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Tesla, Wayfair And Other Profitable Short Trades Could Get A Short Covering Boost

Short squeezes happen when short sellers buy a stock to exit their positions all at one. Short squeezes are typically triggered when a rise in stock prices produces heavy losses for short sellers and they're forced out of their positions. However, S3 Partners analyst Ihor Dusaniwsky said Tuesday that profit-driven short selling can also trigger large spikes in share price. With the SPDR S&P 500 ETF Trust (NYSE: SPY) down 24.9% in the past month, short sellers have been profitable pretty much across the board. But if heavily shorted stocks start to rally, Dusaniwsky said short sellers could start to close out their positions as soon as they see their profits disappearing. Dusaniwsky said Tesla, Apple and other popular large-cap shorts could see a rise in short covering volume if their stocks continue to rally this week.

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