I fully agree with you regarding the latest Shorting activity which has been set in place at prices below the current price level. Obviously those much earlier Shorts, if still active from the price peak around $8.50 downwards remain comfortably in the money.
Overall, based on the latest Net Short position, i estimate the weighted average price set of the 23.144 million Shorts to now be $3.50. Thus overall the Shorters in aggregate remain well in the money - but that position has had reduced gains over recent months.
At the Inclusion Date into the ASX 200 of 23 Dec 2024, the Net Shorts were only 5.219 million, at an estimated weighted average price of $6.74. Clearly that is a far more attractive position than current. If someone wanted to refer to "smart money" I'd argue that group gets the title.
Since 25th March 2025 Shorts have been set at or below $2.50. At that date there were 14.38 million Shorts. Thus since then, and recognising there have been big additions and big reductions to the Net Shorts along the way, overall those recent Shorts are "out of the money". Within that group there was a time, from 7th April, when there was aggressive Shorting, caused by the Big April Fool plus One Liberation Day tariff slump. Those Shorts are now well out of the money, with them set at prices between $1.47 - $1.70. I'd call those Shorts real Dumb Money! (Smart investors, lol).
Even yesterday, mid-session, there were quite a few share dumps, which I consider may well have been Shorts, trying to force the price down, and more particularly to remove any upwards momentum - IMO all predicated on their removal in a couple of weeks time during the rebalance, lol, the rebalance they thought they could get out of gaol! Will those Shorters now try to extricate themselves in the next few days trading? Its going to be interesting because the US markets overnight were atrongly positive!
Now its important to recognise that there's more than 1 Shorter in CU6, and thus there is more than 1 trading strategy to play out. Some are in the money, some are out of the money. Whilst some may be very comfortable at present, and may hang around longer, there will be others very concerned about the fact they are now locked in the market for at least another few months. Their get out of gaol card, the rebalance, has evaporated!
Any doubt about whether some of the Shorters previously were planning to get out only has to look at the last rebalance for the MSCI Small Caps removal. On that day 7.266 million Shorts were covered. Anyone who suggests that within the remaining Shorters there weren't some planning to cover at the next rebalance in 2 weeks time (which isn't going to happen for CU6 now!) must be joking. Of those planning to get out you only need a few sizeable Shorters that will buy back on-market to force the price in an upward direction. On the Friday 20 Dec prior to ASX 200 inclusion there were 12.56 million shares traded, many at the closing auction. Not all those traded were Index Funds, but certainly there would have been a large portion of that total - that suggests to me that at least 50% of that number may well have been planned for Short covering by Shorters! But its not going to happen now.
One further point:
IMO the fact that the ASX 200 inclusion/exclusion is discretionary, and that whilst CU6 is currently ranked about 375 (based purely on mkt cap), there is no guarantee as to whether a company will be added to or removed from the Index. And MAYBE that discretion also considers opportunistic Short Selling trying to take advantage of the Index rebalance as a reason to not remove a company!
Also its important to emphasise that Shorting represents an already sold position. Once enacted it doesn't hold any anchor to the share price. Anyone who looks at the Shorts for a company and automatically assumes there must be something wrong with the Company is plain crazy. There may well be a valid reason for the Shorting, but for a company such as Clarity, which has got 3 Fast Track Designations with the FDA, and is now looking like its got best in class diagnostic imaging for more than 1 Indication I'd suggest the Shorters are playing with fire.
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