By Anna Hirtenstein

Short sellers have backed away from nine of the 13 stocks that Robinhood limited trading on in recent days.

The percentage of GameStop shares that are being lent, a proxy for short interest, declined to less than 28% of shares outstanding on Monday, down from a monthly peak of 81% about two weeks earlier, according to data from IHS Markit. For AMC Entertainment it fell below 12%, almost two thirds down from the level it was at on Jan. 20.

An investor shorting a stock makes money if the price goes down and loses money if it goes up. Robinhood restricted buying on a list of volatile stocks and options starting Thursday, as it dealt with a $3 billion deposit request from its clearinghouse (https://www.wsj.com/articles/robinhood-needed-3-billion-to-shore-up-volatile-trading-in-gamestop-other-stocks-11612180694).

Robinhood has progressively loosening trading restrictions of these stocks, increasing the number of GameStop shares that its users can buy to 20 on Tuesday (https://www.wsj.com/livecoverage/gamestop-amc-silver-stock-market/card/23goHt01usEieeqObnEP), up from a single share on Monday.

The volatility in these shares has been high enough for some investors to rethink shorting single stocks as a strategy, according to Lorenzo Di Mattia, chief investment officer of hedge fund Sibilla Capital.

"They can go up 300, 400% or more, so it's very hard to have a portfolio where you even have a relatively small position. The downside on a short position is too big, it's a new reality," said Mr. Di Mattia. "GameStop has obviously had crazy moves and it's not even close to an acceptable volatility, it's just insane."

It's not all one way, however. Short interest has been ticking up for BlackBerry, Koss, Express and Nokia's U.S.-listed shares in recent days, albeit from much lower levels, data from IHS Markit showed. On Monday short-interest was at 4% for BlackBerry and Koss, close to 20% for Express and 1.5% for Nokia.

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02-02-21 0755ET