Investopedia Video: Short Squeeze

A short squeeze refers to a jump in a stock's price, forcing a large number of short sellers to close their position, which in effect pushes the price even higher.

When an investor shorts a stock, he borrows shares from another account and sells them, agreeing to replace the stock at a later date. Short sellers predict the price will go down, enabling them to buy the shares at a lower price.

When the share price starts to rise, many of these same investors will decide to buy the stock before their losses escalate further. This flood of buy orders causes the price to climb even more.

Contrarian investors will sometimes try to cash in on this phenomenon by taking a long position on heavily shorted stocks -- that is, buying them with the hope that they'll appreciate.

Going against the crowd like this is typically a high-risk, high-reward proposition. Even so, some feel it's safer to bet on a stock rising than on one falling, where the potential losses are limitless.

[awaisk]

That music though 😂. It's like the music is doing everything it can to distract us

[anooppillai]

The coming weeks will likely be one of the most important in WSB history.

[jzk]

LOL I'm late to the party... but, also here because of GME & BB.

[AndresMendoza-qqgu]

Very informative video! Best part was not having a YouTuber forced a stock pick.

[Momentaryoratory]

Very clear and concise video, well done. Question, how do you tell which stocks have a large number of short positions held against it?

[mikei]

Glad they took more time to fix the tail wings.

[flexmendelson]

I cracked up at the airplane 😂 paired with the music and the narrator, very fun and informative video. Thanks 👍

[WPaKFamily]

What's the name of the song? Also, I wonder if there is a trap version of this song. That would slap hard.

[lemonade]

What if you go against the contrarian crowd, are you a typical investor or still a contrarian? 🤔

[DavonMcMillian]

Here because of AMC, The second round. haha. <_< Where yall at?

[garyhanderson]

Is $RGS getting squeezed? I always liked getting my hair cut at Supercuts

[wally_]

According to an article I just read this is why the Dow saw a surge after the March slump

[akoustc]

How do I invest in First Class Aeronautics? 🤣

[AnhH]

Got my GME tendies at 17.00 in early January. Thank you /wsb. Let’s teach those hedge funds a lesson.

[ramd]

I don't understand if I am borrowing stock and already sold it. How does that make it a loss for short sellers if a price goes up? I've already sold it.

[mateosabando]

Why wouldn’t people just wait for the stock price to come back down and then cover?

[coreyboyd]

What is the software you guys use to animate your videos with?

[piratemeow]

“Where the potential losses are *limitless.* ”

[cemented]

we need to fund the SEC properly lol how come no squeeze?

[humanhuman]

I think it is also know as short covering