Short Interest

The total number of shares currently sold short but not yet covered, expressed as a percentage of float — a measure of how bearish market participants are on a stock.

Short interest is reported by exchanges twice monthly and shows how many shares have been borrowed and sold short by traders betting the stock will decline. It is usually expressed as a percentage of the float (short interest as % of float) or as "days to cover" — how many days of average trading volume it would take for all short sellers to buy back their shares.

High short interest (typically above 20% of float) indicates significant bearish sentiment from sophisticated traders who have done enough research to risk borrowing costs and potentially unlimited losses on their short positions. This can be informative: heavy short selling often reflects real concerns about earnings, accounting, or business model viability. However, high short interest is also the precondition for a short squeeze.

A short squeeze occurs when a heavily shorted stock rises rather than falls — forcing short sellers to cover (buy back shares) to limit losses, which drives the price even higher, forcing more covering, in a feedback loop. The 2021 GameStop and AMC events were extreme examples where retail investor coordination through social media triggered squeezes in heavily shorted stocks with low float.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.