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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A situation in which a rapid increase in demand coupled with a small supply causes a stock price to rise significantly. This occurs most commonly in small companies with relatively few shares outstanding.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.