Glossary

A short squeeze is a rapid increase in the price of a stock, primarily caused by a large number of short sellers being forced to close their positions.

When the stock price rises, short sellers who bet against the stock must buy shares to cover their positions, resulting in increased demand and further upward pressure on the price.

Example: In January 2021, GameStop (GME) experienced a massive short squeeze. Retail investors on the WallStreetBets subreddit coordinated to buy shares and drive up the price, forcing short sellers to buy shares at much higher prices to cover their positions.

Fun fact: The GameStop short squeeze led to a significant increase in the use of social media platforms, like Reddit and Twitter, as a means for retail investors to share trading ideas and influence the stock market. 💬