QQQ   337.27 (+1.86%)
AAPL   175.05 (+1.37%)
MSFT   318.52 (+1.44%)
META   246.85 (+1.80%)
GOOGL   122.83 (+1.65%)
AMZN   118.15 (+2.29%)
TSLA   176.89 (+1.74%)
NVDA   316.78 (+4.97%)
NIO   7.82 (-2.62%)
BABA   85.77 (-5.41%)
AMD   107.93 (+4.03%)
T   16.55 (-0.66%)
F   11.64 (+1.22%)
MU   67.57 (+4.08%)
CGC   1.05 (+0.00%)
GE   104.01 (+0.52%)
DIS   93.76 (+1.07%)
AMC   5.07 (-0.59%)
PFE   36.48 (-0.73%)
PYPL   61.27 (-0.31%)
NFLX   371.29 (+9.22%)
QQQ   337.27 (+1.86%)
AAPL   175.05 (+1.37%)
MSFT   318.52 (+1.44%)
META   246.85 (+1.80%)
GOOGL   122.83 (+1.65%)
AMZN   118.15 (+2.29%)
TSLA   176.89 (+1.74%)
NVDA   316.78 (+4.97%)
NIO   7.82 (-2.62%)
BABA   85.77 (-5.41%)
AMD   107.93 (+4.03%)
T   16.55 (-0.66%)
F   11.64 (+1.22%)
MU   67.57 (+4.08%)
CGC   1.05 (+0.00%)
GE   104.01 (+0.52%)
DIS   93.76 (+1.07%)
AMC   5.07 (-0.59%)
PFE   36.48 (-0.73%)
PYPL   61.27 (-0.31%)
NFLX   371.29 (+9.22%)
QQQ   337.27 (+1.86%)
AAPL   175.05 (+1.37%)
MSFT   318.52 (+1.44%)
META   246.85 (+1.80%)
GOOGL   122.83 (+1.65%)
AMZN   118.15 (+2.29%)
TSLA   176.89 (+1.74%)
NVDA   316.78 (+4.97%)
NIO   7.82 (-2.62%)
BABA   85.77 (-5.41%)
AMD   107.93 (+4.03%)
T   16.55 (-0.66%)
F   11.64 (+1.22%)
MU   67.57 (+4.08%)
CGC   1.05 (+0.00%)
GE   104.01 (+0.52%)
DIS   93.76 (+1.07%)
AMC   5.07 (-0.59%)
PFE   36.48 (-0.73%)
PYPL   61.27 (-0.31%)
NFLX   371.29 (+9.22%)
QQQ   337.27 (+1.86%)
AAPL   175.05 (+1.37%)
MSFT   318.52 (+1.44%)
META   246.85 (+1.80%)
GOOGL   122.83 (+1.65%)
AMZN   118.15 (+2.29%)
TSLA   176.89 (+1.74%)
NVDA   316.78 (+4.97%)
NIO   7.82 (-2.62%)
BABA   85.77 (-5.41%)
AMD   107.93 (+4.03%)
T   16.55 (-0.66%)
F   11.64 (+1.22%)
MU   67.57 (+4.08%)
CGC   1.05 (+0.00%)
GE   104.01 (+0.52%)
DIS   93.76 (+1.07%)
AMC   5.07 (-0.59%)
PFE   36.48 (-0.73%)
PYPL   61.27 (-0.31%)
NFLX   371.29 (+9.22%)

Highest Short Interest Stocks

Shares that are sold "short" are borrowed then sold with the hopes that the share price will drop before the shares that were borrowed have to be repurchased and returned. A large amount of short interest indicates that some investors believe a stock's price will decline in the near future. "Short" shares can also serve as a hedge for investors that have purchased a large number of shares of a company thinking that the share price will rise over time. This page lists stocks that currently have the highest levels of short interest. Learn more about short interest.

