Key takeaways
- Many new investors first heard about shorting stocks in 2021 when the meme stock rallies began, the topic remains relevant throughout the unprecedented events of last year.
- When you short a stock, you’re betting that its price will drop in the future. Hedge fund managers short stocks that they believe will decline in the future. The risk here is that the stock could have a rally.
- Short sellers had a profitable year in 2022 due to stock market volatility that led to many of the biggest tech companies dropping in value.
There’s no denying that 2022 was one of the most dynamic years in the stock market. We saw soaring inflation, aggressive rate hikes, and multiple stock market sell-offs.
We also witnessed a busy year for short sellers as they were able to reap profits while the markets tumbled. According to a report from data-analytics firm S3 Partners, short sellers reached almost $50 billion in gains in 2022 just from betting against some of the biggest tech companies. Many bears are optimistic there’s more money to be made in 2023.
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