Definition
Short interest is the total number of shares that have been sold short but not yet covered (bought back). It's typically reported bi-monthly and expressed as a number of shares or as a percentage of float (short interest ratio). High short interest indicates significant bearish sentiment and potential for short squeezes if positive news causes rapid covering. Days to cover (short interest / daily volume) measures how long it would take shorts to close positions. Investors track short interest as both a sentiment indicator and potential catalyst.
Formula
Example
A stock with 20% of float sold short and 10 days to cover has significant bearish positioning. If unexpected good news hits, shorts rushing to cover could create a violent squeeze, amplifying gains.
FAQ
What is Short Interest?
The total number of shares of a stock that have been sold short.
How do you calculate Short Interest?
A common formula for Short Interest is: Days to Cover = Short Interest / Average Daily Volume
Why is Short Interest important?
Short Interest helps investors evaluate trading mechanics and make more informed decisions.