Short Interest

Short Interest refers to the total number of shares of a particular Stock that have been sold short but not yet covered or closed out. It is an important indicator used by investors to assess Market Sentiment regarding a specific stock.

Short interest is typically expressed as a number of shares or as a percentage of the total shares outstanding. A high short interest may indicate that investors are expecting the stock price to decline, while a low short interest may suggest Bullish sentiment.

Example 1: If a company has 1 million shares outstanding and 200,000 shares are sold short, the short interest is 200,000 shares, or 20% of the total shares.

Example 2: If a stock has a high short interest of 30% and positive news causes the stock price to rise, it can trigger a Short Squeeze, where short sellers are forced to buy back shares to cover their positions, further driving up the stock price.

Case: In 2021, GameStop became famous for its high short interest, with over 100% of its available shares sold short. This led to significant volatility and price surges as retail investors bought shares, forcing short sellers to cover their positions.