Short Interest
The number of shares that have been borrowed and sold short. Measures bearish sentiment and potential for short squeezes if the stock rises sharply.
Short Interest
Short Interest is the number of shares that have been borrowed from brokers and sold short by investors betting the stock will fall. It's reported monthly and is useful for assessing bearish sentiment and potential for short squeezes.
Formula
Short Interest = Total Shares Sold Short (but not yet covered)
Reported as a count and as a percentage of float: (Short Shares ÷ Float) × 100
Example
GameStop (GME) had massive short interest in 2021 (over 100 million shares shorted, representing over 100% of float due to errors). As the stock rallied, short sellers scrambled to cover, creating a short squeeze. Amazon (AMZN) has minimal short interest, indicating few bearish bets.
How to Interpret It
- Low short interest (< 5% of float): Few investors are betting against the stock. Limited squeeze risk.
- Moderate short interest (5-20% of float): Moderate bearish sentiment. Normal level for most stocks.
- High short interest (> 20% of float): High bearish sentiment or activist short campaigns. Risk of short squeeze if positive news emerges.
- Very high short interest (> 50% of float): Extreme bearish betting or significant analysis disparity. High squeeze risk.
- Rising short interest: More investors betting the stock will fall.
- Falling short interest: Short sellers are covering (buying back shares), often bullish signal.
Limitations
- Short interest is reported monthly with a 2-week delay, so real-time data is unavailable.
- High short interest can reflect legitimate bearish analysis, not just squeeze risk. A heavily shorted stock might truly be overvalued.
- Naked short selling (selling without borrowing) isn't always captured in short interest data.
- Small short squeezes are common; truly massive squeezes like GME in 2021 are rare and usually require specific catalysts.
Related Terms
- Short Squeeze — rapid stock price rise forcing short sellers to cover
- Days to Cover — time needed for short sellers to cover if volume holds
- Float — tradable shares; short interest often expressed as % of float
- Bearish — expecting price decline