Stock bears have made a mint betting against Cathie Wood this year. On Thursday, they gave a chunk of money back.
(Bloomberg) — Stock bears have made a mint betting against Cathie Wood this year.
On Thursday, they gave a chunk of money back.
Traders short selling the funds of ARK Investment Management — Wood’s firm — saw about $180 million wiped off the value of their positions as the firm’s entire lineup of funds rallied, according to technology and data analytics firm S3 Partners.
The flagship strategy, the ARK Innovation ETF (ticker ARKK), surged 15% for its best day on record amid a broad market rally sparked by slower-than-expected US inflation data.
That’s raising hopes that the Federal Reserve may ease back from the aggressive monetary tightening that has hammered the speculative tech bets beloved by ARK.
On paper, the ARKK move alone cost short sellers about $137 million, S3 said.
The good news for ARK short sellers is they seem well-positioned to absorb the loss.
Even after Thursday’s hit, bets against ARK overall this year have earned about $2.4 billion in mark-to-market profits, according to S3, mostly from ARKK. Meanwhile, as the main fund has slumped, short interest as a percentage of shares outstanding has dropped to about 15% from more than 22% earlier this year.
Since mid-September alone, short sellers’ notional exposure is down by an estimated $502 million, or about 32%, according to Matthew Unterman, a director at S3.
“This implies bears have been taking profits opposed to reloading on the winning trade,” he said.
“A potential sign of falling conviction.”
Read more: ARK Short Sellers Make $999 Million to Eclipse All Gains in 2021
Despite Thursday’s ARKK price jump, the ETF is still down about 75% from its record close of $156.58 in February last year.
It ended the day at $37.30.
The fund was up about 4.8% as of 12:10 p.m. in New York on Friday.
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