Page 418 - How to Make Money in Stocks Trilogy

288 BE SMART FROM THE START

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Volume © 2009 Investor’s Business Daily, Inc.
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Volume © 2009 Investor’s Business Daily, Inc.
130,000,000
70,000,000
40,000,000
20,000,000
Jun 1999 Sep 1999 Dec 1999 Mar 2000 Jun 2000 Sep 2000 Dec 2000
limit of $0.25 or so below the last price. A weak stock could trade down a
point or more without having an uptick.
After a careful study, the SEC recently rescinded the uptick rule. It
should and probably will be reinstated at some point, with more than a penny
price increase being required—perhaps a 10- or 20-cent rally. This should
reduce volatility in some equities, especially in bad, panicky markets. The
uptick rule was originally created in early 1937 after the market had broken
1
1
seriously in the prior year. Its purpose was to require a ⁄8 or ⁄4 of 1 point
1
uptick, which would be 12 ⁄2 or 25 cents, to slow down the uninterrupted
hammering that a stock would be subject to during severe market breaks.
One alternative to selling short is buying put options, which don’t need an
uptick to receive an executed trade. You could also short tracking indexes
like the QQQs (Nasdaq 100), SMHs (semiconductors), or BBHs (biotech).
These also do not require an uptick.