Short interest ratio.

In plain English

The short interest ratio compares the size of a stock's outstanding short position to how much of that stock normally changes hands in a day. A ratio of 1 means one average day of trading could absorb all the covering, while a ratio of 10 means it would take about two weeks of ordinary volume. It is the same arithmetic as days to cover, and the two terms are used interchangeably. Analysts also look at short interest as a percent of float, which measures crowding against shares available rather than against trading activity. Neither version predicts direction; both describe how tight the exit is.

01Why it matters

The ratio tells you whether a wave of covering would be absorbed quietly or would have to fight for shares, which is the difference between a small bounce and a squeeze.

02The math, step by step

Say 4 million shares are short and the stock trades 800,000 shares a day. The ratio is 5. A second stock has 4 million shares short on 4 million shares of daily volume, a ratio of 1. Same short position, very different pressure.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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