Weekly Reports | Feb 15 2018
The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.
Please take note of the Important Information provided at the end of this report. Percentage amounts in this report refer to percentage of ordinary shares on issue.
Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.
Week ending February 8, 2018
Last week saw the ASX200 plunge -300 points in Wall Street’s vacuum, from its prior 6120 high.
One would be forgiven for assuming such a fall would have shorters slathering, given the opportunity for profit-taking, but when we look at the table below, we see mostly red, suggesting increased positions rather than reduced positions. But there are a few points to consider.
Firstly, with a couple of exceptions all those red movements reflect minimal bracket creep. Realistically there was little change in net short positions last week.
Secondly, short positions by no means have to be “naked”. Two common uses of short positions, outside of capital raising arbitrage, are pairs trading and options market making.
A pairs trade matches a short position against a long position, typically between two similar companies. BHP and Rio is an obvious example. CBA and any other major bank would be another. Here the trader is looking to profit on the price differential, not the price itself. So when the whole market falls in concert, there may be no offer of profits on a pairs trade.
Options market makers offer to sell (or buy) calls and puts to (from) clients. They then hedge those positions by buying/selling stock on a ratio reflecting the chance of that option being exercised (delta). Last week saw the US VIX volatility index very much in the spotlight. A rising VIX implies increasing demand for put option protection (Hence: “fear gauge”).
We have a VIX here too, in case you didn’t know, but it doesn’t draw nearly as much attention. We also have a stocks options market. When an investor buy puts from a market maker to protect their stock position, that market maker has to sell stock to hedge. If the market maker does not already have stock in place against other positions, it must be shorted.
Have a look at the short positions table at the bottom of this report for the ASX Top 20 stocks. Last week 13 of the 20 saw short position increases in the plunging market. My take-out from this, and ASIC does not require shorters to explain their positons, is investors were buying puts on the big names, forcing market makers to sell stock short.
An assumption only.
Otherwise, we find Tassal Group ((TGR)) remains at over 8% shorted hence its jump from 5.9% the week before was not a data blip.
Greencross ((GXL)) stood out last week with a fall in shorts to 8.4% from 10.7%.
Credit Corp ((CCP)) jumped from below 5% to 6.2% shorted.
Weekly short positions as a percentage of market cap: