Oct 14 (Businesshala) – Institutional investors are placing their bearish bets on Wall Street’s heaviest short stock in response to a growing appetite for riskier bets, according to strategists at Wanda Research.
Short-sellers are bearish investors who borrow stocks with the goal of buying them back when the price falls to cover the debt and pocket the difference.
Heavy short stocks were rallying on Wednesday and short-sellers were forced to abandon bearish bets to cover their losses, a situation known as a short squeeze.
“We believe that institutional investors were forced to cover their shorts, either because they were de-grossing or because they feared a rebound in risk sentiment could inflict pain on their short book. ,” Wanda strategists Ben Onatibia and Giacomo Pierantoni said of Wednesday’s session.
According to the latest data from S3 Partners, some of the top short US traded stocks have gained momentum recently, in terms of percentage of shares sold short.
The top short, Big 5 Sporting Goods (BGFVO), which sold 41.5% of its floats lower, was up nearly 4% in the past three sessions, but was down 0.5% on Thursday. Altimeter Growth Corp (AGC.O), down 36% of its shares, was up 4% on Thursday with a sharp spike in trading volume.
Blink Charging Company (BLNK.O), which has a 36% float short, was down 2.5% on Thursday after rising 8% in the past three sessions, while Workhorse Group (WKHS.O), with its 35% float short, was down 2.5% on Thursday. It fell 2.5% on Thursday after rising 10.6% in the previous two sessions.
Meanwhile, three of Wall Street’s major indices were up more than 1% on Thursday after gaining ground on Wednesday as well.
Extremely short names on Reddit’s Wallstreetbets also received high retail mentions, Wanda strategists said, noting that comments on such stocks on the platform were very close to the daily average in September and October.
Strategists said retail investors, however, had nothing to do with the low pressure as individual buying of these stocks on Wednesday was much lower than for most days of September and October.
On WallStreetBets, an investor forum on Reddit.com, some commentators were pointing out Wednesday that this was a tough session for bearish investors.
“Somewhere there’s a bear crying…” wrote a WallStreetbets member.
Wanda argued that if the short squeeze in the stock continues “it could eventually lead retail investors to abandon crypto investing”. As he puts it, “rotation between those two asset classes is very common.”