How to Trade a Short Squeeze

A https://www.bigshotrading.info/ happens when too many traders try to short a stock. The “squeeze” refers to the many traders trying to exit at once, which can drive the price even higher. You can calculate the ratio by dividing the number of shares sold short by the number of shares outstanding. The reason you consider the total short position and volume is that they’re not good predictors by themselves. Just because there’s a lot of shorted shares doesn’t mean there will be a squeeze — the stock might perform exactly as expected. But it’s arguably one of the best short-squeeze opportunities.

• Traders rushed to the bid line, snatching up shares and bullish call options.
• Naked short-selling – in which an investor short-sells shares without first borrowing them or determining they can be borrowed – is banned in South Korea.
• Still, short selling among the day trading community is quite common.
• It’s important to understand the risks with any investment strategy, but most importantly, how short and long positions in stocks can be a benefit or detriment to your investment portfolio.

They look for heavily shorted stocks, then weaponize that short interest into a bullish squeeze. A short squeeze occurs when short sellers trigger a rise in price on a heavily shorted stock. The losses of a short squeeze can be substantial because there’s no limit on how high share prices can go. As more short sellers close out their positions, they push the prices even higher. When you short a stock, you’re essentially borrowing shares using a margin account.

What Causes a Short Squeeze?

There’s big hope riding on its technology for self-driving cars, but many investors are skeptical it will get the necessary approvals. The stock’s momentum built on itself, and by the end of the month the stock had soared to more than $120 intraday – up some 60 times in price Short Squeeze from just months before. The stock came off that peak but has remained elevated since. The offers that appear on this site are from companies that compensate us. But this compensation does not influence the information we publish, or the reviews that you see on this site.

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A controversial interview ended Libbi Gorr’s television career. But she still believes in risk

Days to cover, also known as the short interest ratio, is calculated by taking a stock’s total number of shares sold short and dividing that number by the stock’s average daily trading volume. For example, if a stock has one million shares sold short and its average daily trading volume is 100,000 shares, then the days to cover would be 10 days. That is, it would take 10 days for short sellers to cover their entire short position based on the average daily volume of shares traded. In general, the higher a stock’s days-to-cover figure, the more susceptible it may be to a short squeeze. If days to cover for stock A and stock B are two days and 20 days, respectively, then stock B may be more vulnerable as a short squeeze target. The aim of short selling is to generate profit from a stock that declines in value.