What Are Short Squeezes?
Although this isn’t stock market basics, short squeezes are needed to be known by all investors because they can provide them with big profits. Shorting a stock is when an investor plans that a stock is on a sharp decline so they buy high and sell low in hopes that it will decline. Now, there are specific companies that investors tend to short higher than others, mostly companies that are damaged with poor fundamentals or poor management. There are even companies that have up to 10% shares shorted, a very high amount. When for some favorable reason, the stock starts to rise sharply you’ll notice that the stock will take off. That’s because these short investors are buying more shares trying to cover their losses. This is a short squeeze.