We follow 2,171 domestic ETFâ€™s with short interest of $166 billion. In January we saw shares shorted increase by $4.9 billion as short sellers either added to their hedges or took on more short side exposure in this rising market. The Spider S&P 500 ETF (SPY), Invesco QQQ Nasdaq Trust ETF (QQQ) and iShares Russell 2000 ETF (IWM) continue to be the most shorted ETFs in the domestic market.
With the Nasdaq leading the 2020 rally and up 3.36% for the year, six time the increase of the S&P 500, we are seeing very active hedge related short selling in the Invesco QQQ Trust ETF (QQQ), The QQQ is the sole ETF with over $1 billion of short selling January. Runner-up to QQQ short selling was the IEFA ETF, a broader and international portfolio hedge covering large and mid-cap stocks across developed market countries excluding the U.S. and Canada. Nine of the top 25 most shorted ETFs were bond stocks and there were three China related ETFs as well.
While shorts were very active in hedging their long Nasdaq exposure they were covering some of their S&P 500 long exposure. Shares shorted in the Spider S&P 500 ETF (SPY) decrease by $3.2 billion in January. In a distant second and third place we saw short covering in the iShares MSCI EAFE ETF (EFA) which is a broader and international portfolio hedge covering large and mid-cap Core stocks across developed market countries including the U.S. and Canada, and the Spider Financial Select Sector ETF (XLF).
The Spider S&P Retail ETF (XRT) continues to have exceptionally high Short Interest % of Float, at 358%, joined by several leveraged ETFs and a biotech ETF. Shares of these ETFs are being rehypothicated and relent causing the Short Interest % of Float to continue rising. The table below lists the ETFs with the highest Short Interest as a % of Float with a Short Interest over $10 million.
ETFs rarely have very expensive stock borrow rates because they can be created to be lent out if the stock borrow fee is high enough. While equity based ETFs can be created relatively inexpensively and easily, that cannot be said about leveraged, commodity based or futures based ETFs, ETCs and ETNs. Stock borrow rates of these less active ETFs tend to trend higher as secondary ETF creators are not rushing to earn these higher rates due to the difficulty in creating the securities.
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