The short squeeze begins when the price jumps higher unexpectedly and gains momentum as a significant measure of the short sellers decide to cut losses and exit their positions. A short squeeze happens when many investors bet against a stock and its price shoots up instead.
What happens if a stock has a short squeeze?
Speculators and traders who have short positions in a stock will face heavy losses if the stock undergoes a short squeeze. Contrarian investors who have built up long positions in the stock in anticipation of a short squeeze will benefit as the stock price climbs.
What is a short squeeze & a contrarian investor?
A short squeeze accelerates a stock’s price rise as short sellers bail out to cut their losses. Contrarian investors try to anticipate a short squeeze and buy stocks that demonstrate a strong short interest. Both short sellers and contrarians make risky moves. A wise investor has additional reasons for shorting or buying that stock.
How long does a short squeeze last?
In general, short squeezes tend to last somewhere between several days and several months. There is no real “typical” length for a short squeeze, as each one is unique.
