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Crowded shorts

Stocks that many people are already betting against.

A short is crowded when a large share of a company's stock has already been borrowed and sold by people betting it will fall. You can see the crowd in two places: in the borrow fee, which rises as lenders run out of shares to lend, and in the short interest figures that exchanges publish, the fraction of the shares that are currently sold short.

Crowding cuts both ways, and that is why it sells so well. A crowded short means many informed people expect trouble, which is a real signal. It also means that everyone is standing in the same narrow doorway: if the price rises instead, they all need to buy back at the same time, and the buying feeds on itself. That is the squeeze. The famous charts come from the second case, the pitch comes from the first, and the test has to pay for both.

Explore the diagram (scroll horizontally on small screens)
Fourteen short sellers, one stockThe stockHigh borrow feeFew shares left to lendOne narrow door out:If the price rises, they all buy back at once
“Buy here”“+180% in three weeks”
Up session Down sessionIllustrative, not market data
The chart they show you: one famous squeeze, picked after the fact.

Where this word comes up

First needed in the log entry H-059 · Testing the shorting premium: what a rebalancing bug taught us.

From the same entry: Borrow fee, Decile, Delisted, Long-short portfolio, Rebalance, Recall, Short interest percentage, Short selling, Squeeze, t statistic, Universe.

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