The stock market can be a risky game
The stock market can be a risky game, and short selling is one of the most high-risk strategies one can employ. While short selling can yield big gains, it comes with its own unique set of risks, including the potential for unexpected and substantial losses. With a closer look at these risky stocks, it’s clear that the potential for loss is high, making short selling a game of chance that only the bravest of investors should attempt.
The stock market has gone up lately, which is good for people who own stocks. But if someone borrows stocks and sells them hoping to buy them back at a lower price, they could lose a lot of money if the price goes up instead. This is called short selling.
18 stocks that have a high risk of short squeezes.
S3 Partners, a company that tracks short selling, identified 18 stocks that have a high risk of short squeezes. A short squeeze happens when short sellers have to buy back the stocks they borrowed at a higher price because the price went up unexpectedly. This can cause the price to go even higher, making short sellers lose more money.
The 18 stocks with a high risk of short squeezes are: Coinbase (COIN), CarMax (KMX), GameStop (GME), MicroStrategy (MSTR), AMC Entertainment (AMC), TG Therapeutics (TGTX), Upstart Holdings (UPST), Carvana (CVNA), Marathon Digital (MARA), Riot Blockchain (RIOT), Rocket Companies (RKT), Novavax (NVAX), EVgo (EVGO), Arcutis Biotherapeutics (ARQT), Desktop Metal (DM), Tellurian (TELL), Sana Biotechnology (SANA) and UWM (UWMC).
One of the riskiest stocks for short sellers is Coinbase, with almost 25% of its shares sold short. Riot Blockchain has gone up a lot in the past month, which is bad for short sellers who borrowed its shares.
Short selling is risky because it can be expensive to borrow stocks, and if the price goes up, short sellers have to pay even more. A high squeeze score doesn’t mean a stock will definitely go up, but it’s a warning sign for short sellers.
