Business Definition for: short squeeze
short squeeze
situation when prices of a stock or commodity futures contract start to move up sharply and many traders with short positions are forced to buy stocks or commodities in order to
cover
their positions and prevent losses. This sudden surge of buying leads to even higher prices, further aggravating the losses of short sellers who have not covered their positions.
See also
selling short
short squeeze
situation when many traders with
short positions
are forced to buy stocks or commodities in order to
cover
their positions and prevent losses. This sudden surge of buying leads to even higher prices, further aggravating the losses of short sellers who have not covered their positions.
See also
selling short
Related Terms:
selling securities (or commodities futures contracts) not owned by the seller. The investor (seller) earns a profit when the market price of the security declines, and loses money when the purchase price is higher than the original selling price. To make a short sale, the broker borrows stock and loans it to the investor. Later on, hopefully when the market price is lower, the investor buys the shares to repay the lending broker. Assume an investor sells short 50 shares of stock having a market price of $25, for a total of $1250. The broker borrows the shares and holds onto the proceeds of the short sale to secure the loan and satisfy margin requirements. Later on, the investor buys the stock at $20 a share, repays the 50 shares, earning a per share profit of $5, or a total of $250.
Investors "sell short against the box" when they sell short shares they actually own ( not borrowed shares). Short sales against the box may occur so that a loss is minimized or the tax consequences of a long sale may be postponed to a subsequent tax year.
selling securities (or commodities futures contracts) not owned by the seller. The investor (seller) earns a profit when the market price of the security declines, and loses money when the purchase price is higher than the original selling price. To make a short sale, the broker borrows stock and loans it to the investor. Later on, hopefully when the market price is lower, the investor buys the shares to repay the lending broker. Assume an investor sells short 50 shares of stock having a market price of $25, for a total of $1250. The broker borrows the shares and holds onto the proceeds of the short sale to secure the loan and satisfy margin requirements. Later on, the investor buys the stock at $20 a share, repays the 50 shares, earning a per share profit of $5, or a total of $250.
Investors "sell short against the box" when they sell short shares they actually own ( not borrowed shares). Short sales against the box may occur so that a loss is minimized or the tax consequences of a long sale may be postponed to a subsequent tax year.
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