Large short positions will likely need to be closed before January, when he expects a rally in small-cap, value and cyclical stocks. Short squeeze definition: a sharp increase in the price of an asset that forces traders involved in short selling.

Still, Kolanovic said 'there is aggressive shorting, likely in a hope of declines in retail equity position and cryptocurrency holdings – while in fact both of these markets and retail investors have shown resilience in the past weeks.' A gamma squeeze can happen when there’s widespread buying activity of short-dated call options for a particular stock. Overall, the situation from a technical or fundamental perspective doesn't resemble the massive stock market rout seen in the fourth quarter of 2018, he added. A short squeeze can end up driving stock prices up, sometimes significantly, though this upward shift in pricing may not be sustainable for the long term. Key Takeaways The term short squeeze refers to the pressure short sellers face to cover their positions following a sharp price. He pointed out volatility-targeting and risk-parity funds are adding exposure, with a strong value-growth rotation also underway. Indeed, Volkswagen became the world’s largest company by market value on October 28albeit, very briefly. But the conditions needed for a successful short-selling effort don't exist, meaning 'this market episode may end up in a short squeeze and cyclical rally into year-end and January,' Kolanovic predicted. Panic among short sellers set in, and the supply-demand imbalance triggered a monumental short squeeze that drove its share price up from 210.85 to more than 1,000 in less than two days.

Short squeeze meaning