What Is a Short Squeeze? A short squeeze occurs when a stock or other asset jumps sharply higher, forcing traders who had bet that its price would fall, to buy it in order to forestall even greater losses. Their scramble to buy only adds to the upward pressure on the stock's price
KEY TAKEAWAYS *A short squeeze accelerates a stock's price rise as short-sellers bail out to cut their losses. *Contrarian investors try to anticipate a short squeeze and buy stocks that demonstrate a strong short interest. *Both short-sellers and contrarians are making risky moves. A wise investor has additional reasons for shorting or buying that stock.