Rising prices foil short-sellers

February 24, 1992|By New York Times

NEW YORK -- Many traders who had hoped to profit by betting against stocks they thought were overvalued were forced to run for cover again this month as share prices continued to rise.

That trend was evident in figures released Friday by the New York Stock Exchange and the American Stock Exchange on the number of shares sold short and not yet covered in the month ended Feb. 14.

Though those figures represent a tiny fraction of the shares listed on those exchanges, they are an important measure of the overall bearishness of traders.

That is because traders who are bearish about particular stocks or the market can place their bets by borrowing the stock and selling it at the prevailing price, hoping that they will be able to buy the shares later at a lower price.

With so many stocks rallying this year, many short-sellers have preferred to buy back, or cover, the stocks rather than risk deepening their losses. That is especially so after January, when the average professional short-seller lost 7.21 percent, according to the Centurion Trust Co. in La Jolla, Calif.

The number of Citicorp, Unisys and Chrysler shares sold short fell by 1.4 million or more in the month. In each case, traders said, many short-sellers closed their positions to try to limit their losses.

The number of shares sold short and not yet covered on the New York Stock Exchange fell by 7.5 million shares, to 721.9 million. On the American Stock Exchange, the number was 64.2 million, down nearly one million shares.

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