Many argue that naked/short selling should be allowed Since we "factor in" the pessimistic views as well as the optimistic views. In this case, we have better price discovery and prevent bubble prices. Eventually, we get better market and better price movment.
In the case of mhl (just as an example):
if naked selling was allowed, many "players" who had better information would short the stock. The sp would never reach the 6 cents mark. Probably the sp had reached the 3 cents mark and then down to where it is now. In this case, you would lose less money thanks to the short sellers!!!
This is just an example. Normaly, you lose money when u buy overvalued stock. Naked selling prevents the stock from beeing overvalued.
Downside of naked selling: depress the sp and force the sp to be undervalued. This should not be problem since the short sellers can keep this for a short time only and u do not lose money in this case. Eventually, when the company has positive progress, the short sellers disappear and you "get your money"....
By the way, Banning naked or short selling is good for insider trading.
Allowing short selling would save you a lot of money in the case of mhl...and more importantly, would prevent insiders from making money...or reduces their ability to make a lot of money...
What do u think about this simple argument?
MHL Price at posting:
0.2¢ Sentiment: Sell Disclosure: Not Held
