FTSE 100 short sellers made £418 million in profits in September - Business Insider

The FTSE 100 was one of the worst-performing major indices in Europe in September, as a surge in cases of COVID-19 and tighter restrictions on movement, coupled with renewed concern over Brexit, hit UK assets harder than most regional markets. The index fell 2%, compared with a 1.6% fall in the euro zone Stoxx 50.

The FTSE tracks the 100 largest companies on the London Stock Exchange with the highest market capitalization. Overall, short sellers made a profit on 53 out of the 100 companies in the index.Some of the FTSE's heavyweight stocks are those that have been worst-hit by the economic fallout of the pandemic, including jet engine manufacturer Rolls Royce, airlines, such as British Airways parent company IAG, or financial stock, such as HSBC or Barclays.

Short selling is when an investor borrows a security and sells it in the current market. They are betting on the security going down in price, in which case they will buy it back at a later date and hopefully at a cheaper price. Short selling has a high risk-to-reward ratio. An investor can secure significant profits, but can also end up with infinite losses, if they are not careful. In August, Ortex Analytics found that short sellers recorded losses of £420 million.

"Last month we saw a number of big trades turn sour for short-sellers, which impacted overall profitability in August," said Peter Hillerberg, co-founder of Ortex Analytics, in a press release. "At the time, we predicted that the pendulum may swing back the other way in September and that's exactly what we've seen as short sellers continue to profit from the uncertainty surrounding the pandemic.

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