Investor Glossary-short interest ratioInvestor Glossary-short interest ratioInvestor Glossary-short interest ratioInvestor Glossary-short interest ratioInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Short Interest Ratio

The HTML to link to this page
 

Short interest ratio is a metric that reveals positive or negative sentiment about a stock. To calculate the short interest ratio, divide the total number of shares in a company investors have sold short by the stock's average daily trading volume. For example, if a company with 100 shares trading on the open market has 10 shares sold short, and 5 of the company's shares are traded each day, then the short interest ratio is 2. Short interest ratio is also referred to as "days to cover" because it reveals how many days of trading short sellers would need to buy back shares and cover their short position. Knowledgeable investors consider a high short interest ratio to be a bullish signal and a low short interest ratio to be a bearish signal. A high short interest ratio is considered bullish because in theory it indicates that market sentiment about a stock has become excessively negative, presaging a possible rally. However, some investors consider using the short interest ratio to make trading decisions problematic because short interest is published only once per month, rendering the data stale after a few days.



Rate this short interest ratio definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: risk management, annual return, FTSE, dividends payable, implied volatility, Zero Cost Collar, inflation, open position, average price per share, 1031 exchange, option premium, quality assurance, current ratio, FICO score, ex-dividend date, liquidity ratio, labor relations, diluted share, margin rate, required rate of return, irrevocable trust, command economy, minority interest, EBITDA, cancelled check, APR, LIBOR, phantom income, deferred revenue, ex-dividend, real GDP, 401a, 1035 exchange, per diem, 144a, Key Rate Duration, stock split, debt service coverage, deferred tax, in escrow, limit order, VIX, wholly-owned subsidiary, covered put, retained earnings, balance sheet, reverse mortgage, class C shares, stock market close


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use