What Is Short Interest?

There are various ways in which investors can make a profit from trading stocks, options, and other assets. One of the most common is by keeping an eye on very short interest. There are a number of considerations to keep in mind in order to do this successfully.

Fortunately, we’ll tackle these in this article. To start, we’ll give you the answer to the question “What is short interest in stock?”. Then, we’ll also cover how to find short interest and what to do after.

In addition, we’ll discuss is high short interest good or bad for traders and the relationship between short interest and stock float.

What is Short Interest in Stock Trading?

Let’s start with a short interest definition. When shares are sold short, there’s likely to be short interest. It comes about when a number of shares have been sold short and remain outstanding.

A trader will sell an asset short if they expect a decrease in its price by borrowing shares of the stock. This is the basic answer to the question: what is high short interest?

Short Interest Float Meaning

In order to know if you’re dealing with a short interest high enough to further investigate, we’ll have to look at some numbers. Real time short interest data can help you do this.

Generally speaking, when you have low short interest stocks as a percentage of float that’s over 10%, it shows positive sentiment. It means that traders are confident in the price movements of the stocks in the right direction.

On the other hand, low short interest stocks are when the percentage of float short interest is above 10%, it is considered quite high. This, therefore, indicates significant pessimistic sentiment.

Traders tend to closely watch short interest because it can affect the stock’s price. Very short interest can be seen as either good or bad, depending on market conditions. We’ll discuss this further later in this article.

How to Find Short Interest Data for a Stock?

Now that you know what is short interest float, here’s where to find it. Taking note of the most reliable way to find and monitor current short interest is important for successful trading. There are many sources available online, as well as apps that provide free short interest data.

Apps can be convenient if all you want is a short interest list. However, the most reliable places to start are reputable financial publications. Remember, once you know where and how to find current short interest in a stock, you’ll be able to plan your trading accordingly.

Yahoo Finance

  1. To find short interest to float, visit Yahoo Finance’s website.
  2. Search for the stock symbol.
  3. Click the “Statistics” tab.
  4. Scroll down to the “Short Interest” section.
  5. Here you’ll see the stock’s short interest as well as the short interest ratio / days to cover.

MarketWatch

On MarketWatch, you can find short interest data and short interest ratio days to cover by following these steps:

  1. Go to MarketWatch
  2. Search for the stock symbol.
  3. Click on the “Charts” tab.
  4. Select “Fundamentals” from the menu on the left-hand side of the page.
  5. Scroll down to the “Short Interest” section.

Nasdaq

Similar to the above, you find highshort interest stocks by completing the following steps.

  1. Go to Nasdaq.
  2. Search for the stock symbol.
  3. Click on the “Quotes” tab.
  4. Select “Short Interest” from the menu on the left-hand side of the page.
  5. Here you’ll see the stock’s short interest as well as the short interest ratio.

High Short Interest: Good or Bad for Traders?

Now that you know the definition of short interest, when should you get excited or worried about it? Well, this depends on several factors because high short interest can be either good or bad for traders. Market conditions and trading strategies play a role.

You’ll see from the below that understanding what does short interest float mean is important for determining if it’s a good or bad situation.

When is high short interest good?

If you’re on a bullish stock, high short interest can be good for you. That’s because,

when a stock has high short interest, it means many investors are betting against the stock.

So, if the stock’s price starts to rise, these short sellers may need to buy shares to cover their positions and limit their losses. This creates a “short squeeze” that can drive the stock’s price even higher.

This can be beneficial for traders who hold long positions in the stock, as they can profit from the rising price.

When is high short interest bad?

On the other hand, if you’re bearish on stock, high short interest can be bad for you. Consider what would happen if, based on the definition of what is short interest ratio, a stock has high short interest and negative news comes out.

It’d cause a drop in the stock’s price and short sellers may buy back shares to cover their positions. This limits their losses, but it also puts downward pressure on the stock’s price.

An example of this is the short interest ratio GME (GameStop) situation. Due to speculation and influence from social media platforms such as Reddit, GME had a bad high short interest experience that made headlines.

This, therefore, can be terrible for traders who hold short positions in the stock. They’re likely to suffer losses if the price rises instead of falling.

Relationship Between Short Interest and Stock Float

Knowing what is a high short interest ratio aside, we need to know how it’s related to stock float. These two are connected in that short interest is typically expressed as a percentage of a stock’s float.

To further break it down, the stock float refers to the total number of shares of a company’s stock that are available for trading on the open market. Short interest, therefore, is calculated as the total number of shares that have been sold short and not yet covered, divided by the stock’s float.

To help answer the question of “what is short interest percentage?”, here’s an example. If a stock has a float of 20 million shares and there are 2 million shares sold short and not yet covered, the short interest would be 10% (2 million divided by 20 million).

Low Short Interest Stocks

When you have low short interest stocks, it means you have stocks that have a small number of shares sold short by investors. A low short interest typically means that there is a low level of pessimism about the stock’s future performance, as short sellers are betting against the stock’s price.

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