#VW STOCK SQUEEZE PROFESSIONAL#

In the spring of 2020, the number of shorts stood at over 100%. This happened, for example, with GameStop (GME). The more short-sellers there are in the stock, the greater the chance of a short squeeze. There must already be many short positions outstanding. Conditions for a short squeezeĪ short squeeze cannot occur with every stock. The explosive price rises ensure as it were, that the short-sellers are squeezed out of their positions. This creates a snowball effect of rapidly rising prices, reinforced by the stop-loss orders. The purchases cause the price to rise, which, in turn, causes other short-sellers to close their positions. They then unintentionally have to buy back shares at lightning speed in order to avoid losses or to safeguard their profits. It happens when short-sellers are surprised by a sudden sharp rise in the price, for example, if good news about the company unexpectedly comes out. What is a short squeeze?Ī short squeeze is the worst nightmare for short-sellers. Positions are then automatically closed when the price hits a certain level. To limit the potential loss, most short-sellers use a stop-loss order. But because the price of a stock has no limit upwards, the theoretical loss for a short-seller is unlimited. Investors who simply buy a share, or go long, can, in the worst case, lose their investment if the price goes all the way to zero.

#VW STOCK SQUEEZE PROFESSIONAL#

Professional investors, such as hedge funds, often engage in short selling. But if the price rises, the short-seller suffers a loss because they have to buy back the shares at a higher price. The difference between the sale and purchase price is the profit for the short-seller.

If the price subsequently falls, the short-seller buys the shares back at the lower price and gives them to the lender. A short-seller sells shares that they do not own but borrows from other investors, such as pension funds.

Anyone who wants to profit from a price drop can go short.

Vw stock squeeze