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Stock Ideas Top Headlines Would You Like a Scam by Front running with Your Loss?
Stock Ideas Top Headlines Would You Like a Scam by Front running with Your Loss? 
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| Futures were up ahead of the jobs report as stocks were going to try and build off of Thursdays push and rebound some in relief to the prior selling. Then the jobs report missed big with unemployment jumping to 5%, the futures tanked and so did the market when the bell rang. | |
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| Would You Like a Scam by Front running with Your Loss? |
| Friday, 30 November 2007 | |||||||||
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Dear Reader, Excuse me if I sound a little pissed off today. I just got finished researching something that is still making my blood boil. And you should know exactly what it is....Scams have followed man throughout time. And so long as greed exists, scams will stay with us forever. Naturally, scams tend to follow the money. The Nigerian e-mails that scam millions are usually sent to nations with people who are well off. Venture capital firms pop up all the time, scam a wealthy investor, and then drop off the face of the earth. To say there are no scams in the stock market would be naive. But most people never think they are victim to one. Oh how wrong that is. For example, a BusinessWeek investigation found: Amex options specialists and traders are said to regularly engage in price-fixing. The aim is to keep as wide as possible the ''spread'' between the bid--what the public can get to sell an option--and the ask, which is what the public must pay to buy an option. Because the prices are allegedly skewed to favor the denizens of the Amex floor, the public is hurt each year, BUSINESS WEEK estimates, to the tune of $150 million. That means that if you trade options, you’ve probably lost money by paying higher prices for your options and receiving less than you should. In the option world, 10 cents is a big deal. The American Stock Exchange's scandal-free reputation is a mirage. Since 1995, the Amex floor has been rocked by a major floor-trading scandal involving alleged improper trading by Pasquale Schettino, a top official of its most powerful specialist firm, Spear, Leads & Kellogg. Hey, check that out. The AMEX is giving the impression of not having scandals. But when their most powerful specialist firm is involved, you know things aren’t good. It appears the entire floor is littered with money-hungry, greedy traders.
If you’re a good trader, you don’t need to resort to dirty tactics. So why do so many do just that? Maybe it’s because they suck. Or maybe it’s because they have no conscience. Only they know the answer. And the AMEX isn’t the only one under investigation. According to HighBeam Research: The Commodity Futures Trading Commission (CFTC) filed enforcement actions against four traders from the New York Mercantile Exchange's (Nymex) Comex division, claiming they traded gold ahead of executable customer orders and altered the prices of executed customer trades. What these traders did was something called front running. Front running is real easy. Let’s say Warren Buffet is about to place an order that could double the price of silver. If you buy silver before he does because you “found out,” you would be front running. According to hedge fund trader George Hamilton: The NYMEX is run by the mob. There are tons and tons of front runnings, back to backing and cuffing the markets by the locals. I have seen it firsthand. Some seats will hire people just to watch a big trader’s phone line, they know its BP's line, Cargill's or Conagra's line. When they know size is about to go through they start front running the big orders before they are even executed causing extreme price fluctuations. Pissed yet? I am. I can’t imagine how much money you or I have lost because of these stupid tricks. And that’s not even the half of it. Another scam? Don’t put in stop-loss orders on options or stocks. Keep a mental stop. What happens is that the market makers play a game where they take down the stock price to execute the stops. Then once they get those stops executed, they take the market back up. Now they just made some more money on the executed stops. What’s the bottom line here? Wall-Street is as dirty as it gets. If you’ve lost money in the market, you’ve probably lost it to a scam. In order to keep this piece rated PG, I’m not going to express how I really feel. It’s just so frustrating. You work hard, you do your research, and you still might get scammed by the pros. And how dare they do the scamming! It’s not as if they are poor. They live better than 99 percent of the entire world! But they are so consumed by greed that so many make a living by taking money from the small guy. Right now as the market pops higher, they are hard at work, looking for a way to take your money. They don’t care if it’s in your IRA. And they really don’t care if it’s your entire nest egg. Screw your retirement. They’d rather buy a penthouse suite in downtown Manhattan! They don’t earn this money. They barely even worked for it. They just found a stupid loophole and exploited the system for their own greedy needs. I trade options all the time. So finding out that bid and ask spreads are manipulated makes me want to break something. And I can’t blame you for wanting to do the same. I respect all the traders who do the right thing. You know, the ones who aren’t sending fake news alerts to prop up a stock for the day and screw the small shareholders. I respect the traders who look to investing as an art form, those that look for ways to legally increase their wealth. How do you protect yourself against Scams?Stick by the prices you are willing to pay. Don’t pay a nickel more.STOP CHASING STOCKS HIGHER! Wall Street is just going to put a huge short order at the top and push the stock down. Suddenly, you lose 10 percent on a “sure shot” play. And if you put your money into mutual or hedge funds, make sure it’s with someone you trust. Good trading, Charles P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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