Understanding the Short Interest of ETFs
Short selling ranks high on the list of misunderstood facets of the ETF structure. What is short selling, and why is it prevalent in the U.S. markets, particularly in ETFs? According to the Division of Market Regulation, “a short sale is generally the sale of a stock that you do not own (or that you will borrow for delivery). Short-sellers believe the price of the stock will fall, or are seeking to hedge against potential price volatility in securities that they own.”1 The main reasons detailed for shorting are “to profit from an expected downward price movement, to provide liquidity in response to unanticipated ...
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