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Definition of Short Squeeze

Concept Short Squeeze
Concept Short Squeeze
We find that the "Short Squeeze" is an old concept in the "USA Stock" market, but it has recently emerged after the famous GameStop stock affair.
The story of the Short Squeeze begins when the funds are short as a result of research they have done on a stock, such as a technical reason such as a double top or an unjustified rise in the value of the stock.
Then, funds and traders follow, until the shares available for the shorts decrease, and thus the loan value of the shares increases significantly, and then the groups and small traders notice this gathering and plan for the short squeeze.

Short squeeze on stocks and huge losses

When the date for returning the shares to the broker begins, the groups start to raise the share price, so the funds are forced to cover a loss, and thus the price rises more.
We find that some funds exit early since the discovery of the game, and some are related, as happened to Melvin Capital Fund, which lost nearly $5 billion in $GME shares because of the short squeeze.
Thus, the "Short Squeeze" is a process opposite to the shorts, whereby a group supported by investors to pressure the funds and force them to sell at a loss that may be a retaliatory method resulting from the loss of the traders from the short operations of the funds.

The Short Squeeze process appears when the stock returns to the broker. We know this from the trading volumes when they exceed the average of 3 months or the appearance of small green candles after a huge number of large “red candles”.
But knowing the shares eligible for shorts is complicated, including the percentage of shorts, the number of shares available for the shorts, and the loan value. We also find that the unavailability of shares with the broker makes him do what is called short selling and it is called the Naked Short.
For example, shares were loaned without actually having the "Robin Hood platform" with Game stop, which brought the percentage of shorts to about 140%, then Squeeze was easy for groups.

How is the process of shorts on shares?

We find that borrowing shares to make shorts from the broker is limited to a period and value, so if the period is about to expire, you will ask for an extension, and this will cost you more, as is the case with the option.
Thus, funds and large companies fall victim to the short squeak, where they are between two risks:
  1. Increase the duration with the payment of high fees.
  2. Closing the position and thus confirming the loss.
We are trying to emphasize that the short squeeze is a reaction to the shorts. If the funds make shorts on a share, the owners of the stock, supported by investors behind the spotlights of the era of (Squeeze) discuss the funds and regain dominance on the stock after the success of the $GME owners in the task, attention turned to the short squeeze and began to pay attention to it from everyone.

Actually, those who benefit from the short squeezes are the big investors and the biggest affected are the funds and small investors, as they are locked up in shares at high prices.
باحث اقتصادي هدفي إنشاء موسوعة عن الدول العربية توضح جوانب القوة في كل دولة، واتمني أن يأتي اليوم الذي يتحد فيه العرب لتعم الفائدة علي كل الشعوب.


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