The point is that they don't have to put any money up to short a stock and if it goes down, they just collect, if I understand it correctly. That is the naked part.....as I understand it. Correct me if I am wrong. DD
naked shorting is shorting shares that aren't ensured to be available to short. http://en.wikipedia.org/wiki/Naked_short_selling
I thought they outlawed it for OTC stocks. My friend made a killing (over a million dollars) doing this about 7 years ago.