* 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 British online grocer Ocado has surged to a record high, suggesting that some investors are betting on a further drop in its share price after a fall of 14 percent so far this year.
According to Markit data, 'short interest' - which measures the number of shares lent to speculators betting on a fall in the stock - in Ocado has climbed to a life-time high of 23.1 percent of the shares out on loan.
In order to profit from a stock falling, short sellers borrow the stock and sell it, expecting it to drop in value so they can buy it back at a lower price and pocket the difference.
Ocado shares have fallen about 7 percent since last week when Amazon and British supermarket Morrisons agreed to offer fresh and frozen goods to customers, in some places as quickly as under one hour.
Enabling the U.S. online retail giant to compete with Britain's biggest supermarket stores and smallest local shops, the deal opened another front on Amazon's assault on the 178 billion pounds ($247 billion) British grocery market, already hammered by a brutal price war and changing shopping habits.
Since 2013, Morrisons has outsourced logistics for its own online food business to Ocado, whose range includes products supplied by upmarket grocer Waitrose.
"We continue to struggle to see the Ocado brand being a sustainable retail label as the business fundamentally depends upon its relationships with Morrisons and Waitrose for its commercial survival," Clive Black, head of research at Shore Capital, said.
"The significance of this (Amazon-Morrisons deal) for Ocado is that the commercial heat is rising in the pure-play grocery arena in metropolitan areas where Ocado is particularly active."
Ocado missed out on its own target of securing a first overseas technology deal in 2015. Also, Amazon's deal with Morrisons has diminished Ocado's own chances of being taken over by Amazon, which has been periodically speculated on.
The UK grocery market has been convulsed in recent years by shoppers 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 retail jobs could go by 2025 as the industry moves online. (Reporting by Atul Prakash; Editing by Sudip Kar-Gupta)