Short Squeeze

ELI5 - What is a short squeeze and how does it work?

A short squeeze occurs when the price of a heavily shorted stock suddenly rises sharply. Short sellers, who have borrowed shares to sell them in hopes of buying them back in the future at a lower price, find themselves facing potentially infinite losses as the stock’s price climbs. To limit these losses, short sellers scramble to buy back shares to return to lenders, which further increases the stock’s demand and therefore its price.

By Alex 6 months ago