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Short squeeze

Definition:

When a lack of supply tends to force prices upward. In particular, when prices of a stock or commodity futures contracts start to move up sharply and many traders with short positions are forced to buy stocks or commodities in order to cover their positions and prevent (limit) losses. This sudden surge of buying leads to even higher prices, further aggravating the losses of short sellers who have not covered their positions.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Residual method

A method of allocating the purchase price for the acquisition of another firm among the acquired assets.

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