Short Squeeze

A short squeeze can occur when there is a lack of supply and an excess of demand for stock due to short-sellers covering their positions. This increase in volume may cause an upsurge in demand for the stock, which in turn causes the price to rise further. This new demand may trigger margin calls, which would force short sellers to buy more of the stock to cover their margin call, also increasing demand and pushing up the price of the stock even more. Short squeezes are more likely to occur when a large percentage of a stock’s float is short and owners of the stock do not want to sell because the stock is rising price.

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