Nov
24
Shorting stocks is always risky for investors. But it can be a sure way to avoid burning cash when a company’s shares crash, making it worth the bet. Short interest is the total number of shares of a particular stock that have been sold short by investors but have not yet been covered or closed out. This can be expressed as a number or as a percentage.
Most stock exchanges track the short interest in each stock and issue reports. These reports are great for traders because by showing what short sellers are doing, they allow investors to gauge overall market sentiment surrounding a particular stock. A high short-interest stock should be approached with extreme caution but not necessarily avoided at all cost.
Some bullish investors see high short interest as an opportunity. This outlook is based on the short interest theory. The rationale is, if you are short selling a stock and the stock keeps rising rather than falling, you’ll most likely want to get out before you lose your shirt. A short squeeze occurs when short sellers are scrambling to replace their borrowed stock, thereby increasing demand and decreasing supply, forcing prices up. Short squeezes tend to occur more often in smaller cap stocks, which have a very small float (supply), but large caps are certainly not immune to this situation.
As of October 30, 2015, short interest for Assured Guaranty Ltd. (AGO) stood at 6141172 shares, an increase compared to 5896859 shares on October 15, 2015. This short interest comprises 4.3 percent of the entire float. Short interest ratio now stands at 4 at the average volume of 1403189 shares.
According to the latest short-interest data for the two-week period ended October 30, 2015, short interest for the stock of Grupo Financiero Galicia S.A. (ADR) (GGAL) increased from 2701142 shares at the end of the settlement date of October 15, 2015 to 2811514 shares, marking an increase of 110372 shares. The current short interest accounts for 6.81 percent of the company’s total outstanding common shares and the days-to-cover short interest ratio, on the other hand, is 4 as of October 30, 2015, assuming average daily trading volume of 743713 shares.
Short interest for the shares of Skechers USA Inc (SKX) rose 122.4 percent from 3247805 shares on October 15, 2015 to 7222169 shares on October 30, 2015. Investors have taken short positions on 5.9 percent of the total common shares of the stock that are floating on the exchange. The days-to-cover short interest ratio is now at 1 days. It is based on average daily trading volume of 8317813 shares.
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