Backtesting Short Seller Ben Axler’s Performance at Spruce Point Capital (Part 2)

As a quick follow up to Part 1 of Backtesting Short Seller Ben Axler’s Performance at Spruce Point Capital, I analyzed total open interest on all put options for Ben Axler’s respective short reports. I looked at the median % change for total put options starting 20 trading days out from the release of the short report.

The median open interest on put contracts has historically increased 53.3% leading up to the day of the report, with the bulk of the contracts being written in the 2-3 days prior to the release of the report.

As expected, the number of open put contracts surge on the day of the report (between periods 0 and 1) as retail investors pile into the respective stock. The total put contacts taper off after peaking at roughly 100% (or 2x) of the starting open interest.

This leads me to believe that Ben Axler and his colleagues purchase put contracts just a few days leading up to the announcement of the short report, releasing the put contracts shortly thereafter.