View publication schedule for short interest reports

MarketRank evaluates a company based on community opinion, dividend strength, institutional and insider ownership, earnings and valuation, and analysts forecasts.
Available with a MarketBeat All Access Subscription
MarketRank™Upgrade to All Access to use the All Ranks Filter
Media sentiment refers to the percentage of positive news stories versus negative news stories a company has received in the past week.
Available with a MarketBeat All Access Subscription
Media SentimentUpgrade to All Access to use the All Sentiments Filter
Analyst consensus is the average investment recommendation among Wall Street research analysts.
Available with a MarketBeat All Access Subscription
Analyst ConsensusUpgrade to All Access to use the All Ratings Filter
CompanyShares Sold Short (4/30/2023)Dollar Volume
Sold Short
Shares Sold Short (4/15/2023)Change from Previous ReportDays to Cover% of Float
% of Total
Shares Shorted
T-Mobile US, Inc. stock logo
T-Mobile US
28,120,000 shs $4.05 billion 31,340,000 shs-3,220,000 shs
5.45.5%2.2%Analyst Report
Insider Selling
High Trading Volume
Occidental Petroleum Co. stock logo
Occidental Petroleum
49,760,000 shs $3.06 billion 49,930,000 shs-170,000 shs
3.75.5%5.3%Analyst Report
Insider Buying
Analyst Revision
Moderna, Inc. stock logo
17,850,000 shs $2.37 billion 16,700,000 shs+1,150,000 shs
Paramount Global stock logo
Paramount Global
91,550,000 shs $2.14 billion 97,440,000 shs-5,890,000 shs
7.415.0%N/AAnalyst Report
Insider Buying
T. Rowe Price Group, Inc. stock logo
T. Rowe Price Group
18,990,000 shs $2.13 billion 20,610,000 shs-1,620,000 shs
128.6%8.4%Analyst Report
Coinbase Global, Inc. stock logo
Coinbase Global
37,190,000 shs $2.00 billion 36,380,000 shs+810,000 shs
223.2%N/AAnalyst Report
Verisk Analytics, Inc. stock logo
Verisk Analytics
10,000,000 shs $1.94 billion 10,600,000 shs-600,000 shs
9.37.0%6.2%Dividend Announcement
Analyst Report
Extra Space Storage Inc. stock logo
Extra Space Storage
11,620,000 shs $1.77 billion 10,290,000 shs+1,330,000 shs
88.7%8.7%Analyst Report
Positive News
CarMax, Inc. stock logo
22,770,000 shs $1.59 billion 23,070,000 shs-300,000 shs
10.414.5%14.0%Analyst Report
Analyst Revision
Old Dominion Freight Line, Inc. stock logo
Old Dominion Freight Line
4,870,000 shs $1.56 billion 4,770,000 shs+100,000 shs
6.65.2%4.2%Dividend Announcement
Analyst Upgrade
Analyst Revision
News Coverage
Etsy, Inc. stock logo
14,200,000 shs $1.43 billion 16,280,000 shs-2,080,000 shs
4.111.7%11.2%Analyst Report
Xylem Inc. stock logo
13,770,000 shs $1.43 billion 13,190,000 shs+580,000 shs
97.7%7.6%Analyst Report
Pool Co. stock logo
4,010,000 shs $1.41 billion 3,700,000 shs+310,000 shs
9.510.6%10.0%Analyst Upgrade
C.H. Robinson Worldwide, Inc. stock logo
C.H. Robinson Worldwide
13,880,000 shs $1.40 billion 14,440,000 shs-560,000 shs
11.912.1%10.6%Analyst Report
Analyst Revision
Enphase Energy, Inc. stock logo
Enphase Energy
7,560,000 shs $1.24 billion 6,010,000 shs+1,550,000 shs
1.75.7%5.6%Analyst Report
Options Volume
Voya Financial, Inc. stock logo
Voya Financial
16,230,000 shs $1.24 billion 19,890,000 shs-3,660,000 shs
7.816.7%13.4%Analyst Report
Lucid Group, Inc. stock logo
Lucid Group
154,780,000 shs $1.23 billion 143,400,000 shs+11,380,000 shs
823.0%N/AShort Interest ↑
Royal Caribbean Cruises Ltd. stock logo
Royal Caribbean Cruises
18,490,000 shs $1.21 billion 17,800,000 shs+690,000 shs
4.98.4%7.3%Analyst Upgrade
DoorDash, Inc. stock logo
19,350,000 shs $1.18 billion 19,340,000 shs+10,000 shs
4.18.2%6.6%Insider Selling
