What Is A
Short Squeeze?
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Short squeezes typically occur after a company stock posts a sudden increase. This causes short sellers to try to exit a bearish position quickly.
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To sell a stock short, an investor must first borrow the shares. They then consequently sell
in the open stock
market hours.
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Short selling is incredibly risky as stock prices have historically tended to drift upward.
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To invest in a short squeeze, traders start by surveying the markets for stocks that have garnered substantial interest from short sellers.
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If they’re heavily shorted, it’s because investors have ample reason to believe that the underlying company faces significant business issues.
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Long-term investors may try their hands at winning a short-squeeze trade here and there. But it requires deep research, constant monitoring and the ability to move in and out of a
stock quickly.
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