Editor's Note: Ask TheStreet is designed to answer questions about the market, terms, strategies and investment methods. Please email us to ask a question, but keep in mind that we cannot offer specific investment- or stock-related advice.
Where do you find the percentage of shorts in the float of a stock? - D.
I'm a big believer in the importance of investors knowing all about the short position in a stock
making a purchase. I'm going to answer D's question first, and then explain what the percentage of shorts in the float of a stock is and why it's important. I'm also going to assume that readers know what it means to take a short position in a stock, and understand what it means when I say that a certain number of shares of a stock are being "shorted." (If you need a quick refresher on shorting, or "short-selling," check out
Where You Can Find Short Interest Data
You can find data regarding the short position in a stock in a number of places. A good place to start is
, which provides short interest data for stocks listed on the
, as well as the
New York Stock Exchange
(NYSE) and the American Stock Exchange (Amex). The site is particularly helpful because it provides short interest data for each of the past 12 months, so you can see if the short position in a stock has been increasing or decreasing over the past year. However, Nasdaq.com only provides the number of shares shorted each month, as opposed to the "percentage of shorts in the float of a stock" that D. is looking for.
Where You Can Find the 'Percentage of Shorts in the Float of a Stock'
The easiest place to find this information is by putting a ticker into
and clicking on the "Key Statistics" link. Scroll down a bit and look at the right column under "Share Statistics" -- here you'll find the most recent data for:
- Number of shares shorted
- Short ratio
- Short position as a percentage of the float
- Number of shares shorted during the previous month
number of shares shorted
should be the same as the information from Nasdaq.com.
, also referred to as "days to cover," is an expression of how large the total short position is in a stock relative to the average daily volume.
short position as a percentage of the float
is the information that D. is looking for. This percentage expresses the number of shares shorted divided by the "float" (
Float Defined), or number of total shares that are free to be traded by the investing public.
If the percentage of shorts in a stock were to hit 100% that would mean that every single available share of a stock had been sold and would have to be bought back before being available to be sold again. (Note: In reality, 100% would be effectively impossible to see, but it is useful to explain this concept.)
Anyone who takes a short position in a stock is entering an interesting situation: In order to exit the position, he or she has to "cover" or buy back the shares that are being shorted. So if a stock has a very high percentage of its shares being shorted, it means that there are more investors who need to buy shares at some point, whether the stock goes up or down.
This is interesting because those who have already taken a short position need those who own the stock (or are "long") to sell their shares and push the price lower.
When Good News Is Actually Bad News
If a company comes out with positive news and more investors want to buy a stock -- pushing the price higher -- those with short positions can rack up losses quickly. For this reason, stocks with high short ratios are more prone to a big upward move, called a "short squeeze," in which what would have been a smaller rise in the share price is exacerbated by short covering, as those who are "short a stock" panic and buy back shares to cut their losses. (In November 2006, I wrote about a short squeeze in
A Tight Fit for Crocs' Shorts.)
Short Percentages in 'Safer' Stocks
Large-cap blue-chip stocks tend to have an extremely low short position relative to their float. This is due to a number of factors, including the sheer amount of stock that is being held my mutual funds and other institutions, as well as the simple fact that anyone looking for a stock that could go down significantly will generally not be interested in these stocks, which are safer and significantly correlated to the broad economy.
Think of it this way: If something were to happen to push
down 10% or more, there are much more risky stocks out there that would go down a lot more on that day. Here are some well-known blue chips and the recent short position as a percentage of the float:
Short Percentages in 'Riskier' Stocks
You'll find higher short percentages in riskier stocks. There are a number of reasons for an investor or trader to take a big short position in a stock. Some may think a stock has gone up too much and is set for a fall, while others may see a struggling company with a falling stock and are willing to bet that it will go down further. Some simply believe that the valuation for a stock is too high, while some are predicting an earnings shortfall in the near future.
There's no "typical" percentage for investors to compare a stock to, but the list below shows a number of companies, some good and some bad, and the recent short position as a percentage of the float:
In keeping with TSC's editorial policy, Larsen Kusick doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Kusick is a research associate at TheStreet.com, where he works closely with Jim Cramer and works on TheStreet.com Stocks Under $10. Prior to joining TheStreet.com, he worked in options trading and management consulting. He appreciates your feedback;
to send him an email.
Interested in more writings from Larsen Kusick? Check out