12/31/2023 0 Comments Gme short floatFor example, the most shorted S&P 500 stocks now have an average short interest of 11% of shares outstanding, compared to 1.6% for the median stock (in Chart 1). The most shorted stocks have much more of their market capitalization held short compared to the typical level across all stocks. It’s also interesting to compare the left axis on both charts. For example, short interest in mid-cap stocks, which includes the majority of meme stocks, fell from 60% to 25% in just weeks.Ĭhart 2: Average short interest for 10 most heavily shorted stocks (in each group) That shows a dramatic drop in the most shorted stocks in January 2021, likely impacted by the meme stock short squeeze. In Chart 2, we focus on the average short interest of the 10 most heavily shorted stocks in each group. GME initially had close to a 100% short interest ratio, although as we explained, that’s not as short as it sounds. Of course, the meme stock trading in January 2021 was, initially at least, focused on a few very high short interest stocks. Small- and mid-cap short interest also remains above record lows for the period in Chart 1. Given that, it is interesting the typical short interest in large-cap names is around half the normal levels of short interest for mid- and small-cap stocks throughout the period. Some amount of shorting of stocks is required just to hedge arbitrage positions against those index products. There are also liquid options markets on the S&P 500 index as well as swaps. S&P 500 stocks make up the most liquid ETF in the U.S., as well the futures, which trade even more than the whole stock market with significant open interest. Some of the short interest in S&P 500 stocks is required to maintain arbitrage. Interestingly, S&P 500 short interest fell fastest right after COVID-19 lockdowns, dropping to around 1.6% during 2020, which is roughly where they sit today.Ĭhart 1: Short interest has generally declined since 2016 For example, the typical (median) short interest in S&P 500 stocks has ranged from 1.6% to 2.9% (blue line in Chart 1).ĭespite that tight range, short interest ratios peaked in March 2016 for all company size groups and have since been generally declining. Over the last decade, median short interest levels have been relatively constant. Today we take a look at short interest as a percent of shares outstanding (short float) over time. Instead, we typically compare short interest ratios that either look at shorts as a percentage of float shares outstanding (short float) or average daily liquidity (days to cover). Because not all companies are the same size, just looking at total shares doesn’t allow good comparisons. Regulators require total short shares held in each security to be disclosed twice every month. Short interest represents the total amount of shares shorted. The shares received in settlement are returned to the stock lender, and collateral on the loan is returned to the short seller. When the short seller closes their position, they buy back the stock. It’s done by borrowing shares of that stock and (effectively) selling the borrowed shares in the market. Short selling happens when a trader sells a stock they don’t already own. What’s the difference between short selling and short interest? The meme stock activity back in January 2021 shined a light on short selling, spurring an SEC report and new SEC and FINRA rule change proposals.īut what is interesting when we look at the data is that short interest was actually declining well before the MEME stock squeeze happened. By Phil Mackintosh, Chief Economist, Nasdaq
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