What it means
A short squeeze occurs when a heavily-shorted stock rises, forcing short sellers to cover (buy back) their positions to limit losses. The buying pressure accelerates the rise, forcing more covering - a feedback loop.
Why it matters
GameStop in January 2021 was the canonical case. Squeezes can produce moves of hundreds of percent in days. They also typically end badly for both the original shorts and the late-arriving longs.
How to use it
Monitor short interest (% of float short) and days-to-cover (short interest / average daily volume). Both above 20% with positive catalyst risk is squeeze territory. Sizing matters - these are option-like trades.
Take it further
Want a worked example or a deeper dive? Ask Rocky how this concept applies to your specific watchlist or trade idea.
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