The Wall Street Journal-20080126-Nasdaq Short-Selling- Short Interest Surges on the Nasdaq
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Nasdaq Short-Selling: Short Interest Surges on the Nasdaq
NEW YORK -- Short interest rose sharply at the Nasdaq Stock Market in the first half of the month as recession fears began to wreak havoc on the stock market.
For the two-week period ending Jan. 15, the number of short-selling positions not yet closed out at Nasdaq -- so-called short interest -- leapt 7.1% to 8,686,053,949 shares from 8,112,753,852 shares on Dec. 31.
Marketwide, the short ratio, or number of days' average volume represented by the outstanding short positions at the exchange, fell to 3.6 from 5.0 in late December.
Investors who "short" shares borrow them and sell them, betting the price will fall and they will be able to buy the shares later at a lower price for return to the lender. In general, the higher the short interest, the more investors expect a downturn.
The tech-focused Nasdaq Composite Index slid nearly 9% during the period covered by the report as investors began to focus on the effects from Wall Street's mortgage debacle on the broader economy.
Bearish investors had been on a roll even before the big January selloff. According to consulting firm Treflie Capital Management, which tracks short interest, the average short-selling portfolio was up 1.5% in December and enjoyed an 11.8% return for all of 2007, beating the Nasdaq, the Dow Jones Industrial Average and the Standard & Poor's 500.
Harry Strunk, a Treflie partner said he believes his firm's month- end performance reading for short sellers in January could turn out to be the strongest in nearly a decade, once all the data are in hand.