World Wrestling Entertainment, Inc. stock logo
World Wrestling Entertainment
10,480,000 shs $1.12 billion 10,710,000 shs-230,000 shs
8.724.8%23.2%Analyst Report
Williams-Sonoma, Inc. stock logo
9,140,000 shs $1.11 billion 8,990,000 shs+150,000 shs
8.814.0%12.0%Upcoming Earnings
Analyst Report
Floor & Decor Holdings, Inc. stock logo
Floor & Decor
10,930,000 shs $1.09 billion 11,390,000 shs-460,000 shs
7.510.5%10.4%Positive News
DICK'S Sporting Goods, Inc. stock logo
DICK'S Sporting Goods
7,440,000 shs $1.08 billion 8,000,000 shs-560,000 shs
5.512.5%11.4%Upcoming Earnings
Analyst Report
Short Interest ↓
Analyst Revision
Expeditors International of Washington, Inc. stock logo
Expeditors International of Washington
9,150,000 shs $1.04 billion 8,990,000 shs+160,000 shs
7.16.0%5.4%Analyst Report
Positive News
Coterra Energy Inc. stock logo
Coterra Energy
38,630,000 shs $988.93 million 41,540,000 shs-2,910,000 shs
4.35.2%N/AAnalyst Report
Short Interest ↓
Palantir Technologies Inc. stock logo
Palantir Technologies
123,520,000 shs $957.28 million 130,070,000 shs-6,550,000 shs
2.97.1%6.9%Gap Up
High Trading Volume
Plug Power Inc. stock logo
Plug Power
105,980,000 shs $957.00 million 100,580,000 shs+5,400,000 shs
5.619.9%18.6%Analyst Revision
Prometheus Biosciences, Inc. stock logo
Prometheus Biosciences
4,900,000 shs $950.36 million 4,920,000 shs-20,000 shs
Celsius Holdings, Inc. stock logo
9,890,000 shs $945.19 million 8,940,000 shs+950,000 shs
10.623.3%13.7%Options Volume
Rivian Automotive, Inc. stock logo
Rivian Automotive
73,440,000 shs $941.50 million 68,720,000 shs+4,720,000 shs
Ball Co. stock logo
17,520,000 shs $931.71 million 18,200,000 shs-680,000 shs
Darden Restaurants, Inc. stock logo
Darden Restaurants
6,060,000 shs $920.70 million 5,650,000 shs+410,000 shs
4.75.0%4.6%Analyst Report
Short Interest ↑
agilon health, inc. stock logo
agilon health
36,780,000 shs $892.65 million 36,940,000 shs-160,000 shs
13.717.2%N/AAnalyst Report
Insider Selling
High Trading Volume
Zoom Video Communications, Inc. stock logo
Zoom Video Communications
14,460,000 shs $888.28 million 14,610,000 shs-150,000 shs
3.56.6%6.1%Upcoming Earnings
Insider Selling
Best Buy Co., Inc. stock logo
Best Buy
11,640,000 shs $867.41 million 10,410,000 shs+1,230,000 shs
5.26.0%4.6%Upcoming Earnings
Analyst Report
Wynn Resorts, Limited stock logo
Wynn Resorts
7,460,000 shs $852.53 million 7,510,000 shs-50,000 shs
3.17.7%6.4%Analyst Upgrade
Repligen Co. stock logo
5,360,000 shs $812.74 million 4,870,000 shs+490,000 shs
9.210.4%9.8%Analyst Report
Live Nation Entertainment, Inc. stock logo
Live Nation Entertainment
11,850,000 shs $803.19 million 11,660,000 shs+190,000 shs
6.38.3%5.4%Analyst Report
Options Volume
Positive News
Wayfair Inc. stock logo
22,810,000 shs $794.47 million 24,070,000 shs-1,260,000 shs
4.330.0%29.4%Analyst Report
Akamai Technologies, Inc. stock logo
Akamai Technologies
9,580,000 shs $785.27 million 11,470,000 shs-1,890,000 shs
5.56.2%5.9%Analyst Report
Insider Selling
Five Below, Inc. stock logo
Five Below
3,920,000 shs $773.65 million 4,560,000 shs-640,000 shs
5.57.2%7.0%Analyst Report
Zillow Group, Inc. stock logo
Zillow Group
17,720,000 shs $771.53 million 18,010,000 shs-290,000 shs
Sirius XM Holdings Inc. stock logo
Sirius XM
200,700,000 shs $762.66 million 186,440,000 shs+14,260,000 shs
11.830.0%N/AAnalyst Report
Analyst Revision
Wolfspeed, Inc. stock logo
16,350,000 shs $761.09 million 15,920,000 shs+430,000 shs
6.213.2%N/AAnalyst Report
Zscaler, Inc. stock logo
8,360,000 shs $753.24 million 7,610,000 shs+750,000 shs
AutoNation, Inc. stock logo
