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.