What is a Short Squeeze?
If a stock price starts to rise rapidly, the trend may continue to escalate because the short sellers will likely want out. They all head for the same door at the same time! For example, say a stock rises 20% in 10 minutes because of lets say merger news , those with short positions may be forced to liquidate and cover their position by purchasing the stock Buy to Cover. If enough short sellers buy back the stock, the price is pushed even higher starting a major Short Squeeze and its painful and could cause major losses if you cant cover in time.
A short squeeze occurs in stock trading. A short squeeze is when there is a temporary lack of supply and a large amount of demand for a stock thus forcing the stock price higher and higher. A short squeeze can occur if a stock is heavily shorted. This means that a large portion of the float is held short, where these short sellers are hoping to gain from a decrease in the price of the stock.
A short squeeze is a situation which arises when the value of a stock starts to go up radically, putting pressure on short sellers and leading to a situation in which there are not enough shares of the stock available to meet the demand. Short squeezes can occur in a wide variety of markets and they usually happen because of a news item or political event which has made stock traders nervous or restless. For short sellers, a short squeeze can be a catastrophic turn of events which results in large losses. Short squeezes usually happen when the cost of a stock starts to rise and short sellers rush to cover their positions. Some short sellers may move because they fear taking a large loss on the stock, while others may be forced to move because they have exceeded their trading margins and they want to avoid a margin call from their brokers. As more and more short sellers clamor to buy shares of the stock, the price goes up and keeps climbing. Some people can profit from a short squeeze,
The term “short squeeze” has been bandied about quite a bit in the media as of late, especially when referring to the current situation involving Porsche and Volkswagen. Volkswagen’s shares exploded earlier this week as the result of a major “short squeeze.” Volkswagen traded from approximately 210 euros to just under 1000 euros over the course of just a couple of days. For a short period of time, Volkswagen was the most valuable company in the world, topping the likes of Exxon Mobil, Microsoft and General Electric. In quick and simple terms, a “short squeeze” is when short-sellers in a company are forced to cover at a higher price. The optimal conditions for a legitimate “short squeeze” include: a heavily shorted stock with a small float that releases some type of positive news. You are not going to get a “short squeeze” in stocks that do not have heavy short positions relative to their floats. You might look at Microsoft and think that they are candidates for a “short squeeze” becaus
A short squeeze is one of the most exciting events in finance, and could drive silver to $100/oz. very quickly! A short squeeze happens when those who manipulate the market begin to act according to old Wall Street rhyme, “He who sells what isn’t his’n, buys it back or goes to prison!” The silver shorts, who have been one of the key forces capping the price of silver ever since 1980, are buying back the silver they sold, the silver that they don’t have, the silver that may not exist, and they are buying “contracts for it” from people who might not have it either, in a rising market, because the shorts have begun to panic. Another way to say it, is that the fat cats are beginning to wake up, repent and change, and realize the error of their ways! Perhaps we are seeing the inevitable failure of a 100+ year war of the international bankers, a war waged against an inherent property of silver. But silver is a monetary metal, and the failure to recognize that truth has consequences. Dan Norc
What is a Short Squeeze?