People betting against once-beloved technology giants made $1.6 billion in paper profit last week, according to data from S3 Partners.
So-called FAANG stocks, including Facebook, Amazon, Apple, Netflix and Google’s Alphabet, fell 4.7 percent last week. They were down 3.6 percent on Friday, alone and are also among the 10 most shorted U.S. stocks, S3 said. The profit number on those short positions for the week assumes the trades were marked at the market price on Friday
Tech is down again on Monday, with the tech-heavy Nasdaq Composite down more than 1 percent. Amazon, which is down 8 percent in afternoon trading, is now on pace for its worst month since November 2008, when it fell 25.4 percent. Netflix also tumbled more than 6 percent on Monday. The short-sellers are still in the hole for the year, however. Year to date, the mark-to-market losses on FAANG shorts is $7.4 billion.
Traders have $9 billion bet against Apple, according to S3 data, based on reported short interest. There is $7.9 billion on the line against Amazon and another $5 billion waged against Netflix. In total, short positions on FAANG shares are $30.5 billion. In a short sale, a trader borrows stock and sells it hoping it will decline in value and can be bought back later at the lower price, making a profit.
Ihor Dusaniwsky, the managing director of predictive analytics at S3, says shorting the FAANG group of stocks has generated higher returns than betting against the S&P 500. Despite the broad market’s decline, FAANG stocks are down 18 percent more. The shorts have piled on throughout the October market rout, with short positions rising 7 percent for FAANGs. Of course, that means it could go in the other direction soon.
“October’s significant increase in shares shorted will increase the potential for some volatile swings to the upside,” Dusaniwsky wrote in a note on Monday.