5,680,000 shs $748.06 million 6,210,000 shs-530,000 shs
7.420.4%6.9%Analyst Report
Short Interest ↓
Chewy, Inc. stock logo
23,200,000 shs $719.43 million 22,230,000 shs+970,000 shs
Chesapeake Energy Co. stock logo
Chesapeake Energy
8,570,000 shs $708.57 million 8,040,000 shs+530,000 shs
5.67.7%N/AOptions Volume
Academy Sports and Outdoors, Inc. stock logo
Academy Sports and Outdoors
10,990,000 shs $698.08 million 11,150,000 shs-160,000 shs
Campbell Soup stock logo
Campbell Soup
12,800,000 shs $695.04 million 12,620,000 shs+180,000 shs
5.96.5%4.2%Analyst Report
Options Volume
Positive News
Ceridian HCM Holding Inc. stock logo
Ceridian HCM
10,720,000 shs $680.51 million 10,360,000 shs+360,000 shs
Stanley Black & Decker, Inc. stock logo
Stanley Black & Decker
7,830,000 shs $676.04 million 8,550,000 shs-720,000 shs
4.55.2%4.8%Analyst Report
DraftKings Inc. stock logo
30,810,000 shs $675.05 million 30,040,000 shs+770,000 shs
11,370,000 shs $668.56 million 11,270,000 shs+100,000 shs
Unity Software Inc. stock logo
Unity Software
24,400,000 shs $658.07 million 26,010,000 shs-1,610,000 shs
Texas Roadhouse, Inc. stock logo
Texas Roadhouse
5,920,000 shs $654.87 million 5,390,000 shs+530,000 shs
6.88.9%8.5%Dividend Announcement
Fox Co. stock logo
19,610,000 shs $652.23 million 22,560,000 shs-2,950,000 shs
5.86.7%5.9%Analyst Report
Ralph Lauren Co. stock logo
Ralph Lauren
5,650,000 shs $648.56 million 5,980,000 shs-330,000 shs
6.214.1%11.7%Upcoming Earnings
Analyst Report
CRISPR Therapeutics AG stock logo
CRISPR Therapeutics
13,200,000 shs $646.01 million 12,950,000 shs+250,000 shs
11.117.5%17.4%Analyst Revision
TG Therapeutics, Inc. stock logo
TG Therapeutics
25,610,000 shs $635.90 million 27,460,000 shs-1,850,000 shs
5.819.3%18.1%Analyst Report
Sprouts Farmers Market, Inc. stock logo
Sprouts Farmers Market
18,080,000 shs $626.65 million 16,660,000 shs+1,420,000 shs
11.217.7%15.3%Analyst Downgrade
Analyst Revision
Helen of Troy Limited stock logo
Helen of Troy
6,060,000 shs $608.06 million 5,360,000 shs+700,000 shs
SoFi Technologies, Inc. stock logo
SoFi Technologies
97,130,000 shs $605.12 million 95,960,000 shs+1,170,000 shs
2.912.5%N/AAnalyst Downgrade
Insider Buying
Analyst Revision
Polaris Inc. stock logo
5,510,000 shs $598.66 million 5,730,000 shs-220,000 shs
1010.3%9.0%Analyst Report
Crocs, Inc. stock logo
4,830,000 shs $597.33 million 4,890,000 shs-60,000 shs
2.88.1%7.4%Analyst Report
Analyst Revision
Murphy USA Inc. stock logo
Murphy USA
2,170,000 shs $597.25 million 2,200,000 shs-30,000 shs
7.611.0%8.1%Analyst Revision
Whirlpool Co. stock logo
4,220,000 shs $589.07 million 4,270,000 shs-50,000 shs
5.27.9%6.7%Analyst Report
RH stock logo
2,300,000 shs $586.80 million 2,290,000 shs+10,000 shs
2.912.4%10.9%Analyst Upgrade
Hasbro, Inc. stock logo
9,870,000 shs $584.50 million 8,210,000 shs+1,660,000 shs
57.7%7.2%Analyst Downgrade
Analyst Revision
Super Micro Computer, Inc. stock logo
Super Micro Computer
5,520,000 shs $581.97 million 5,610,000 shs-90,000 shs
3.312.1%11.1%Analyst Report
Options Volume
Positive News
Axsome Therapeutics, Inc. stock logo
Axsome Therapeutics
7,990,000 shs $571.52 million 7,840,000 shs+150,000 shs
8.923.3%21.3%Analyst Revision
Penske Automotive Group, Inc. stock logo
Penske Automotive Group
4,120,000 shs $570.95 million 4,050,000 shs+70,000 shs
11.320.2%5.1%Dividend Increase
Analyst Report
Analyst Revision
Credit Acceptance Co. stock logo
Credit Acceptance
1,160,000 shs $567.82 million 1,240,000 shs-80,000 shs
1414.7%6.9%Analyst Report
Short Interest ↓
Analyst Revision
H&R Block, Inc. stock logo
H&R Block
