Short Interest Theory

Short Interest Theory Short interest is the total number of shares sold short, but not yet repurchased to close the short position. This theory postulates that a large short interest in a particular share presages a rise in the market price, because although short selling reflects a beliefs that the prices will fall, the fact that the short positions will have to be eventually covered, will cause the prices to rise. The selling, in short, will have to be covered by buying, and therefore a large short interest is an indication that the market is about to rise.

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