What Is Shorting?
Short selling is a trading strategy commonly used by experienced traders who use speculation to buy and sell shares, hoping the price will drop at a later date. It involves borrowing shares and selling them on the open market. Investors then purchase the same shares later on and pay off the loan for the original purchase, then keep the profits for themselves.
For general shorting information, such as the short interest ratio (which is the number of a company's sharesthat have been sold short divided by the average daily volume) you can usually go to any website that features a stock quotes service. Finance-specific sites are a great option or you can even find related information through specific stock exchange websites.
If you're not sure where to start or need a refresher on how to locate this information, we've highlighted some of the main sites where you can gain the knowledge you need related to short interest data for specific stocks.
Key Takeaways
- Short sellers purchase shares using borrowed capital and sell them on the open market, then purchase shares at a lower price, pay off the loan, and pocket the profits.
- Short interest describes the number of sharesshorted but not yet covered or closed out.
- A large change in short interest indicates that investors are becoming more bearish or bullish on a stock.
- For general shorting information about a company's stock, you can usually go to any website with a stock quote service.
- For more specific short interest info, you would have to go to the stock exchange where the company is listed.
Shorted Stocks and Short Interest
Before we look at some of the places you can locate short interest data, it's important to understand some of the basics involved with this specialized trading strategy.
Shorted Stocks
As noted above, a short position means you sell stocks or other securities that you don't actually own. Individuals who use this trading strategy believe the price will drop over time so they borrow shares and sell them to other traders. The borrower then re-buys the shares at a lower price and returns them to the lender. This allows the short trader to close their short position and make a profit.
Shorting is not a strategy that should be taken lightly, especially by novice investors. It should only be considered by people who are experienced traders. Investors must be able to tolerate a greater degree of risk because there's leverage or borrowed capital involved to make the original purchase. But there's also the chance that the security's price will rise rather than drop, which means the investor may incur a loss instead.
Short Interest
The term short interest refers to the number of sharesthat are sold short but have not yet been covered or closed out. Short interest is generally expressed as a percentage of the number of shorted shares divided by the total outstanding shares. For example, a company with a 10% short interest might have 10 million short shares out of 100 million shares outstanding.
Short interest is an indicator of market sentiment. Large changes in the short interest also flash warning signs, as it shows investors may be turning more bearish or bullish on a stock. Extremely high short interest shows investors are very pessimistic or potentially over-pessimistic.
Day traders commonly use short interest as a technical indicator. If there is a high short interest in a particular equity and a breakout occurs, traders could scramble to cover their shorts, creating a snowball effect that day traders use to compound their profits.This is colloquially referred to as a short squeeze in investing jargon.
Shorting is the opposite of taking a long position. In a long position, investors actually own the asset rather than borrowing them. People who take long positions believe the price of the asset will rise in the future.
Finding Short Interest Data for a Specific Stock
If you want more specific information about a particular stock's shorted shares, such as specific numbers about volume, average daily share volume, or days to cover, you can visit certain websites that provide these details free of charge. Here are some of the most popular sites to visit to get the information to help guide your shorting strategy.
Stock Exchanges
Individual stock exchanges issue general reports at the end of each month, giving investors a short-selling benchmark tool. The free data is generally updated just twice a month. Short interest tables typically show information for the last two reporting dates. Daily short interest data is available but can only be purchased through a subscription.
- New York Stock Exchange (NYSE): According to the NYSE,all of this data is acquired from broker-dealers as part of the exchange's regulatory requirements. However, the specific site you need to visit depends on the stock exchange in which the stock that you are seeking information for trades. The NYSE calculates its own short interest ratio for the entire exchange, which can be a useful metric for determining overall market sentiment. If the stock that you are interested in is found on the NYSE, you can check out the NYSE Group Short Interest File, a semi-monthly archive of uncovered shorts dating back to 1988. However, you must purchase the report to access the information.
- Nasdaq: Nasdaq publishes short interest reports in the middle and at the end of every month. This means the information traders use is always slightly outdated and the actual short interest may already be significantly different than indicated in the report. If the stock trades on the Nasdaq, you would have to use Nasdaq Trader's Trading Data, where you can find Nasdaq's Monthly Short Interest Tool.
Other Sites
There is a variety of financial websites that you can use to get access to free information. You just need to know where to look. Here are some of the most common ones where you can find information on short positions for either specific stocks or on a market-wide basis.
- Yahoo! Finance: You can get a list of the most shorted stocks based on the percentage of shares outstanding from the NYSE and Nasdaq by clicking on the Screeners tab on the homepage and going to the Most Shorted Stocks link. You can also find short information for specific stocks. Search for the stock, click on the Statistics tab, and scroll down to Share Statistics, where you'll find the key information about shorting, including the number of short shares for the company as well as the short ratio.
- The Wall Street Journal: The Wall Street Journal provides short-sale data on any public company that is tracked on the "Market Data" page. Simply search for the ticker symbol of the stock and find the heading "Shares Sold Short" in the right-hand column.
- Other Sites: Many other financial sites track short interest data. You can also use sites like MarketBeat.com, which provides the largest short interest positions, increases, and decreases.
What Is Short Interest Data?
Short interest data is information related to the total number of shares that are sold short for a particular stock by investors who have yet to close or cover the position. This data can be expressed as a percentage, which is the total number of shares shorted divided by the total number of outstanding shares.
Who Releases Short Interest Data?
Short interest reporting is required by the Financial Industry Regulatory Authority (FINRA). Under the agency's regulations, broker-dealers are required to submit details about short positions taken in accounts in all securities to exchanges two times a month. They must be reported by 6 p.m. EST on the second trading day after the settlement date outlined by FINRA.
Is Short Interest Good or Bad?
Large changes in short interest mean that investors are changing their views when it comes to a particular stock and that they're taking a bullish or bearish view on its direction. Stocks that become very heavily shorted may indicate that investors are becoming much more pessimistic about where it's headed.
How Do I Use Short Interest Data?
You can use short interest data to determine market sentiment. When expressed as a percentage, short interest data is called the short interest ratio. It is the total number of a company's shorted shares divided by the total number of outstanding shares.
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