also yes, there was nothing else we could have legally done as a firm to locate more shorts for our traders.<\/p>\n<p>*no relevant positions<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-43621\" src=\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2016\/05\/10tradeswebinar.jpg\" alt=\"10tradeswebinar\" width=\"600\" height=\"297\" srcset=\"\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2016\/05\/10tradeswebinar.jpg 600w, \/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2016\/05\/10tradeswebinar-300x149.jpg 300w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>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 &#8230; <a href=\"https:\/\/www.smbtraining.com\/blog\/a-test-of-conscience-at-a-trading-firm\" class=\"more-link\">Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":43671,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[4981,1304,1251,733],"class_list":["post-43670","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general-comments-2","tag-conscience","tag-firm","tag-prop","tag-test"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.1.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>A test of conscience at a trading firm | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/a-test-of-conscience-at-a-trading-firm\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A test of conscience at a trading firm | SMB Training\" \/>\n<meta property=\"og:description\" content=\"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 ... Read More\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.smbtraining.com\/blog\/a-test-of-conscience-at-a-trading-firm\" \/>\n<meta property=\"og:site_name\" content=\"SMB Training Blog\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/smbcap\/\" \/>\n<meta property=\"article:published_time\" content=\"2016-05-25T22:28:43+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-08-04T02:28:58+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2016\/05\/MGT-1.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1025\" \/>\n\t<meta property=\"og:image:height\" content=\"769\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Bella\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@smbcapital\" \/>\n<meta name=\"twitter:site\" content=\"@smbcapital\" \/>\n<meta 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