‘Short Selling’ Rises on NYSE

“Short” sellers--traders who believe stock prices are going lower--continued to raise their bets in that direction in the 30 days ended Nov. 15, the New York Stock Exchange said Tuesday.

The number of NYSE shares sold short rose to a record 4.59 billion as of Nov. 15, up 2.1%, or 96.6 million shares, from mid-October, the exchange said.

On the tiny American Stock Exchange, the number of shares sold short jumped 5.3% to 212.9 million shares in the same period, Amex said.

In a short sale, a trader borrows shares from a brokerage and sells them in the open market, pocketing the proceeds. If the stock’s price then falls in the market, the short seller can replace the borrowed shares later by purchasing new shares. The profit on the trade is the difference between the trader’s initial sales price and the repurchase price.

A short sale is very risky, because if the stock price rises instead of falls, the short seller can face unlimited losses until he or she replaces the borrowed stock.

Many traders are waiting to see whether Nasdaq short interest also continued to surge between mid-October and mid-November.