During the Silicon Valley Bank and Signature Bank fiasco, the shorts have been cleared up.
Regional bank short sellers have made a cool $3.53 billion in mark-to-market profits so far in March, according to fresh data from S3 Partners. Short sellers seek to profit from a decrease in stock price. Mark-to-market gains for shorts have increased by $2.29 billion just in the past three trading days.
According to S3 Partners, the top 20 most-shorted regional bank stocks included Silicon Valley Bank and Signature Bank.
The fall of Silicon Valley Bank on Friday, which was the second-largest bank failure in the United States, was followed by the failure of Signature Bank, which was the third-largest financial bust. Shareholders in each outcome were completely destroyed.
Last Sunday, regulators intervened to support bank depositors in order to stop the onset of a larger financial sector catastrophe.
Despite the government’s assistance, however, this week’s extreme levels of volatility in bank stocks led the shorts to emerge from hiding.
According to S3 Partners, the SPDR S&P Regional Banking Sector ETF fell 23% from March 8 and March 13. According to S3 Partners, this decline has resulted in $416 million worth of fresh short selling in regional banks during the past seven days.
Nevertheless, as the week progresses and the bank-bust storylines begin to fade, the short trade on regionals may be positioned to turn around.
In response to this unexpected increase in stock prices, “we anticipate see a wave of short covering in some of the regional banking companies as short sellers attempt to realise some of their recent $2.29 billion in mark-to-market profits,” predicts Ihor Dusaniwsky of S3 Partners.