Short Sellers Take $23B Hit As US Markets Bounce Back

The late-year volatility in the stock market has some traders concerned that the bull market is finally coming to an end.

Yet short sellers who swooped in to bet on the sell-off to worsen in the closing weeks of the year were badly burned last week when the S&P 500 bounced off its recent lows, said S3 Analytics analyst Ihor Dusaniwsky.

From the beginning of October through the end of November, short sellers earned $93.7 billion in net profits, a gain of 11.1 percent. Those gains took a big hit last week when the S&P rallied 3.3 percent, costing short sellers a total of $23.3 billion.

According to Dusaniwsky, Amazon.com, Inc. AMZN short sellers took the biggest hit last week, losing roughly $822.5 million. Alibaba Group Holding Ltd BABA and Netflix, Inc. NFLX shorts took the next-largest hits with losses of $747.7 million and $437.6 million, respectively.

Dusaniwsky said he was not surprised to see this group of stocks inflicting the most pain on short sellers last week.

“These are stocks that are not only alpha plays but also beta hedges which usually outperform on both the upside and downside in volatile market conditions,” he said.

The pain continued early this week, with the S&P 500 gaining another 1 percent Monday. Amazon (+4.8 percent), Alibaba (+1.7 percent) and Netflix (+1.4 percent) all added to their short sellers’ losses Monday.

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