Short squeeze.

In plain English

A short squeeze happens when a heavily shorted stock starts rising and short sellers face mounting losses. Because a short position loses money as the price climbs, brokers issue margin calls and sellers close out by buying shares. That buying adds demand on top of whatever started the move, which drives the price up further and squeezes the remaining shorts. The loop can run far past any estimate of the company's value, and it ends as abruptly as it began. A short position has limited profit and, in principle, unlimited loss, which is what makes the pressure so intense.

01Why it matters

Prices during a squeeze reflect forced buying rather than any change in the business, so anyone buying into one is paying for mechanics that reverse once the shorts are gone.

02The math, step by step

Say 30 percent of a stock's float is sold short and average daily volume is 1 million shares. Covering 6 million shorted shares would take roughly 6 days of the entire market's volume. That mismatch is what turns a 10 percent move into a 100 percent move.

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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