Short sellers increase bets on falling prices – despite previous losses

2023-08-09 04:02:03

Dealers at the Cross New York

Many professional investors were surprised by the strong price increases in July.

(Photo: Reuters)

Dusseldorf The rally on the US stock exchanges surprised many hedge funds that have been betting on falling prices. In July, these “short bets” made them close to $54 billion in losses. This is shown by an analysis by the financial data provider S3 Partners. This corresponds to a negative return of 5.2 percent on the capital employed.

This means that the losses of speculators, also known as short sellers, have increased to 175 billion dollars since the beginning of the year. That corresponds to a negative return of 18 percent. For comparison: the market-wide US index S&P 500 rose by 19.5 percent in the same period, the tech index Nasdaq 100 even by 44 percent.

Despite this, most hedge funds don’t end their bets, in fact they continue to increase them. In July, $17 billion of net new short positions were opened, according to S3. This increases the value of the bets to almost 1.1 trillion dollars. S3 analyst Ihor Dusaniwsky sees two possible explanations for this.

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