What is a Short Squeeze? A short squeeze happens when a heavily shorted stock, meaning many investors have bet it will fall, is suddenly propelled upward. Short sellers must buy shares to cover their positions, causing the price to spike further. This can trigger a rapid, self‑reinforcing rally $OPEN: A Prime Case Study Over the past month, $OPEN surged 500%, with a jaw‑dropping 170% in just five days. Here's what fueled the squeeze: High short interest: Around 19–25% of the float was shorted, a red flag for vulnerability. Retail frenzy on social media: Posts on Reddit’s WallStreetBets, StockTwits, and hash-viral tweets about Opendoor sparked unprecedented buying momentum. Speculative option flows: A surge in call option activity added leverage and volatility,...
What is a Short Squeeze? Let’s take a closer look at short-selling, a strategy that allows traders to profit from a stock's decline. Short sellers make money by “shorting” stocks they believe are overvalued or poised for a downturn. Here’s how it works:When you short a stock, you first "borrow" shares from your broker (e.g., through platforms like Robinhood or Schwab) at the current market price. The goal is to repurchase the stock later at a lower price, return it to the broker, and pocket the difference. For example, let’s say after conducting thorough research, you identify a stock priced at $100 that seems overpriced and likely to drop. You can borrow shares of this stock from your broker and...
What is Position Trading? Position trading is a medium to long-term investment strategy where traders hold positions in financial assets, such as stocks, commodities, or currencies, for extended periods, typically ranging from several months to a few years. The primary goal is to capitalize on long-term trends rather than short-term price fluctuations. Key Characteristics of Position Trading: Long-Term Outlook: Position traders focus on broader market trends and fundamental factors, such as economic indicators, company performance, and geopolitical events, rather than short-term market noise. We primarily choose our companies based on fundamental strength, specifically by looking at their financial statements and focusing on value. We try to buy undervalued companies and hold them until they move higher as markets recognize the...
What’s happening with $SMCI? Super Micro Computer shares have moved over 200% in 2024 as the stock experiences what’s known as a “short squeeze”. The basics of a short squeeze is that Wall Street and traders will look for stocks that are heavily shorted (bet against) and begin buying them up in order to force the short positions to close. For a short trader to close their position, they need to buy it back at that price. Shorting a stock means you’re borrowing shares from your broker at a price, you take the shares and try to sell them to the market at a lower price, then give the shares back to your broker and keep the difference. So if...
