SYNT: Insiders Vs. Shorts

The most recent short interest data was recently released for the 11/15/2016 settlement date, and Syntel Inc. ( SYNT) is one of the most shorted stocks of the Russell 3000, based on 6.43 "days to cover" versus the median component at 4.41. There are a number of ways to look at short data, but one metric that we find particularly useful is the "days to cover" because it considers both the total shares short and the average daily volume of shares typically traded. The number of shares short is then divided by the average daily volume, to express the total number of trading days it would take to close out all of the open short positions if every share traded represented a short position being closed.

Ten Bargains You Can Buy Cheaper Than The Insiders Did »

In the case of Syntel Inc. ( SYNT), the total short interest at the 11/15/2016 settlement date was 4,570,399 shares, which compares to the average daily trading volume of just 711,166 shares, for a "days to cover" ratio of 6.43.

When short sellers eventually cover their positions, by definition there must be buying activity because a share that is currently sold short must be purchased to be covered. At the present levels of short interest, if from this point forward every single SYNT share traded represented a short position being closed, then at the average daily volume of 711,166 shares it would only be during the 7th trading day that every short position would be closed.

So it would stand to reason that should some unexpectedly good news come out, and short sellers did not have 7 days of patience but instead wanted to cover their short positions very suddenly, that situation could result in sending the stock higher until the higher price produces enough sellers to generate the necessary volume to close out those positions quickly.

If you liked this article you might like

5 Earnings Plays That Could Squeeze the Shorts

5 Stocks Insiders Love Right Now

Banks, Oils Should Be Trump Winners in 2017

Analysts' Actions -- Cognizant, Dick's, Seattle Genetics, VF Corp. and More

Here's Why Syntel (SYNT) Stock Is Jumping Today