What is the difference between a short squeeze and short covering? By Investopedia A: "Short covering" and "short squeeze" are different terms to describe a situation involving short positions. A short squeeze is a situation in which a security's price increases significantly, causing short sellers to close their short positions. Conversely, short covering involves buying back a security to close out an open short position.
A short squeeze involves a rush of buying activity among short sellers due to an increase in the price of a security. The increase in the security price causes short sellers to buy it back to close out their short positions and book their losses. This market activity causes a further increase in the security's price, which forces more short sellers to cover their short positions. Generally, securities with a high short interest experience a short squeeze.
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