Short Interest

Short interest is the number of stock shares that have been sold short but not repurchased. It is basically expressed as a percentage of the total securities outstanding. For example, if a company XYZ has sold short 5 million shares from a total of 120 million outstanding shares.

Short interest = 5 million / 120 million = 4.2%

Short interest is also used as a market sentiment indicator. When the short interest for a stock is very high, it may be a warning sign that the market for the company is negative. However, it also suggests that a high number of outstanding short positions in a stock leads to a rise in the stock’s price in the future. This is because eventually, the short sellers will have to buy the stock to cover their short position.