Apr 7, 2016

Posted by in Stock Market News | 0 Comments

How Are The Shorts Trading These Healthcare Stocks? – Gilead Sciences Inc. (GILD), UnitedHealth Group Incorporated (UNH), Amgen Inc. (AMGN)

How Are The Shorts Trading These Healthcare Stocks? – Gilead Sciences Inc. (GILD), UnitedHealth Group Incorporated (UNH), Amgen Inc. (AMGN)

When an investor sells a stock short, they are betting the price will fall. They will borrow the shares from a trader, sell them at the current price, and then repurchases them in the future to hand back to the trader. When the shares have been returned, the contract is covered and closed out. The difference in the sale price and repurchase price goes into the investor’s pocket as profit. With any stock, an analyst can know how many shares have been sold on margin, and this indicates how many investors must repurchase the stock in the future to settle the short sale transaction. This percentage of shares outstanding that has not been repurchased is the short interest of the stock.

Depending on stock’s trading history, 10 percent may be a high amount of short interest. In this case, an investor will know there is a relatively large amount of shares that must be repurchased in the near future in order to cover short sale contracts. As a result, stock’s price may be temporarily inflated when these investors repurchase shares to cover. It would be a bad time for an individual to start a new short sale contract on the stock. However, it may be an excellent time for an investor to purchase shares of the stock outright or to purchase a contract for difference on the stock with a short maturation. Both of these could turn out to be highly profitable in the short term, given the stock’s current high short interest.

When a security is experiencing a period of low short interest, it can indicate investor sentiment about the security is actually quite high. Very few investors believe the security’s price will fall. For example, if a stock has only 2 percent short interest when compared to the earlier 10 percent, an investor knows short sale tactics have dropped substantially. Most people holding shares in the security are doing so in order to profit off the company’s growth. If an investor believes the security will take a turn for the worst, this would be a good opportunity to sell short.

As of 15/03/2016 short interest for Gilead Sciences Inc. (GILD) stood at 31720165 shares, a decrease of -4537759 shares or -14.31 percent compared to 36257924 shares on 29/02/2016. This short interest comprises 2 percent of the entire float. Short interest ratio now stands at 2.62 at the average volume of 12112904 shares.

According to the latest short-interest data for the two-week period ended 15/03/2016 short interest for the stock of UnitedHealth Group Incorporated (UNH) decreased from 12938012 shares at the end of the settlement date of 01/03/2016 to 11196035 shares, marking a decline of -1741977 shares or -15.56 percent. The current short interest accounts for 1.2 percent of the company’s total outstanding common shares and the days-to-cover short interest ratio, on the other hand, is 4.010599 as of 15/03/2016 assuming average daily trading volume of 2791612 shares.

Short interest for the shares of Amgen Inc. (AMGN) rose 10.17 percent from 9961282 shares on 29/02/2016 to 11089234 shares on 15/03/2016. Investors have taken short positions on 1 percent of the total common shares of the stock that are floating on the exchange. The days-to-cover short interest ratio is now at 2.867572 days. It is based on average daily trading volume of 3867116 shares.

 

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