Short Squeeze
A short squeeze is a situation in which a heavily shorted stock or commodity moves sharply higher, forcing short sellers to close out their short positions and adding to the upward pressure on the stock. Short squeezes can be triggered by a positive news event, such as an earnings surprise, or by a short seller’s decision to cover their position. Short squeezes can cause rapid and dramatic increases in the price of a stock, and can be a profitable opportunity for investors who are able to anticipate them.
History of the Term
The term “short squeeze” was first used in the early 1900s to describe a situation in which a heavily shorted stock or commodity moved sharply higher, forcing short sellers to close out their short positions and adding to the upward pressure on the stock. The term has since been used to describe any situation in which a heavily shorted stock or commodity moves sharply higher, regardless of the cause. Short squeezes can be triggered by a positive news event, such as an earnings surprise, or by a short seller’s decision to cover their position.
Comparison Table
| Term | Definition |
|---|---|
| Short Squeeze | A situation in which a heavily shorted stock or commodity moves sharply higher, forcing short sellers to close out their short positions and adding to the upward pressure on the stock. |
| Short Selling | The practice of selling a security that the seller does not own, in the hope of buying it back at a lower price. |
| Bull Market | A market characterized by rising prices. |
| Bear Market | A market characterized by falling prices. |
Summary
A short squeeze is a situation in which a heavily shorted stock or commodity moves sharply higher, forcing short sellers to close out their short positions and adding to the upward pressure on the stock. Short squeezes can be triggered by a positive news event, such as an earnings surprise, or by a short seller’s decision to cover their position. Short squeezes can cause rapid and dramatic increases in the price of a stock, and can be a profitable opportunity for investors who are able to anticipate them. For more information about short squeezes, investors can visit websites such as Investopedia, The Balance, and Seeking Alpha.
See Also
- Short Selling
- Bull Market
- Bear Market
- Options Trading
- Margin Trading
- Day Trading
- Swing Trading
- Scalping
- Arbitrage
- Hedging
