The short squeeze has surprised markets on many occasions. Learn more about what it is, its causes and the effects on traders.
A good example is the Volkswagen AG short squeeze of 2008 whereby Porsche purchased large volumes of Volkswagen shares driving up prices roughly fourfold ultimately causing short sellers to lose billions in the process. The chart below shows the relative price increase between Volkswagen AG and the German
Investors identify what they believe to be an overvalued share and take short positions on the particular share – in expectation of a price drop whereby they may buy back the shares at a lower price .Short sellers then realize that the position is not profitable and try to buy back shares at a minimal loss, thus causing further price escalation.
1. Stop loss: A stop loss is a level whereby a position will be closed should price hit a certain aforementioned level. For example, if a share is shorted at $10 a stop loss may be placed at $15 which means if the share price reaches $15 a purchase will ensue and the position will be closed at a loss of $5.
Note: Traders should be aware of risks to stop loss orders. They are vulnerable to short-term fluctuations in price that could activate the stop price. All stop orders will be filled, though there is no guarantee of the price. What’s more, if your level is reached, your stop order cannot be filled at a better price than your stop, only the same price or worse, and this could impact your original risk-reward ratio.
Malaysia Latest News, Malaysia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
'Santa Claus squeeze' coming to gift crypto gains this Christmas: analystRecent macroeconomic shifts hint at a potential pre-Christmas crypto rally, according to Matrixport analyst Markus Thielen.
Read more »
Inspired by online dating, AI tool for adoption matchmaking falls short for vulnerable foster kidsToday's Video Headlines: 11/06/23
Read more »
Studio Ghibli's Nausicaa Tackles Live-Action Film in Viral Short: WatchStudio Ghibli's Nausicaa of the Valley of the Wind just got a stunning live-action tribute with one Brazilian fan's short film
Read more »
SAG-AFTRA says studios' latest offer falls short of union's AI demandsHollywood actors aren’t totally on board with the latest labor agreement pitch.
Read more »
SAG-AFTRA says studios' latest offer falls short of union's AI demandsHollywood actors aren’t totally on board with the latest labor agreement pitch.
Read more »
Inspired by online dating, AI tool for adoption matchmaking falls short for vulnerable foster kidsTynin Fries joined The Denver Post in 2018 as an intern. Then, she joined the team as a Digital Strategist and was promoted to Deputy Director of Audience in 2022. She is a proud ASU Cronkite alumna (godevs)! In between producing news and writing stories, Tynin is out exploring all that Colorado has to offer.
Read more »