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* Short interest in Ocado hits record high
* Shares slip further after Amazon-Morrisons deal
* Ocado shares down 14 percent so far this year
By Atul Prakash
LONDON, March 9 (Reuters) - "Short interest" in Britishonline grocer Ocado has surged to a record high,suggesting that some investors are betting on a further drop inits share price after a fall of 14 percent so far this year.
According to Markit data, 'short interest' - which measuresthe number of shares lent to speculators betting on a fall inthe stock - in Ocado has climbed to a life-time high of 23.1percent of the shares out on loan.
In order to profit from a stock falling, short sellersborrow the stock and sell it, expecting it to drop in value sothey can buy it back at a lower price and pocket the difference.
Ocado shares have fallen about 7 percent since last weekwhen Amazon and British supermarket Morrisons agreed to offer fresh and frozen goods to customers, in someplaces as quickly as under one hour.
Enabling the U.S. online retail giant to compete withBritain's biggest supermarket stores and smallest local shops,the deal opened another front on Amazon's assault on the 178billion pounds ($247 billion) British grocery market, alreadyhammered by a brutal price war and changing shopping habits.
Since 2013, Morrisons has outsourced logistics for its ownonline food business to Ocado, whose range includes productssupplied by upmarket grocer Waitrose.
"We continue to struggle to see the Ocado brand being asustainable retail label as the business fundamentally dependsupon its relationships with Morrisons and Waitrose for itscommercial survival," Clive Black, head of research at ShoreCapital, said.
"The significance of this (Amazon-Morrisons deal) for Ocadois that the commercial heat is rising in the pure-play groceryarena in metropolitan areas where Ocado is particularly active."
Ocado missed out on its own target of securing a firstoverseas technology deal in 2015. Also, Amazon's deal withMorrisons has diminished Ocado's own chances of being taken overby Amazon, which has been periodically speculated on.
The UK grocery market has been convulsed in recent years byshoppers turning to discounter retailers such as Aldi and Lidl,which has put pressure on the "Big Four" of Tesco,Sainsbury, Wal-Mart's Asda and Morrisons.
The British Retail Consortium predicts that 900,000 retailjobs could go by 2025 as the industry moves online. (Reporting by Atul Prakash; Editing by Sudip Kar-Gupta)
