Short Interest Ratio

Short interest ratio, known also as days to cover, is a metric used to evaluate the levels of bearish pressure affecting a stock. The greater the value, the heavier is the pressure. In order to calculate the short interest ratio, the average daily trading volume of the stock is divided by the number of shares that are shorted. Simply defined, by comparing a stock's short interest to its average daily trading volume, the ratio can instantly inform an investor if a stock is highly shorted or not. At some point stocks that are heavily shorted will start attracting buyers. If the buying pressure keeps growing, it will trigger what's called a short squeeze, a situation where short sellers are trying to get out of their short position as quickly as possible. A short squeeze will generally create a bullish wave that will lift the price significantly.