Short sellers are piling into energy stocks at a rate nearly equal to what banks were seeing during the financial crisis.
As oil prices struggle to recover and expected debt default rates climb, the level of energy shorts on the S&P 1500 as a percentage of float, or those available for selling, is at 12.5 percent, approaching the 13.45 percent level financials saw in July 2008 amid the crisis, according to calculations by Bespoke Investment Group.
Short interest for energy is at the third-highest level of any sector dating back to 2007 just before the crisis unfolded. Consumer discretionary shares hit 18 percent, also in July 2008.
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Short sellers borrow shares then sell them for later repurchase in hopes the stock will fall. They then profit on the price difference.