What Is A Heavily Shorted Stock?
The definition of a heavily shorted stock will vary depending on who you ask. Nonetheless, it has to do with the percentage of the float that is reported as being sold short.
The float in a stock is the amount of shares that are actually available in the stock market. A heavily shorted stock is any stock with a high percentage of the float is reported as being sold short. This is where the debate comes in.
Some believe that a heavily shorted stock is any stock that trades with more than 15% of its float being sold short. For others, 20% of the float being sold short is considered a heavily shorted stock.
If you’re looking to get ahead of a short squeeze, the higher the short ratio the better. However, I happen to side with the 20% of the float or higher. While a squeeze can happen at 15% of the float, larger short ratios lead to larger gains.
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