16,590,000 shs $562.57 million 15,580,000 shs+1,010,000 shs
11.311.0%9.1%Short Interest ↑
Omega Healthcare Investors, Inc. stock logo
Omega Healthcare Investors
20,740,000 shs $555.00 million 22,510,000 shs-1,770,000 shs
The Carlyle Group Inc. stock logo
The Carlyle Group
18,260,000 shs $553.83 million 16,150,000 shs+2,110,000 shs
Analyst Report
PBF Energy Inc. stock logo
PBF Energy
15,760,000 shs $549.39 million 12,260,000 shs+3,500,000 shs
513.7%13.1%Analyst Upgrade
Analyst Revision
Frontier Communications Parent, Inc. stock logo
Frontier Communications Parent
24,150,000 shs $544.34 million 23,380,000 shs+770,000 shs
13.911.0%N/AOptions Volume
High Trading Volume
Wingstop Inc. stock logo
2,650,000 shs $530.29 million 2,830,000 shs-180,000 shs
3.99.1%8.9%Analyst Report
Paylocity Holding Co. stock logo
2,740,000 shs $529.61 million 2,580,000 shs+160,000 shs
5.66.6%5.0%Analyst Report
Insider Selling
Group 1 Automotive, Inc. stock logo
Group 1 Automotive
2,320,000 shs $520.79 million 2,260,000 shs+60,000 shs
14.917.1%12.8%Analyst Report
ChargePoint Holdings, Inc. stock logo
59,610,000 shs $516.82 million 59,290,000 shs+320,000 shs
7.122.9%N/AInsider Selling
C3.ai, Inc. stock logo
28,940,000 shs $515.71 million 31,190,000 shs-2,250,000 shs
1.232.9%29.7%Options Volume
First Horizon Co. stock logo
First Horizon
29,220,000 shs $512.81 million 31,870,000 shs-2,650,000 shs
2.75.5%5.3%Analyst Report
Short Interest ↓
Fluor Co. stock logo
17,280,000 shs $502.16 million 16,260,000 shs+1,020,000 shs
10.712.2%12.2%Analyst Report
Short Interest ↑
Lyft, Inc. stock logo
48,800,000 shs $500.20 million 54,250,000 shs-5,450,000 shs
2.115.5%15.2%Analyst Report
Short Interest ↓
On Holding AG stock logo
15,010,000 shs $487.07 million 19,000,000 shs-3,990,000 shs
3.68.1%N/AEarnings Report
Analyst Report
High Trading Volume
AMN Healthcare Services, Inc. stock logo
AMN Healthcare Services
5,630,000 shs $486.15 million 6,000,000 shs-370,000 shs
7.214.3%11.9%Analyst Report
Short Interest ↓
Avis Budget Group, Inc. stock logo
Avis Budget Group
2,740,000 shs $484.08 million 3,060,000 shs-320,000 shs
5.47.1%3.9%Analyst Report
Short Interest ↓
Analyst Revision
Atkore Inc. stock logo
3,830,000 shs $483.84 million 3,270,000 shs+560,000 shs
8.49.8%8.2%Analyst Report
NRG Energy, Inc. stock logo
NRG Energy
14,140,000 shs $483.16 million 13,480,000 shs+660,000 shs
3.46.3%5.8%Analyst Report
Cinemark Holdings, Inc. stock logo
28,310,000 shs $477.87 million 27,700,000 shs+610,000 shs
10.226.3%23.7%Analyst Report
Bank OZK stock logo
Bank OZK
13,370,000 shs $477.58 million 13,170,000 shs+200,000 shs
6.611.6%N/AAnalyst Report
Options Volume
Denbury Inc. stock logo
5,090,000 shs $475.30 million 5,350,000 shs-260,000 shs
Reata Pharmaceuticals, Inc. stock logo
Reata Pharmaceuticals
4,790,000 shs $473.54 million 5,170,000 shs-380,000 shs
3.416.7%15.3%Analyst Report
Insider Selling
THOR Industries, Inc. stock logo
THOR Industries
5,990,000 shs $473.33 million 5,670,000 shs+320,000 shs
9.511.7%10.9%Analyst Report
Knight-Swift Transportation Holdings Inc. stock logo
Knight-Swift Transportation
8,300,000 shs $467.46 million 8,400,000 shs-100,000 shs
4.45.5%5.0%Analyst Downgrade
Options Volume
UiPath Inc. stock logo
33,130,000 shs $466.47 million 33,080,000 shs+50,000 shs
5.68.8%N/AUpcoming Earnings
Kohl's Co. stock logo
21,070,000 shs $464.17 million 20,790,000 shs+280,000 shs
4.920.0%13.5%Upcoming Earnings
Analyst Report
Generac Holdings Inc. stock logo
4,540,000 shs $464.08 million 4,520,000 shs+20,000 shs
3.67.5%7.2%Analyst Report
Short Selling - Explanation For Shorting Stocks

