Short interest
TradingDefinition
The total number of shares of a stock that have been sold short (bet against) but not yet bought back. Exchanges report this number twice a month. High short interest means many traders think the stock will fall. But it cuts both ways: if the stock starts rising instead, short sellers are forced to buy shares to exit their bets, which can rocket the price higher in what is called a short squeeze.
Short interest as a percent of the tradeable float is the more useful number. Above 20% is notably high. Above 40% is squeeze territory. GameStop briefly reached about 140% in early 2021.
Short interest as a percent of the tradeable float is the more useful number. Above 20% is notably high. Above 40% is squeeze territory. GameStop briefly reached about 140% in early 2021.
Formula
Short interest ratio = shares sold short divided by average daily trading volume. This tells you roughly how many days it would take shorts to cover their bets.
Example
A stock has 100 million total shares, of which 80 million are freely tradeable. 24 million of those 80 million are sold short. Short interest = 24 / 80 = 30% of float, which is very high.