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Short selling up on Nasdaq, NYSE
Short interest on the Nasdaq and New York Stock Exchange (NYSE) rose in the second half of June, the exchanges said on Friday, suggesting a continued increase in bearish sentiment following a recent run-up in stocks.
- Reuters
- Published: 23:02 July 12, 2009
New York: Short interest on the Nasdaq and New York Stock Exchange (NYSE) rose in the second half of June, the exchanges said on Friday, suggesting a continued increase in bearish sentiment following a recent run-up in stocks.
The broad Standard & Poor's 500 index shot up about 40 per cent from 12-year lows hit in early March and peaked in the first half of June, but was essentially unchanged for that month following large increases in March, April, and May.
The increase in short interest at the end of June suggests some investors are betting the upward trend will reverse.
Bill Rhodes, from Rhodes Analytics in Boston, said investors might be ready to reverse their bets.
"People who believe [the market] has rallied all it is going to are going to go in and short it again," he said.
So far in July the S&P is down 4.4 per cent, which could mean increasing profits for short sellers, as they borrow shares and sell them with the expectation of buying them back at a lower price, pocketing the difference. As of June 30, short interest rose 1.6 per cent to about 15.6 billion shares on the NYSE, compared with 15.35 billion shares as of June 15. Short interest made up 4.08 per cent of shares outstanding.
Rhodes pointed out that the more than 4 per cent of shorted shares on the NYSE amounts to less than 3 per cent of the exchange's market capitalisation, which suggests shorting has moved away from large stocks.
Short sellers "probably think the larger companies have easier access to liquidity and capital", Rhodes said, a position that could better allow shares of those big companies to withstand another downturn.
On Nasdaq, short interest rose 3 per cent to about 6.86 billion shares, compared with 6.66 billion shares over the same time frame. The average number of days it would take to cover the outstanding short positions, or the index's short ratio, rose to 2.91 days from 2.85 days.
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