How the MarketBeat short interest tracker can help investors find stocks

Short selling refers to the sale of security such as a stock, in anticipation of prices falling. The trading strategy is motivated by the belief that the prices of a security will drop, providing an opportunity for the stocks to be repurchased later and for the difference in price to be taken as profit.

Short sellers borrow shares of stocks they don’t own and try to sell them at the current price with the aim of rebuying them once the price drops significantly. The aim of this strategy is to benefit from the difference between the price of short selling and the cost of rebuying the stocks.

Unlike an investor who holds stocks for their value and the income they produce, traders capitalize on an anticipated decline in price by trying to sell high and buying low. Short selling is most of the time limited to margin accounts because of the unlimited losses that can come into being if stock prices start rising rather than dropping.

In this article, we’ll help investors understand the process of short selling and help them understand how to use the MarketBeat short interest tracker to identify stocks that may be good candidates for this strategy.

Short selling is a three-step process with specific actions needed to be taken at each step:

  • First, a trader identifies a stock that they believe will trade lower and borrows a quantity of shares of the stock from a broker. Once that request is accepted, the trader sells the shares at the market price.
  • Second, if the stock price does fall below the sales price, the trader buys back the equal number of shares at the lower price.
  • Third, the trader sells those shares back to the broker at the price the trade initially paid.

The trader profits from the difference between the share price at the time of borrowing the shares and the share price at the time of returning the shares. Let’s look at an example of how this works:

  • Trader expects the stock of company XYZ, currently priced at $25, to fall in the future. He calls his broker and asks the broker to find him 100 shares of the company to borrow for a short sale. As soon as the broker lends the stocks, Mr. Trader sells them all for $25 each. Now Mr. Trader has $2500 but owes his broker 100 shares of XYZ.
  • If all goes as Mr. Trader hoped, and the share price drops to $20, he can cover his short position by buying back the stock. Mr. Trader now spends $2,000 to repurchase the shares and return them to the broker he borrowed them from. Once the transaction is complete, the profit on the trade will be $500.

Speculation is the main reason behind short selling, especially on companies that investors feel are overvalued. Companies can suffer from poor business plans, increased competition, and lousy management that may not be accurately reflected in its stock price.

Another reason traders engage in short selling is to hedge a long position in the same or similar stocks. A third reason is to participate in a short sale is as a way of seeking favorable tax treatment.  Whatever the reason short selling requires solid research, good intuition, and excellent timing if a trader is to profit from speculation.

With that said, short selling is one of the most misunderstood strategies in investing. Short sellers are generally reviled for trying to benefit from a bad situation. After all, a short seller could end up profiting from the woes of a company even while company stockholders’ and employees’ livelihoods are being destroyed.

However, that is not a complete and fair view of the job of a short seller. Optimism in the market can drive prices to lofty levels that are unsustainable and that don’t reflect the actual value of a company. The presence of short sellers in the marketplace can help to rebalance stock prices to ensure that companies are fairly valued.

Short selling also provides a form of defense against financial fraud by bringing to light companies that have tried to inflate their performance and valuation. If all stockholders could profit from a stock’s value rising, but no one could profit from the stock’s value falling, there would be very little pressure to keep the stock’s price in line with reality.

