How markets work
Short interest
The number of a company’s shares currently sold short, often shown as a percentage of the free float.
How it works
High short interest tells you a lot of capital is betting against the company. It is a genuine signal of scepticism and sometimes of fundamental problems that later prove correct.
Days to cover — short interest divided by average daily volume — estimates how long it would take shorts to buy back, and so how violent a squeeze could be.
Where it misleads people
Short interest is published with a delay of a week or more in most markets, so it describes positioning that may already have changed.
Related terms
- Short sellingBorrowing a security, selling it, and hoping to buy it back cheaper before returning it.
- Short squeezeA sharp price rise caused by short sellers being forced to buy back at once.
- Free floatThe portion of a company’s shares that is actually available to trade in the market.
- Average daily volumeThe typical number of shares traded per day, usually averaged over the last month or quarter.
More in How markets work
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