What is a bear raid?
A strategy used on the stock market, where traders try to forcibly lower the price of a stock to cover the price of a short position. This is normally achieved by spreading negative rumours about the target company, which puts negative pressure on the share price.
Where have you heard about bear raids?
When Bear Sterns collapsed in 2008, many acknowledged that it was because of short sellers taking advantage of the company’s trades on mortgage-backed securities. However nobody is likely to admit to bear raiding as it is considered a type of securities fraud and a form of market manipulation.
What you need to know about bear raids.
The point of a bear raid is to make windfall profits within an incredibly narrow margin of time through short sells. If the raid is a success and the stock under mark plummets, the shares can be bought cheaply by short sellers on the open market. These shares would then be sold at a much higher rate, with the short sellers keeping the difference.
Find out more about bear raids.
To learn more about the bear raid strategy, see our page on short position.