Mar 18, 2016

Posted by in Stock Reports | 0 Comments

How Are The Shorts Trading These Services Stocks? – Staples, Inc. (SPLS), Netflix, Inc. (NFLX), Rite Aid Corporation (RAD)

How Are The Shorts Trading These Services Stocks? – Staples, Inc. (SPLS), Netflix, Inc. (NFLX), Rite Aid Corporation (RAD)

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 29/02/2016 short interest for Staples, Inc. (SPLS) stood at 30370343 shares, an increase of 770214 shares or 2.54 percent compared to 29600129 shares on 12/02/2016. This short interest comprises 5 percent of the entire float. Short interest ratio now stands at 3.9 at the average volume of 7786032 shares.

According to the latest short-interest data for the two-week period ended 29/02/2016 short interest for the stock of Netflix, Inc. (NFLX) decreased from 55143013 shares at the end of the settlement date of 12/02/2016 to 53840552 shares, marking a decline of -1302461 shares or -2.42 percent. The current short interest accounts for 12.82 percent of the company’s total outstanding common shares and the days-to-cover short interest ratio, on the other hand, is 3.360598 as of 29/02/2016 assuming average daily trading volume of 16021124 shares.

Short interest for the shares of Rite Aid Corporation (RAD) rose 3.69 percent from 33173438 shares on 12/02/2016 to 34445382 shares on 01/03/2016. Investors have taken short positions on 3 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 3.288663 days. It is based on average daily trading volume of 10473979 shares.

 

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