Short interest

Short interest is the total number of a company's shares that have been sold short and not yet bought back to close the position. In the US, broker-dealers report their customers' short positions to FINRA twice a month, and the totals are published with a lag.

How it works

Short positions are measured as of two settlement dates each month, one around mid-month and one at month-end. The data is compiled and released roughly a week or more later, so short interest is always a backward-looking snapshot.

It is commonly expressed three ways:

• Shares short: the raw number.
• Percent of float: shares short divided by public float. This is the most cited figure.
• Days to cover: shares short divided by average daily volume.

Short interest is not the same as short volume. Short volume counts shares sold short during a single day, much of it by market makers who cover the same day; short interest counts positions that are still open.

Why it matters for traders

High short interest means many investors are betting against a stock, and also that many will eventually have to buy shares to cover. When positive news hits a heavily shorted stock, forced and fearful covering can accelerate a rally into a short squeeze. Rising short interest ahead of a catalyst can also reflect skepticism worth understanding.

The traps: the data is stale by the time it is published, and it does not show who is short or whether those shorts are hedged.

Example

Northwind Therapeutics (NWTX) has a public float of 60 million shares. The latest report shows 12 million shares sold short, and the stock averages 1.5 million shares traded per day.

• Short interest as a percent of float: 12M / 60M = 20%
• Days to cover: 12M / 1.5M = 8 days

Both figures are high, which is why traders might watch NWTX closely ahead of its PDUFA date.

FAQ

What is a high short interest?

There is no fixed threshold, but short interest above 20% of float is generally considered high, and above 30-40% is unusual.

Can short interest be more than 100% of the float?

Yes. Shares that are borrowed and sold can be lent again by the buyer's broker, so reported short interest can exceed the float, as happened with GameStop in January 2021.