Netflix's surging stock is destroying short sellers

Maybe it's time for Netflix short sellers to take a hint.

With the company's shares surging as much as 12%, to a record high, after a blockbuster earnings report that smashed subscriber growth forecasts, those betting against the company are having a rough day.

They're out more than $400 million on a mark-to-market basis, according to data compiled by financial analytics firm S3 Partners. The loss only adds to the misery of being short Netflix, a stock that's surged 41% this year, costing speculative bears roughly $1.4 billion over the period.

It's just the latest hit for Netflix pessimists, who were already card-holding members of the market's fifth-worst performing short even before Tuesday's massive earnings-led rally, S3 data show.

The streaming video service's short sellers have proven to be a stubborn bunch, increasing the size of their anti-Netflix position to a year-to-date high of $4.7 billion heading into Monday's second-quarter earnings.

The group likely viewed Netflix's stock increase as unsustainable, and were hoping to profit from an eventual selloff. But as part of the elite group known as FANG - along with fellow mega-cap tech titans Facebook, Amazon and Google - Netflix has been an unstoppable force, and is showing no signs of slowing.

Amid their ongoing futility, short sellers are feeling pain similar to that of Tesla pessimists, who have also been burned by torrid gains in the underlying stock. In fact, Tesla is the worst performing short in the US, according to S3. Members of both groups will soon have to take a long, hard look at whether it's worth prolonging their bearish bets.

"We have not seen a rash of buy to covers this year, but today's price move will tell us whether Netflix shorts have the conviction to take as hard a hit as Tesla shorts, and if they are or aren't immune to a short squeeze," Ihor Dusaniwsky, the firm's head of research, told Business Insider.

Netflix climbed 12% to $180.39 at 11:06 a.m. ET.