Understanding Short Interest: Every company has s
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Posted On: 05/26/2018 7:59:21 PM
Understanding Short Interest:
Every company has stock traders who believe its stock price is going to go up and stock traders who believe its stock price is going to go down. Typically, those stock traders who believe the stock price is going to go down simply put their money elsewhere by investing in other stocks.
However, when stock traders believe so completely that a stock is going to go down, they actually sell the stock short.
Of course, just looking at today’s numbers doesn’t tell you the whole story. You need to look at how those numbers are changing over time to get a complete picture. To do so, you can monitor three numbers:
1.Short interest
2.Days to cover
3.Short-interest ratio
What Is Short Interest?
Short interest is the number of shares that investors are currently short on a particular stock.
For instance, if stock traders shorted 15 million shares of a company and then covered 5 million shares by buying the stock back, the current short interest would be 10 million shares (15 million – 5 million = 10 million).
What Is Days to Cover?
Days to cover is the number of days — based on the average trading volume of the stock — that it would take all short sellers to cover their short positions.
For instance, if a stock has a short interest of 20 million shares and an average trading volume of 10 million shares, the days to cover would be two days (20 million / 10 million = 2 days).
What Is the Short-Interest Ratio?
The short-interest ratio is a comparison between the short interest in a stock and the total number of outstanding shares of that stock.
For instance, if a company has a short interest of 15 million shares and outstanding shares totaling 150 million, then the short-interest ratio is 10 percent (15 million / 150 million = 10%).
This is the nut shell I understand. If anyone else wants to add or correct anything feel free.
"The Stewy"
Every company has stock traders who believe its stock price is going to go up and stock traders who believe its stock price is going to go down. Typically, those stock traders who believe the stock price is going to go down simply put their money elsewhere by investing in other stocks.
However, when stock traders believe so completely that a stock is going to go down, they actually sell the stock short.
Quote:
Knowing how many shares of a particular stock have been sold short is a valuable indicator and provides a glimpse into the investor psychology surrounding that stock.
Of course, just looking at today’s numbers doesn’t tell you the whole story. You need to look at how those numbers are changing over time to get a complete picture. To do so, you can monitor three numbers:
1.Short interest
2.Days to cover
3.Short-interest ratio
What Is Short Interest?
Short interest is the number of shares that investors are currently short on a particular stock.
For instance, if stock traders shorted 15 million shares of a company and then covered 5 million shares by buying the stock back, the current short interest would be 10 million shares (15 million – 5 million = 10 million).
What Is Days to Cover?
Days to cover is the number of days — based on the average trading volume of the stock — that it would take all short sellers to cover their short positions.
For instance, if a stock has a short interest of 20 million shares and an average trading volume of 10 million shares, the days to cover would be two days (20 million / 10 million = 2 days).
What Is the Short-Interest Ratio?
The short-interest ratio is a comparison between the short interest in a stock and the total number of outstanding shares of that stock.
For instance, if a company has a short interest of 15 million shares and outstanding shares totaling 150 million, then the short-interest ratio is 10 percent (15 million / 150 million = 10%).
This is the nut shell I understand. If anyone else wants to add or correct anything feel free.
"The Stewy"
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"The Stewy"
