Finance Glossary

Short interest refers to the amount of shares that have been sold short but have not been covered or closed. It can be expressed as a number, percentage or ratio, and can apply to individual companies or markets as a whole. Short interest is an important indicator of market sentiment; the higher the value, the more investors expect the company or market to take a downturn. For instance, short interest in excess of 25% is a strong indicator of negative sentiment. Short interest rising above 40% makes a stock susceptible to a short squeeze, in which a small increase in price leads a large number of investors to close their shorts within a brief period of time, causing the stock to rapidly rise. This particularly true of stocks with smaller floats.  Stock exchanges generally release short interest data at the end of the month, giving investors an important analytical tool.