Skip to content

Short sellers lost $120 billion in 2023 amid stock market rebound

Short sellers lost $120 billion in 2023 amid stock market rebound

Short-sellers have found themselves on the losing end this year as the stock market experienced an impressive rebound following the turbulence of 2022. 

Many who bet against the market’s upward momentum have been left scrambling to cover their positions as stocks surged higher and defied their expectations.

Specifically, short-sellers sustained around $120 billion in mark-to-market losses in 2023, of which $72 billion occurred in the first half of June, according to a Wall Street Journal report on June 20, citing data from financial data firm S3 Partners.

Most of the short-selling positions are held by hedge funds and other institutional investors, highlighting their concerns about the stock market. Swollen company valuations and possible further interest rate hikes from the Federal Reserve is making many of these investors skeptical about the extent of the current market rally. 

“There are still many investors and hedge funds who think that this rally is ready for a pullback. Or at least that several of the highflying stocks will lose steam and revert back to the mean.”

– said Ihor Dusaniwsky, managing director of predictive analytics at S3.

Short interest in US exceeds $1 trillion

Short-sellers refer to investors who profit by borrowing and selling securities they anticipate will decrease in value, with the intention of buying them back at a lower price to return to the lender.

This month, total short interest in the US market surpassed the $1 trillion mark, representing its highest level since April 2022, per S3 Partners data. At the start of 2023, total short interest stood at $863 billion.

Meanwhile, another factor that contributed to the growing short-selling activity is the increasing use of leverage by hedge funds after taking a defensive approach at the beginning of the year. 

“Hedge funds are increasing their market exposure, adding to both their long and short holdings, looking to play catch-up after missing some of the early year rally.”

– added Dusaniwsky.

Why are short sellers losing money?

Put simply, short-sellers are incurring substantial losses primarily due to an exceptional stock market comeback after a very challenging 2022.

Moreover, some of the biggest short positions this year are held in some of the hottest stocks, such as Tesla (NASDAQ: TSLA), Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT), among others.

Current short interest in TSLA, AAPL, MSFT, NVDA, and AMZN. Source: WSJ

For instance, Tesla, which currently has the highest short interest as a percentage of available shares, at 3.3%, has seen its stock price more than double this year.

Similarly, shares of Nvidia nearly tripled year-to-date amid the ongoing artificial intelligence (AI) frenzy, while Apple, Microsoft, and Amazon’s stocks soared 47.8%, 44.6%, and 46.2% this year, respectively. 

Best Crypto Exchange for Intermediate Traders and Investors

  • Invest in cryptocurrencies and 3,000+ other assets including stocks and precious metals.

  • 0% commission on stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

30+ million Users
Securities trading offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Finbold.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD

Read Next:

Finance Digest

By subscribing you agree with Finbold T&C’s & Privacy Policy

Related posts

Sign Up

or

By submitting my information, I agree to the Privacy Policy and Terms of Service.

Already have an account? Sign In

Disclaimer: The information on this website is for general informational and educational purposes only and does not constitute financial, legal, tax, or investment advice. This site does not make any financial promotions, and all content is strictly informational. By using this site, you agree to our full disclaimer and terms of use. For more information, please read our complete Global Disclaimer.