U.S. market sell-off brings short sellers $344 bln profit

Reuters ^ | Sinéad Carew

[Kalija]

March 21 (Reuters) - Investors betting on declines in U.S. stocks saw big profits in the last month as equities crashed while the global spread of coronavirus darkened economic prospects and net increases in short selling implying no turnaround in bearish sentiment.

Short sellers borrow shares in the hope of buying them back at a cheaper price and pocketing the difference.

U.S. shorts saw a one-month paper profit of $343.67 billion from the S&P 500 and Nasdaq's Feb. 19 peaks through to March 19, according to the latest data from financial technology and analytics firm S3 Partners, which measures bets against U.S. stocks

[Kalija]

Friends of Bill no doubt

[Bayard]

Soros probably made billions.

[HighSierra5]

And those Senators.

[spintreebob]

For the entire Trump years, and most of the history of the market, the stock market has been volatile. The current volatility is just an extreme example of other volatilities.

Remember how Trump recognized Jerusalem as the capital of Israel. The media predicted WWIII. The pessimists sold. The optimists bought.

Many fortunes are made off volatility.The same is true in real estate as in the stock market. Atlanta has had a booming real estate market. Recent events have caused a small dip in that market.

Vultures have entered the Atlanta Real Estate market to make a killing. House Flippers already in place and optimistic about flipping in a volatile market are doing quite well.

[SanchoP]

[ConservativeInPA]

I want to remind everybody before you jump on shorting is evil and evil people do it, that you too can short. Just like anyone can be in the stock market, but people (not on FR) complain about rich people in the stock market. Then there are complaints about banks, and rich bankers. Well go out and own a bank, buy stock in one.

Shorting is a valuable investment tool. It allows one to manage his portfolio and provide insurance for positions. It can cover positions and be used very conservatively. Shorting also has a side affect of providing liquidity to a market. All those lemmings wanting to sell the past couple of weeks, they are thanking God for shorters, because when you short, you buy to close out your position, and you do it when the price has gone down.

[entropy12]

He looks awful! How old is Soros now?

[entropy12]

Time to short was when DOW was flirting with 30,000.
The big money in shorting is already been made.

[Tijeras_Slim]

six hundred and sixty six... but who’s counting.

[SanchoP]

I think he’s dead. That looks a lot like a rigor mortis grin.

[ConservativeInPA]

That's wasn't my point at all. Let me clarify. Shorting is a tool that is to be used regularly and often to cover positions. Options are another tool to achieve similar effects. The market will go up and down. That is something that I absolutely know. When it will happen, I absolutely do not know. I, by no means, claim to be a market guru. Given the volatility and volume of this market, it is wise to cover your positions. There's another word for this, it is called hedging. I've tried to avoid using that word because people have a negative view of hedge fund managers. They hedge (cover) positions all the time. They use various tools to do it. And it is perfectly legal. Buy into a hedge fund if you have the money and you don't have the time to trade yourself. It's a conservative/safe thing to do.

Let me give you an example using the oil market today ... which is completely whacky given the F'n Saudis and this coronavirus. Crude oil is cracked into two primary products, gasoline and heating oil. Given the time of year, more of one product is refined. (I think you can figure which one is refined more in summer.) Sell crude oil short, buy gasoline and heating oil long, in proportion to the crude oil that you short. If price of oil goes down, the price of heating oil and gasoline will not go down as much. You have an instant profit locked between the two. If the price of oil goes up, and there is that possibility, you know that gasoline and heating oil will go up too. Your short position on oil is covered. But guess what, gasoline/heating oil might go up more than oil and you will have a profit.

That's covering a position.

You can do that futures and options. It works with many commodities, and the same idea works with equities. You just need to know how primary products of equity companies react to one another.

These are actually conservative techniques. You can make a killing by trading naked - uncovered oil futures for example. But you can also get killed if the price goes against you. Be conservative, cover your positions, all the time.

[grobdriver]

All of those things are true, and none apply to the current situation.

The economy is crippled by events (closures, reduced commerce) necessary to battle the Chinese Flu.

That is NOT the time for vultures to flock to make a killing. Foreigners may be doing that out of their hate for the United States - but Americans going out of their way to profit off of the pain of their country is disgusting.

An honorable reaction would have been to remain on the sidelines until there is a recovery, then invest in our recovery.

The shorters are merely walking up to a down and wounded opponent and shooting them repeatedly in the belly, laughing while they do it and saying, "Look at me - I'm so smart to capitalize on this situation!"

[NELSON111]

I did it. And I’m not evil. I shorted the market and made lots of money on the 24th of December 2018 alone. Then I reversed and went long. I’ve shorted this market since the 24th of January and made lots of money. One day I will reverse and go long (already have in some sectors with some LEAPS). .

