Yes, that's right. You read the title correctly. As of the report released on 4/11 the Nasdaq short interest data for Sirius XM (SIRI) showed a 20.2 million decrease in short shares to 287,587,035 settled on 3/30 from 307,802,184 settled on 3/15.
The short interest data is something I see bulls and bears alike often twist to their advantage, touting increases or decreases once this data is released as somehow being advantageous for their position. If the short interest decreases, the bulls run with it and say it proves their bullish position. If the short interest increases, the bears run with it and say it proves their bearish stance.
I'm a Sirius XM bull, and I'm here to tell you that this data proves nothing. It's worthless to an investor or trader today for several reasons as I have stated before. I felt it important to write about this since now the short data should match my bullish stance and allow me to use it to further my opinion. I could use this data and write up an article explaining to you, my readers, that this proves my point of view. But to do so would be doing you a terrible disservice. You deserve honesty and integrity. The following is just that.
What's in a number? First to understand the Nasdaq short interest number you need to understand a few things.
- The short interest number disseminated on 4/11 is from a settlement date of 3/30 which was 12 days prior
- The settlement date is 3 days after the date of trading which was 3/27, pushing back the actual number to 15 days prior making this number over 2 weeks old once it is released
- The number is the total of all shares short on that one day, 3/27. It is not an average as some assume. It is a single data point from the close of the day on 3/27.
- The number, 287,587,035, is all short positions. This includes but is not limited to hedged short positions, market maker short term shorts from the day, and actual short positions by those betting the stock will go down.
- Flying Purple People Eaters wear short shorts.
When considering that this number is taken from data on a single day, you need to look at that day's trading, closing price, and then the previous short data's trading and closing price, in order to get a better picture of the "why?" behind that number.
Let's look at trading for Sirius XM on 3/27, short interest of 287,587,035:
The day's range was $2.20 to $2.26 with a close of $2.25. Based upon previous days leading up to this date this was near the absolute low, and thus an obvious place for the short interest to be on the low side when you consider the previous data point before that.
Trading for Sirius XM on 3/12, which gave the previous data point for short positions at the close of that day, showed 307,802,184 short positions. This was near the absolute high and one of Sirius XM's recent peaks with trading that day from $2.29 to $2.35. It is reasonable, then, to assume that since this day fell on a peak at Sirius XM's then high price, that the most shorts would be found at this position.
It's a fun little history lesson, and these numbers once released to the public can paint a wonderful picture of "what happened" weeks ago. But how does this help us going forward? It doesn't unless we expect history to repeat itself to infinity.
Remember this when the next round of short data comes out if the bears start roaring about the end of Sirius XM and pointing you to old short interest data. When that happens, point them to this article, and tell them to read it 100 times over and then get back into their caves until something bearish actually takes place.
Additional disclosure: I am long SIRI April, May and June $2 calls.