Risk rally pushes U.S. stock investors to unwind short bets -Vanda Research

Stock Markets18 minutes ago (Oct 14, 2021 03:50PM ET)

(C) Reuters. FILE PHOTO: People are seen on Wall Street outside the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2021. REUTERS/Brendan McDermid/File Photo

(Reuters) – Institutional investors have been paring their bearish bets on Wall Street’s most heavily shorted stocks in response to increasing appetites for riskier bets, according to strategists at Vanda (NASDAQ:VNDA) Research.

Short-sellers are bearish investors who borrow stocks, aiming to buy them back when the price falls to cover the loan and pocket the difference.

Heavily shorted stocks were rallying on Wednesday and short-sellers were forced to leave bearish bets to curtail their losses, a situation known as a short squeeze.

“We believe institutional investors were forced to cover their shorts, either because they were de-grossing or because they feared that a rebound in risk sentiment could inflict pain on their short book,” Vanda strategists Ben Onatibia and Giacomo Pierantoni said about Wednesday’s session.

Some of the top shorted U.S. traded stocks, in terms of percentage of shares sold short, have been rallying recently, according to the latest data from S3 Partners.

The top short, Big 5 Sporting Goods, with 41.5% of its float sold short, had risen almost 4% in the last three sessions but was down 0.5% on Thursday. Altimeter Growth Corp, with 36% of its shares shorted, was rallying 4% on Thursday with a sharp spike higher in trading volume.

Blink Charging Co (NASDAQ:BLNK), which has 36% of its float shorted, was down 2.5% Thursday after rising 8% in the previous three sessions while WorkHorse Group, with 35% of its float shorted, was falling 2.5% Thursday after rising 10.6% in the last two sessions.

Meanwhile, Wall Street’s three major indexes were up more than 1% on Thursday after also gaining ground Wednesday.

Highly shorted names also got high retail mentions on Reddit’s WallStreetBets, the Vanda strategists said, noting that comments on such stocks on the forum was very close to the daily average in September and October.

Retail investors, however, had nothing to do with the short squeeze, the strategists said, as individual purchases of these stocks on Wednesday were a lot smaller than most days in September and October.

On WallStreetBets, an investor forum on Reddit.com, some commentators were pointing out on Wednesday that it was a rough session for bearish investors.

“Out there somewhere is a bear crying…” one WallStreetBets member wrote.

Vanda argued that if the short squeeze continues in stocks “it could eventually lure retail investors to abandon crypto investments” as they say “that rotations between those two asset classes are very common.”

Risk rally pushes U.S. stock investors to unwind short bets -Vanda Research

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Related Stories

Enjoying my content?

Join the exclusive subscription today and get premium articles for free

Discover

Biden, Democrats aim for deal on spending package in...

World6 minutes ago (Oct 19, 2021 08:02PM ET) 2/2 (C) Reuters. FILE PHOTO: U.S. President Joe...

Global ‘Squid Game’ mania lifts Netflix quarter

Economy12 minutes ago (Oct 19, 2021 07:56PM ET) 2/2 (C) Reuters. FILE PHOTO: A smartphone with...

U.S. Senate panel to hold new hearing on social...

Stock Markets26 minutes ago (Oct 19, 2021 07:41PM ET) (C) Reuters. Young girls look at...

U.S. House committee nears contempt vote on Trump aide...

World7 minutes ago (Oct 19, 2021 07:01PM ET) (C) Reuters. FILE PHOTO: Former White House...

Activision Blizzard fired 20 employees following harassment claims

Stock Markets18 minutes ago (Oct 19, 2021 06:50PM ET) (C) Reuters. The entrance to the...

Haiti gang seeks $1 million per person for kidnapped...

World19 minutes ago (Oct 19, 2021 06:50PM ET) (C) Reuters. An entrance to the Christian...

Popular Categories