Madaz shorted $TCCO this morning and I wanted to dissect the trade.

First, we know he was watching $TCCO because it was the number one Up Gapper:

At 9:39 AM he tweeted that he had "nailed" it for $5,200 having shorted "4ish average" and covering $3.50.

Now let's look at a micro timeframe chart here, 10 second bars ... that should read "pre-open high $3.70" not "high $3.70."

Later at 9:54 AM he tweeted that he covered his final 2,000 shares at $3.20 bringing the total gain to $5,800 ... $3.20 is 30 cents below $3.50, times 2,000 shares is $600 additional, that makes sense, I guess.

Here's the chart again with the $3.20 level marked.

Finally, he tweets his P&L, which he does every day, win or lose.

What's revealed in the P&L is that he realized $5,942.85 by shorting $TCCO, generating 10 tickets and trading 66,096 shares. I'm not sure if the shares and tickets numbers mean he bought and sold 33,048 shares or bought and sold 66,096 shares, or 5 buys 5 sales, 8 buys 2 sales, 9 buys 1 sale, etc.? Maybe some kind reader can enlighten me via email (or Twitter).

Let's assume that he bought 33,048 shares and sold 33,048 shares to make the $5,942.85. That's almost exactly 18 cents a share. So we have to assume that he is averaging into the position and averaging out of it, and was able to walk away with 18 cents of profit.

If he simply shorted 33,000 shares at $4 and covered 33,000 shares at $3.50, he would be making over $15,000 on the trade, not $6,000. I'm not sure how much of a difference the final 2,000 shares covered at $3.20 can make.

I'm just thinking aloud here, I'm trying to make sense of this.

A bigger question is *why* did he begin shorting where he did to build a 30,000 share position with a 4ish cost basis? Was he "reading the tape" and built the short based on that? This thing traded up to $4.40 ... if he were short 30,000 shares from 4 and it ran on him, would he get out at $4.40? How much slippage would he suffer? Was he willing to risk $12,000 to make $6,000?

I'm just thinking out loud here, trying to make sense of this. I'll update the post as I continue to think about it, and incorporate any other wise people's thoughts, with credit of course!

Two readers have written in with their comments, both full-time traders with many years of experience: