10 Biggest Short Squeezes in History

A short squeeze is a unique situation that results in a rapid rise in a stock price. To avoid a short squeeze scenario, the security should have an unusual level of short-sellers who hold their stock positions.

A short squeeze generally starts when the price unexpectedly jumps a bit higher. The condition plays a vital role in short-term traders who randomly decide to reduce losses and leave their positions.

This guide will explain short squeezes, what this concept is about, and a list of the biggest short squeezes in history.

Understanding the concept of a short squeeze

Unless the price of heavily shorted stocks is expected to rise, sellers should short trade immediately to limit their losses. Sellers briefly borrow shares of assets that they think their price will increase to buy after they fall. 

If they somehow happen to be good, they will return the share. This return was the difference between the price when they started the short and purchased the stake to close any short position. 

If they make any mistake, they will insist on buying at a higher price. They have to pay the difference between the price they set and the overall sales price. 

As sellers shortly leave their positions with purchase orders, the unexpected departure of these sellers briefly pushes prices higher. Continued rapid price growth has also attracted securities buyers. 

Under what condition does a short squeeze happen?

Short-sellers briefly open stock positions because they believe their price will fall while their thinking is good! Joyous news, product announcements, or revenue streams that stimulate buyer interest can encourage them.

The change in stock wealth may be temporary. Otherwise, the short trader may suffer losses as their expiration date approaches. They usually decide to sell immediately, even if it means they will make a significant loss. 

18% are Tesla shares representing short-term interest at the end of 2019. The share price has quadrupled, and sellers have shortly lost billions.

This is where a short squeeze happens. Each purchase transaction made by one short-seller increases the price and forces the other short-seller to buy.

List of Biggest Short Squeezes in History

Now without a second delay, let's move to the main topic of discussion and list down the top 10 biggest short squeezes in history of all time:

1. Volkswagen

Also known as VW, they are among the most famous German carmaker Volkswagen in short squeezes history. This generally happens once the company becomes the most valued one during the brief business period. 

Volkswagen Wagen is in the process of being taken over by Porsche. Therefore, the premium of his regular parts has risen to an extremely high level compared to his preferred details. Hedge funds smell of arbitration opportunities. Sell plain and fence by buying the required components.

One weekend Porsche announced a public takeover of VW. He occupied most of the fleet, and only 6% of the free fleet remained. In contrast, short sales accounted for 12% of total extraordinary stocks.

It is mathematically impossible for any short trader to buy a stock and thus close its position. In other words, half of the room is left in the burning building without a passage. A panicked struggle for the East began. 

The irony is that although Porsche was able to fire many small dealers, it failed to pay for its prominent positions and was eventually taken over by VW.

2. Herbalife

A hedge fund manager, Bill Ackman has taken a short position of $ 1 billion at Herbalife, a multi-tiered global marketing company.

Ackman's case was based on a fraudulent pyramid scheme. And he still won Pyrrha's victory when in the year Federal Trade Commission took the coercive action in opposition to the company.

In a long-running battle involving a live broadcast on CNBC, Icahn eventually won many victories, while Ackman's fund lost $ 1 billion.

3. Tesla

Tesla and its founder, Elon Musk, have always struggled with short selling, and despite the Securities and Exchange Commission's (SEC) raids, the former has so far won the fight.

Tesla's short-term efforts are expected to lose more than $ 40 billion by the end of 2020, as the company's stock rose 740% last year. 

It is based on data collected by Ihor Dusaniwski, an executive director of predictive analytics at S3 Partners, a financial analyst. 

No wonder Musk and the Redditors were found to be equal, and the former continued to gather monkey troops through their tweets. Dusaniwsky told Institutional Investor that Tesla's short was "the longest unprofitable short I have ever seen."

4. Trust (RIL)

Unlike the Piggly Wiggly's Saunders, Dhirubhai Ambani became so angry when he got to know that the bear cartel was making some profit by shortening the Reliance shares.

And like Saunders, he also decided to fight only against the bear cartel. But unlike the Saunders, the Bears were utterly crushed, and Ambani won, which gives him the legendary Dalal Street name.

5. First Solar Inc.

It can be said that the enormous short squeeze in the First Solar FSLR, 2.17%, began at the end of August 2012, when 37% of the shares of the solar energy company were reduced and a shame worth 20 USD. 

In mid-January, shorts fell to 22% on special shares as shares exceeded $ 30 per share. In April, stocks made significant gains because they provided management that exceeded market expectations, but some analysts saw the recovery as an "exaggerated response." 

While the stock tested $ 55 per share, shorts fell to 19% on exceptional stocks. The first part of Solar is 75% higher year-on-year.

6. ITT Educational Services Inc.

With almost 37% of its shares, ITT Educational ESI fell 0.30% this year, although the Securities and Exchange Commission has scrutinised the training firm for private student loan agreements.

After the number of traded shares reached a maximum for the year in March, the share jumped during the year and reached almost 125%. The jury has yet to decide whether the squeeze will last, as the shares lost 8% on Wednesday, leaving only 48%.

7. Herbalife Ltd.

With short-term interest rates at 35% at the beginning of the year and a disgraceful $ 33 stake, Herbalife shares partially jumped $ 45 in January when billionaire Carl Icahn bought a significant stake in the company, contrary to the statement of short-seller Bill Ackman. 

Following public clashes between Icahn and Ackman and other hedge fund managers leaving senior positions and the loss of one auditor, shares remained close to 47% for the year, with short-term interest rates remaining constant at 32%. 

8. GameStop Corp.

Short-term interest rates on GameStop GME rose 6.89% with the price of video game trading stocks for most of the year, reaching a peak of 37% before falling to the current 33% as the stock price fell to $ 35. 

The stock cooled somewhat and fell back to $ 35, still up 44% a year, and remains one of the most undervalued stocks in the area. 

Many video game-related stocks have rallied around the turmoil of new gaming consoles in recent weeks. 

9. Barnes & Noble Inc.

With a peak of 24% in shares in January this year, short interest in Barnes & Noble US: BKS fell below 19% as shares rose 48% during the year. 

Shares rose sharply in early May after news that Microsoft was considering the acquisition of digital bookmaker Nook by the bookstore for $ 1 billion.

10. Questcor Pharmaceuticals Inc.

While it can be said that this is not an enormous squeeze, it is also difficult to ignore that the shortest shares of the S&P 1500 index for the whole year are still growing by almost 38%. Questcor US Shorts: QCOR rose 47% in January and fell 41% in early April when the stock reached $ 36 a share. 

The sellers briefly redoubled their efforts and returned to 46% at the end of April. Stock shorts started high in September and fell to $ 50 a share after announcing a review of the company's marketing practices and payment limits for its main drag.

11. Supervalu Inc. 

Shares of Supervalu US: SVU have risen 174% year to date, the most among all companies in the S&P 1500 Index. 

The short interest currently accounts for nearly 26% of the company's outstanding shares, down from more than 41% in early February. 

In January, Standard & Poor's placed a rating watch on the company, and Fitch Ratings raised the firm's junk-debt rating in February. SAC Capital Advisors, led by Steve Cohen, has also been a big fan of Supervalu, increasing its stake to 5.1% in the company earlier this month.

12. Netflix Inc.

It is followed by the most powerful S&P 500 SPX index -0.33%, Netflix NFLX, 4.33%, with shares of 153%. 

The company began the year with approximately 23% of its shares outstanding at a price below $ 93 per share. That fell to 13% on new shares at the end of March, when the shares reached about $ 190 per share.

While the stock is testing $ 240 on the one hand, the sellers seem to be convinced that the stock is upside down again, as short interest rates have risen to more than 18%. 

At the end of April, the stock received a real blow when the film's streaming company announced better-than-expected quarterly results, but short positions also began to rise.

13. Boyd Gaming Corp

The squeeze on the casino operator's shortcuts has begun, with positions declining at the end of April. Meanwhile, Boyd's BYD shares, 1.20%, have almost doubled in the year. 

Short-term interest rates above 21% of special shares fell to 18% when Boyd shares exceeded $ 12. While the company posted a loss in the first quarter, it also announced the sick development of Echelon Casino in Atlantic City worth $ 350 million in March.

14. Dynamics Green Mountain Coffee Roasters Inc.

As late as November, almost 35% of the Green Mountain fleet in the United States was low: GMCR. The steady growth of shares from 69% to nearly USD 46 per share decreased compared to February to 18%. 

The sellers visited again for a short time; cautious shorts rose by 23% of outstanding shares in April. 

It came sharply after the Green Mountain rally following the announcement of Starbucks Corp. SBUX, 0.87%, became a business for the company's K-Cup coffee packages. Shares have risen 91% so far.

Betting on a short squeeze

Opposing investors can buy stocks at high short interest rates to take advantage of the potential for a short squeeze. The rapid rise in stock prices is attractive but not without risk. Due to a poor outlook, stocks can be a bit short. 

Active traders will check the written-off shares and see that they start to grow. Once the price begins to pick up, the trader jumps into the purchase and tries to grab something that could be a short push and a significant step up.

What are the risks of a short trading squeeze?

There are numerous examples of stocks moving higher after a solid short-term interest. But you will also find countless scarce stocks whose prices are continuously falling all the time. 

High short-term interest rates do not mean that the price will go up. This means a lot of people think it's going to fall apart! 

How can you find a short squeeze?

It is effortless for investors to put a short squeeze on the wrong side because it can happen anywhere. Many warning signals as such can predict a severe short circuit. Here are three primary ways to identify the short squeeze:

1. The first thing to remember is that high short-term real estate stocks are usually the most readily available. If you notice a short interest rate higher than 20%, you should consider this condition a potential warning flag.

   
   

2. Shares with a small amount or number of shares available for trading may also be tight. A sudden increase in the number of functions can cause a quick change up or down. 

   
   

3. Another way to find a short squeeze is when you notice that the stock is growing fast, at higher volumes, without seeing the company or technical formations. This means that the probability of a short squeeze occurring is high. If such a situation occurs with the stock you are investing in, you must immediately understand and evaluate your options.

How can you avoid a short squeeze?

Besides explaining how you can identify the stocks in the short squeeze, you should also learn how you can survive if caught in a short squeeze cycle. Here we have a few important tricks for you to follow:

1. Find out if you are ready to afford it both financially and emotionally.

   
   

2. If you think that your margin account has sufficient funds and you could bear a short-term loss, you should check if something has changed at the primary level. If there are no fundamental changes, you can wait for them. 

   
   

3. You can even set with the stop-loss so that the shorter squeeze will never overwhelm you. The stop-loss setting triggers a purchase order, which helps you leave the trade.

   
   

4. Avoid shortening inventory until and unless you do not have a clear exit strategy.

   
   

5. Hire a professional investment expert to manage all your investments.

Related questions (FAQs)

1. Is a short squeeze illegal?

Short-term squeezing is illegal. Any intermediary company that can deliberately go through a short-term squeeze without acting may have many legal obligations.

2. What triggers a short squeeze?

Short squeezes are often triggered by unexpected good news, which pushes the security price higher than usual. This will gradually increase the buying squeeze, which is beginning to move the market selling squeeze. 

3. How high can a short squeeze go?

If you shorten a share by $ 10, it won't be less than zero, so you can't earn more than $ 10 per trade share. But there is no ceiling in stock. You can sell it for $ 10 and then be forced to repurchase it for $ 20.

4. Who benefits from a short squeeze?

Entrepreneurs can make huge profits by taking advantage of short squeeze holdings. If you want to take advantage of squeezing, you need to know how to sell them well. It is unknown when there will be a short squeeze, but by watching stocks under many squeezes, you can be alert when one starts.

Final thoughts

Speculators or traders with short stock positions will gradually suffer from heavy losses. But this is just if the stock goes through a short squeeze condition.

Opposing investors who build long positions in equities in anticipation of short pressures will benefit from rising stock prices.

Therefore, a short squeeze usually lasts a short time. Gains or losses can take a while, but your investment can have many consequences, so you know how to find a shortcut. You cannot predict how long the short squeeze will stay with you.