Is SoundHound Stock (SOUN) About to Short Squeeze? | 7investing Live

Heather, this is a neat dynamic.

A short squeeze is an indication that there are a lot of people betting against a certain stock.

And when that happens, if a stock outperforms expectations or there's some kind of catalyst that actually is working in this company's favor, it tends to outperform all of that negativity.

A lot of the glass half empty investors will have to cover their short positions and it can lead to a stock price going up very, very quickly.

We refer to that as a squeeze because those that are betting against the stock, when the stock price starts rising very quickly, they have to cover a short position in order to get out rapidly to avoid future losses.

So let's define a few terms and set the ground rules of what we're discussing here.

There's two important metrics that I wanted to find right up front before we start getting into the nitty gritty and into the trenches.

The first is short interest.

And the second is days to cover.

Heather, if possible.

Oh, perfect.

I've read my mind.

Here we go.

What does a short interest mean and why does it matter to traders? Thank you to Investopedia for providing these great kind of overviews of these investing topics.

But basically, a short interest is if you take the total number of shares that a company has and you take the total number of shares that are out there, there's a certain portion of those that are being sold short.

What that means is there are certain traders out there who are borrowing the shares, selling them today, and they're wanting to buy them back in the future.

This is a short position.

You're hoping you can buy them back at a lower price than the market is selling them for here today.

Because those shares are taken out of the market, they're considered shares sold short.

And if we divide that number of short shares by the total number of outstanding shares in the free float, that's what we call a short interest.

Free float, by the way, the number of publicly available shares that are out there and are available for trading, right? Some are locked up by insiders.

Some of them are just not available when you count the total number of shares.

But if you look at kind of the total number of shares that are available to be publicly traded, And then from that denominator, you look at the number of short shares as the numerator.

That's what a short interest is.

Right.

Heather, this is a neat dynamic.

A short squeeze is an indication that there are a lot of people betting against a certain stock.

And when that happens, if a stock outperforms expectations or there's some kind of catalyst that actually is working in this company's favor, it tends to outperform all of that negativity.

A lot of the glass half empty investors will have to cover their short positions and it can lead to a stock price going up very, very quickly.

We refer to that as a squeeze because those that are betting against the stock, when the stock price starts rising very quickly, they have to cover a short position in order to get out rapidly to avoid future losses.

So let's define a few terms and set the ground rules of what we're discussing here.

There's two important metrics that I wanted to find right up front before we start getting into the nitty gritty and into the trenches.

The first is short interest.

And the second is days to cover.

Heather, if possible.

Oh, perfect.

I've read my mind.

Here we go.

What does a short interest mean and why does it matter to traders? Thank you to Investopedia for providing these great kind of overviews of these investing topics.

But basically, a short interest is if you take the total number of shares that a company has and you take the total number of shares that are out there, there's a certain portion of those that are being sold short.

What that means is there are certain traders out there who are borrowing the shares, selling them today, and they're wanting to buy them back in the future.

This is a short position.

You're hoping you can buy them back at a lower price than the market is selling them for here today.

Because those shares are taken out of the market, they're considered shares sold short.

And if we divide that number of short shares by the total number of outstanding shares in the free float, that's what we call a short interest.

Free float, by the way, the number of publicly available shares that are out there and are available for trading, right? Some are locked up by insiders.

Some of them are just not available when you count the total number of shares.

But if you look at kind of the total number of shares that are available to be publicly traded, And then from that denominator, you look at the number of short shares as the numerator.

That's what a short interest is.

Right.