What does "Short Squeeze" mean in stocks?

Question

What does it mean when a company is going to begin "short squeezes"?

also what does "squeeze trigger price" mean?


thanks

Answer 1

The 1st responder is generally correct, but I think a little more expanation might be due. Shorts borrow stock that they sell. So lets make a simple example. Say there are 1 million shares outstanding of a company's stock. Say shorts have shorted 200,000 shares. So now the total stock held by the publi\c is 1,200,000 shares, but there is only 1,000,000 outstanding. Now lets us assume that of the 1,000,000 outstanding only 500,000 is available for trading. The other 500,000 is closely held, maybe by people who control the company. So of the 500,000 that is available for trading 200,000 have been borrowed and sold. Those people who shorted the stock eventually will have to cover their shorts. If someone or some group start buying up the free float, the shorts may not be able to buy back their short positions at any price because the stock just is not available. The classic example of the short squeeze happened in the early 1920s to Stutz Motor Car Company. Members of the NYSE started shorting the stock. Mr. Ryan who was president of Stutz bought up more than the available float of the stock, so that the shorts could not cover their positions at any price. But, they were members of the NYSE. So guess what happend? The NYSE to protect its members halted trading in Stutz Motor Car Company and stated that the members did not have to cover their shorts.

Answer 2

It means that so few people had faith that a stock was going to go up in price that they made the opposite selection and are betting it is going down. They sell-short meaning that they sell stock they do not yet own to other people (who think the stock is going up ) at the present price. If the price really does go down then they buy it at the cheap price and deliver it to the person who bought it from them. The short sellers made a profit then. If however it goes up they need to buy the stock at its new higher price because their buyer wants the stock delivered. Now the buyer made a profit and the short seller has a loss.

When the stock keeps going up and the short-sellers realize they are going to have to buy some to meet their commitments they panic and start buying quickly to cover those short sales. That buying flurry raises the price more and they are in a short squeeze.

The trigger is the panic-point price when it is clear that there needs to be some buying before things get even worse in the price rises.

Answer 3

Short squeeze typically refers to an investor that bets a stock will go down in the future, but the bet does not come to fruition. As a result, the investor must pay up! Let say you predict the price will go down from $10 to $8 and it never does. Well, you basically are at a lost and must eventually pay the difference. That is what they mean by getting squeeze. For investment matters, see http://ibooyah.com

Answer 4

The availability of being shorted and the price of the stock are not related. So the stock price does not reflect the fact that it is not or can not be shorted. There is only one thing that drives a price - BUYERS, if there are no buyers, the stock will drop, if there are buyers the price of the stock will rise. Apparently you have stock in which very few have an interest, but there are more buyers for the stock than sellers, since the price has not dropped,

Answer 5

Short Squeeze is when the short stock traders start covering their positions by buying the stock, and this way a short squeeze is created, and the price of stock starts climbing.

Answer 6

"He what sells what isnt hizzen
either pays or goes to prizzin".
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