Short sellers track two key metrics when deploying short selling to generate returns from the stock market: short interest and short interest ratio. Traders can determine the percentage of a company’s shares that are being sold short, by first checking ‘short interest.

Short interest refers to the total number of shares sold as a percentage of a company’s total outstanding shares. If a stock has a short interest ratio of 10%, then it means that for every 10 outstanding shares, one is held as a short. Stocks with a high short interest ratio are usually at risk of “short squeeze,” a phenomenon that is most of the time associated with unexpected upward price spikes.

Hedge Funds are the most active when it comes to short selling stocks. Such funds try to hedge the market by short selling stocks they believe are overvalued. Sophisticated investors are also involved in short selling as they try to hedge market risk. Short selling is an ideal trading strategy for traders who think short term as it requires people to keep a close eye on trading positions.

While a necessary part of the market, short selling also has its fair share of risks.

  • For starters, when a large number of traders enter short positions, the collective actions could result in a dramatic impact that would drive prices to levels never seen before. It is for this reason that regulators at times ban short selling in a bid to protect stocks of companies under pressure.  During the financial crisis, investors were barred from short-selling stocks of banks and other financial institutions.
  • Short selling can also lead to unlimited lossesin the event that stock prices rise instead of fall as expected.  An unexpected spike in prices will force short sellers to cover their positions at once. This is known as a short squeeze. When this happens, all traders who have shorted the stock scramble to buy the stock back quickly before the price goes even higher. With such high demand, those who hold the stock assume full control and the stock price rises far beyond its true value. Short sellers who fail to cover their positions fast enough can end up with huge losses.
  • Short selling also comes with a number of costs that can eat into one’s returns significantly. For starters, short sellers are normally charged stock borrowing costs that, in worst case scenarios, can exceed the profit from the short trade, especially when dealing with stocks that are difficult to borrow. Also, because short selling is done in margin accounts, traders must pay for margin interest on positions taken. Short sellers also must turn over any dividends and distributions paid on borrowed stock. If the trader isn’t careful, the costs can bite out trading gains.

To be able to engage in short selling one first needs to open and finance a margin account. The standard margin requirement is 150%, which means one must set aside 50% of the value of the stock at the time of borrowing in that account. For example, if one wishes to short sell 100 shares of a company going for $10 a share, one will need about $500 in a margin account.

  • Short sellers use screening tools to identify potential short candidates whose price might have run ahead of fundamentals and are destined to trade lower.  Stocks with prices hitting lower lowsat higher volume, signify that sellers are running the show, which implies possible further movements on the downside. Stocks that have rebounded considerably from a downtrend also provide short selling opportunities especially if they are trading in overbought territory.  While in overbought areas, stocks tend to lose upward steam providing a chance to profit on the price plummeting back to the lows.
  • Once a short position is triggered in a stock, implementing a kind of protection on the order is ideal. In this case, a buy stop order or a trailing buy stop order can come into play as a way helping manage a potential loss, especially during a short squeeze. A short squeeze happens when there is a lack of supply to cover the excess of demand for a particular stock. Short sellers are then forced to buy stock to cover their positions, resulting in an uptick in buying volume and therefore a higher price for the stock.
  • A buy stop order is used to trigger a market order to buy stock once the price rallies back to the stock price entered.  A trailing buy stop order, on the other hand, adjusts the trigger price for taking profits as the stock price moves lower.

Investors can use the pull-down menus to screen for specific stocks based on categories such as stock sectors, market capitalization, investor sentiment, and analyst sentiment. Investors can also choose to screen for the largest position which means they can look for the most shorted stocks or the least shorted stocks.

The screener pulls U.S. stocks from both the New York Stock Exchange (NYSE) and the Nasdaq. Along with the stock listing, investors will get an indicator that provides insight as to why the stock has high short interest (e.g. an upcoming earnings report or recent analyst revision).

Short selling is an important trading strategy that allows traders to profit when the market falls. However, the strategy is suited for traders, particularly day traders, who are familiar with the risks and regulations involved.

Taking into consideration the risks involved, this strategy is ideal for disciplined traders who know how to cut their losses and cover the losses that they do incur.  The approach is also ideal for people who are willing and ready to handle unlimited risks. Short selling also requires constant monitoring as holding an unprofitable position for long may not be a viable strategy for many investors.

More Short Interest Resources from MarketBeat

My Account -