We track almost 2,200 domestic ETFs with total short interest of $159 billion. The top five most shorted ETFâ€™s in the U.S. market did not change over the last week, but overall ETF short selling increased by just over $4.77 billion. ETF short sellers continue to make fixed income ETFâ€™s a popular short for both hedging and outright trading purposes as five out of the top twenty ETF shorts are fixed income ETFs. On average, the borrow cost for shorting ETFs is slightly above General Collateral levels at 0.57% fee and shorts are paying $76.3 million in stock borrow costs monthly to finance their shorts.
The largest increase in ETF short selling occurred in two of the largest index ETFs, the Spider S&P 500 ETF (SPY) and Invesco QQQ (Nasdaq) ETF (QQQ) with almost three quarters of the $4.77 billion of new ETF short selling occurring in these two ETFs.
On the short covering side, we see $611 million of covering in the iShares High Yield Corp Bond ETF (HYG) and the broader iShares Russell 2000 ETF (IWM). The VanEck Vectors Gold Miners ETF rounds out the top three with $292 million of short covering.
For most of 2019, total ETF short interest and the VIX have been trading in relative lockstep. ETF short covering\decrease in VIX volatility and ETF short selling \increase in VIX volatility generally moving in unison.Â But since late August the VIX has fallen and ETF short selling has increased. If our earlier trend re-establishes itself, we should see an increase in the VIX and volatility to increase in the domestic market.
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Managing Director Predictive Analytics, S3 Partners, LLC
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