The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we’re going to answer the question, “What happens in a short squeeze?” A short squeeze is actually a really popular thing with people to talk about. You often hear about a short squeeze happening or potentially happening after a stock has had a big run down and then potentially gets some news that could turn it the other way. All that really happens in a short squeeze is that there becomes a lack of supply of the stock available and then excess demand for the stock and this is where the shorting really comes into interest because when you short a stock, you have to have supply of that stock available to borrow from the brokerages or from the market itself. If somebody wants to short stock, they have to borrow it from somewhere. If there’s a lack of supply, now there’s this demand, what happens is that short sellers have to cover their positions on the stock. If they get good news or if the company has a good ann