Aggressive Stock-Picking, Week 5: How to Squeeze the Shorts

Editor's note: The Aggressive Stock-Picking Training Program is a series of six weekly assignments. To start with Week 1, click here. Each assignment is based on one of James Altucher's strategies in his book, Trade Like a Hedge Fund. To get a copy of the book, click here.

This assignment was written by Stockpickr member Ira Krakow.

Many professional traders make their money shorting stocks, betting they will go down. Shorting a stock involves borrowing the stock from a broker, creating a short position . The trader can only recognize a profit if, after the stock has decreased in price, the position is closed by buying the stock on the open market (see "Ask TheStreet: Short Squeeze"). This is called short-covering.

Another statistic to measure the potential intensity of a "short squeeze" (a rising shorted stock forcing buyers to rush in and buy the stock) is days to cover -- the number of days a short-sellers needs to buy back shares to close their positions. The greater the number of days to cover, the more intense the short squeeze can be. ...