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Wall Street Roundup

Short sellers less active on NYSE

August 22, 2007|From Times Staff and Wire Reports

Bearish bets on New York Stock Exchange-listed shares retreated a bit earlier this month, as some traders who had guessed correctly on lower stock prices pared or closed out their positions.

The NYSE said Tuesday that the number of shares sold "short" -- usually in a bet on lower prices -- dipped 3.5% this month from the record level of mid-July.

In a short sale a trader borrows stock and sells it. If the market price of the stock falls, the trader eventually can buy shares at a lower price to replace the loaned stock and pocket the difference between the sale price and the repurchase price.

As stocks plunged from mid-July to mid-August some short sellers cut back or closed out their bets. That reduced the number of shorted NYSE shares to 12.49 billion as of Aug. 15, down from 12.95 billion on July 13.

The latest figure reflects transactions through Aug. 10 and settled by Aug. 15.

The largest increase in shorted shares was in stock of Countrywide Financial: 83.6 million shares were sold short as of mid-month, up from 51.4 million in mid-July, the NYSE said.

With the overall number of shorted shares still near the all-time high, those bets could help drive the market higher if stocks begin a sustained rally. That's because short sellers could scramble to close out their trades if prices turn up, rather than risk having to pay more to repurchase stock than what they got when they sold the shares.

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