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Meme stocks such as GameStop Corp . (NYSE: NYSE:GME) and AMC Entertainment Holdings Inc (NYSE: AMC) showed massive strength this week as retail investors rotated their way into the same stocks that saw the historical short squeeze in 2021.
The threshold for a potential short squeeze is when the high short interest of a stock is 20% or above. Meaning if 20% or more of the outstanding shares of a stock are owned by short-sellers, the underlying stock can be on-ramped to a short squeeze.
See Also: Most Shorted Stocks
Short-sellers make profits when the price of the asset goes down, borrowing shares from their brokers in hopes to return the shares at a lower price. A short squeeze can occur when the price of an asset goes up, forcing the short-sellers to cover their positions, leading to more losses because buying shares increases the price of the stock.
A great example of this is the aforementioned short squeeze of GameStop. When it was revealed to retail investors 140% of the public float was sold short to hedge funds, it led to billions in losses.
According to Benzinga Pro, short-sellers own more than 20% of these stocks:
(Percentages are the shares in the float sold short.)
Read at Benzinga
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