Anyone who thinks short selling is evil is a hypocrite because they are riding the long coattails of all the evil manipulation that have made this market explode beyond what it should have. They made a ton of money off of that overinflated balloon and not it’s popped. If they didn’t have sense to know that’s why it was blowing up to the upside-and that this was going to massively deflate it-I’m sorry-if they manage their own money-I don’t feel the least bit sorry for them. Not one bit. If someone else manages their money-they should fire them and get someone who is honest.

[grobdriver]

If you shorted this current market, knowing what you do, you are, in fact, evil. You helped destroy the lives of people living off their savings who may not be as market savvy as you, but it's ok because you're better and the market deserved it and blah blah blah.

You don't understand that this not normal times, and you don't behave in your normal fashion. To you it was an opportunity to make money. To the people you made money off of it's a nightmare.

And full disclosure, I'm all in cash, and just an observer.

[ConservativeInPA]

The wounded opponent wouldn't be wounded if he didn't sell. You can only lose in this market if you were stupid enough to sell. I said it bluntly, but it is true. The market would not have crashed if people didn't sell. Shorters would not have made a killing if the losers didn't sell. It takes two people to make a trade. Buyers and sellers are just as responsible for the current market conditions. Why in the world would anyone fault someone that is getting the better half of a deal because the other half is F'n stupid? Again, being blunt as possible. If the market presents too much risk to people, or people don't know or care to manage that risk, then they shouldn't be in the market.

As the market recovers, and it will, you should still cover your positions, because the market will go down and up during a recovery. And on the way down, a lot a losers are going to sell again, thinking it is time to get out, even though they bought in at the bottom. Timing the market is for LOSERS. No one knows where the bottom or the top is.

I can tell you several things that are absolutely true about this market and using that information you can successfully trade. 1.) There will be long term volatility 2.) There will be intra-day volatility 3.) Volume will be tremendous on some securities. (at least 4 out of every 5 trading days.) 4.) All products will consistently consolidate on price (have short periods of time when the price is stable). Develop a strategy that relies on those four things. They are known. Market direction and price is unknown, and anyone who says he knows and trades naked is a gambler.

Trade using technical analysis. Fundamentals don't mean jack right now.

Lastly, don't listen to stock brokers, investment advisers, talking heads on CNBC, and journalists. If they knew what they were talking about they wouldn't have time to pimp their products or opinions because they would be trading and making a killing.

Learn about how markets work. Learn about equities, futures, options, and options on future. Learn about order types (market, limit, stops, MIT, etc.) Learn basic trading strategies, and develop your own to fit market conditions. Then back test. Revise and test again. Trade cautiously at first and build reserves before increasing the size of trades. A good strategy will work with 1 share/1 contract or many shares/contracts. The maximum number of shares/contracts that can be traded is dictated by average daily volume for those shares/contracts. You don't want to be stuck on a trade and unable to close your position because there is not enough volume.

[ConservativeInPA]

Dittos Nelson

[grobdriver]

There are a lot of people who are not involved in the trading but who none the less are affected as the market spirals down, and takes all value with it.

[lodi90]

If you shorted this current market, knowing what you do, you are, in fact, evil. You helped destroy the lives of people living off their savings who may not be as market savvy as you, but it’s ok because you’re better and the market deserved it and blah blah blah.
You don’t understand that this not normal times, and you don’t behave in your normal fashion. To you it was an opportunity to make money. To the people you made money off of it’s a nightmare.

And full disclosure, I’m all in cash, and just an observer.

---

Agree. It’s totally unsurprising to me that some of the loudest Kung Flu pumpers had selfishly shorted the market. That’s just how they roll.

Personally, I’m in good shape too. But I do feel bad for those of my fellow Americans who are getting crushed economically by the Kung Flu Panic of 2020.

[ConservativeInPA]

takes all value with it.

Value, if you mean money, is simply transferred. One person had it, now another person has it. The money didn't disappear. The person who now has it will put it to work earning a return. The value of the market has not disappeared. The true value of the market, now pay attention, because this is critical to capitalism, the true value of the market is to provide perfect price information, perfect product information, and the ability to easily enter and exit the market. THAT is the value of the market. The only thing that is not perfect (that's an economic term, by the way, not every day usage) is price information. It's not technically possible to have instantaneous price information given network latency. The closest thing you can get to perfect price information is trading FOREX pairs. But then you can't explicitly cover your positions since futures and options are traded on a different exchange. You have to arbitrage to achieve that.

[McGruff]

This shouldn’t be able to happen to our nation’s economy.