short squeeze

Short Squeeze

A situation in which a lack of supply and an excess demand for a traded stock forces the price upward.

Notes:

Short squeezes occur more often in smaller cap stocks with small floats.

If a stock starts to rise rapidly, the trend may continue to escalate because the short sellers will likely want out. For example, say a stock rises 15% in one day, those with short positions may be forced to liquidate and cover their position by purchasing the stock. If enough short sellers buy back the stock, the price is pushed even higher.

See also: Bear, Buy Back, Buy To Cover, Float, Liquidity, Short, Short Covering, Short Interest, Short Sale Rule, Selling short, Short Squeeze, Small Cap

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Short squeeze

When a lack of supply tends to force prices upward. In particular, when prices of a stock or commodity futures contracts start to move up sharply and many traders with short positions are forced to buy stocks or commodities in order to cover their positions and prevent (limit) losses. This sudden surge of buying leads to even higher prices, further aggravating the losses of short sellers who have not covered their positions.

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short squeeze

The pressure on short sellers to cover their positions as a result of sharp price increases or difficulty in borrowing the security the sellers are short. The rush to cover produces additional upward pressure on the price of the stock, which then causes an even greater squeeze. Also called squeezing the shorts.