Slashdot Mirror
Buy Low, Spam High
An anonymous reader writes "A recent study on spam has revealed that spammers see a return between 4.9% and 6% when selling stocks they have bought low and spammed the world with." From the article: "The researchers say that approximately 730 million spam e-mails are sent every week, 15% of which tout stocks. Other estimates of spam volumes are far higher. The study, by Professor Laura Frieder of Purdue University in the US and Professor Jonathan Zittrain from Oxford University's Internet Institute in the UK, analysed more than 75,000 unsolicited e-mails. All of the messages touting stocks and shares were sent between January 2004 and July 2005."
Folks, that's 6% in 2 days, not 1 year. That's about 33,000% anually.
actually they do sometimes catch them.
insert inflammatory anti-microsoft comment here
One morning I got my email right after the market openned, saw no movement... on a whim, bought a few hundred bucks worth, figuring, people stupider than me had to fall for it... Made about 20%-30% on the deal after commissions...
Haven't tried in a few years, been to busy, but it was actually pretty funny... Thought about doing that with some small money... I mean, the annual percentage gain is really impressive if you actually acted on all these and got some fast run ups...
The problem is, it's all short term, which means major taxes... Alternatively, you could do it in an IRA or other shielded account, but that means keeping in cash except when you make the play... no margin means you need to keep cash sitting around when you aren't playing, which cuts into returns... If you have margin, you can always move the cash in 2-3 days later conveniently.
Alex
"I wonder if it is against NASDQ/NYSE/etc exchange rules for a company to knowingly engage or have a 3rd party engage in unsolicited spam to promote the stock."
It is against SEC regulation (read Federal LAW). It's called "Pump and Dump" or "Microcap fruad"
http://www.sec.gov/answers/pumpdump.htm
http://www.sec.gov/investor/pubs/cyberfraud.htm
While it is interesting to see the return for the spammer, check out the return for the sucker that buys them. http://www.spamstocktracker.com/
You'd probably be better off shorting these stocks a few days after the spam is sent, since the price will certainly fall. That being said, shorting is very risky and should only be done by experienced investors. But if a stock price is being hyped by spam, you know it will be falling soon.
Shorting isn't something you can do with every stock. In fact there are even stocks in major indexes that can't be shorted. When you short a stock, you are essentially borrowing the stock, selling it and promising to return it in the future. But, you have to borrow the stock from someone. Most penny stocks would be considered "hard to borrow" and not available for shorting.
Further, there are rules about when you can short a stock - only on an uptick.
Bottom line, shorting isn't usually possible in these situations. This is probably why the spammers chose the penny stocks - cheap to take a position, don't have to worry about people shorting the stock AND there are usually not that many shares outstanding, so it doesn't take much to move the market.