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Short Sellers Are Up $170M On Online Broker Stocks In 2019

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Short Sellers Are Up $170M On Online Broker Stocks In 2019

Online broker stocks have been hammered this week after the latest wave of online commission cuts have sent trading fees to $0. But a brutal week for investors has been a big winner for one group.

Shorting Up

Short sellers of Charles Schwab Corporation (NYSE: SCHW), TD Ameritrade Holding Corp. (NASDAQ: AMTD), E*TRADE Financial Corp (NASDAQ: ETFC) and Interactive Brokers Group, Inc. (NASDAQ: IBKR) booked mark-to-market gains of more than $190 million on Monday alone. As of the close on Monday, short sellers of the four brokers were up more than $170 million combined year to date, according to S3 Partners analyst Ihor Dusaniwsky.

TD Ameritrade has been the biggest cash cow for broker short sellers this year. The stock is down 32.5% on the year, and short sellers were up $109.1 million on their stakes as of Monday’s close. Those gains have only increased in the past two days.

No Relief In Sight

Dusaniwsky said short sellers of the 40 stocks in the Investment Banking & Brokerage Sector have booked mark-to-market gains of $330.6 million year to date. He is not expecting any relief for the stocks in the near future.

“We should see continued short selling in these brokerage stocks as momentum short sellers join value short sellers in this short-term price weakness and short interest which has been declining since the 2nd quarter trend back towards year-to-date highs,” Dudaniwsky said Tuesday.

Benzinga’s Take

The shift to commission-free trading is going to take a major bite out of the earnings and revenue growth potential of online brokers. Until investors get clarity on the “new normal” for brokers, attempting to buy the dip in these battered stocks is a high-risk endeavor.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

Wells Fargo Downgrades Online Brokers, Says Finding Bull Case 'Has Become Very Difficult'

'Zero Commissions Now A Reality': Wall Street Reacts To Broker Commission Cuts

Latest Ratings for AMTD

DateFirmActionFromTo
Oct 2020Morgan StanleyMaintainsEqual-Weight
Jul 2020Morgan StanleyMaintainsEqual-Weight
Jul 2020Deutsche BankMaintainsHold

View More Analyst Ratings for AMTD
View the Latest Analyst Ratings

 

Related Articles (AMTD + IBKR)

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