Short Ratio

Discussion in 'Trading' started by comp652, Jan 25, 2007.

  1. comp652


    When I look at Yahoo Keystatistics for GOOG I see that they have a Short Ratio of 1.2

    What does this number tell me?
    Is 1.2 considered a lot? - Little?
    I see other stocks that have a short ratio of 5. Is that a lot?
    How do I read into this number (Short Ratio)? What would be considerd a lot? I tried Investopedia but didn't find anything.


  2. it is unclear what that ratio is, but you can also look at

    Short % of Float (as of 09-Jan-07)3: 1.90%

    (which is clearly defined).
  3. From, "Short-Interest Ratio
    The short-interest ratio is the number of shares sold short (short interest) divided by average daily volume. This is often called the "days-to-cover ratio" because it tells, given the stock's average trading volume, how many days it will take short sellers to cover their positions if positive news about the company lifts the price.

    Again, let's assume Microsoft has a short interest of 75 million shares, while the average daily volume of shares traded is 70 million. Doing a quick and easy calculation (75,000,000/70,000,000) we find that it would take 1.07 days for all of the short sellers to cover their positions. The higher the ratio, the longer it will take to buy back the borrowed shares - an important factor upon which traders or investors decide whether to take a short position. Typically, if the days to cover stretch past eight or more days, covering a short position could prove difficult.

    Thus, in the case of google:
    yahoo shows Average Volume (3 month)3: 5,650,810
    Shares Short (as of 09-Jan-07)3: 5.81M

    short ratio=shares short/avg vol(3mo)

    however, using 10 day vol it is

    not sure if they are rounding to get 1.1,
    or using slightly different daily vol from alt source. Short interest can also be interpreted as days to cover; i.e., it would take approximately 1.03 days for all the short positions to cover if volume traded at the average daily liquidity (approximate, because non-covering buyers also add demand). Even less than that, if vol was say closer to the daily of last 10 days.

    How to interpret this? If the mm was looking at the figure and wanted to squeeze shorts, the higher the number, would be better. So if the typical days to cover was about 2 days, and the short interest ratio was say 5, they could ratchet it up on a squeeze and a lot of shorts would be forced to cover quickly as the supply would be short term limited. In the case of google, the
    small short ratio seems about average and something that shouldn't cause concern for a squeeze.

    Look at ffiv has a short ratio of 2.2, and lately it has been rising on lowered estimates and guidance. Methinks some shorts are getting the squeeze there.

    Or kkd has a short interest ratio of 22.8!
    @8Xbook and -40% equity, and just look how that stock has been taking off in the past year.

    You could take a distribution of short interest ratio of nas 100 stocks, to gauge a better feeling for the average.
    Consider the outlying tail ends to be indicitive of heavy short interest and potential for squeeze play.
  4. piezoe


    I am very very old, but if my tired brain can recall correctly, the short ratio is the number of days at average volume that would be required to cover all the short positions. A short ratio of 5 is large, a short ratio of 1.9 is small. The result of a bear trap should be in proportion to the short ratio. Hence when the short ratio of a stock is large any good news (or skullduggery) that sends the stock higher can smoke out the bears and cause a covering rally. I don't trade on this sort of thing, but there are people who make their living out of snooping out stocks that have unusually high short ratios and recommending to others that they buy them in anticipation of a short rally. It's never been clear to me whether the folks who recommend this sort of thing actually buy their own recommendations, or whether they just make their living from charging others for their advice. see for example
  5. rcj


    The problem with the short interest data is that it's
    published only once per month. For many stks the data becomes stale after a couple of days - practically useless.
  6. Jackson


    Hi - Where can I find the most current, most accurate and FREE information (or at least very inexpensive) on the short interest in NYSE listed stocks?


  7. rcj


    The data only comes out to public once a month!! You are not
    buying any advantage here. Just getting fancy sprdsheet.
  8. Jackson


    Thanks - I will definitely look into it. But paying for the information if it is not any more current seems like a waste of money. Is it any better than Yahoo Finance?

    If anyone has any other suggestions i would appreciate it.

  9. ugz


    what, if any, value has anyone identified between a high short interest ratio/days to cover and a short term (1-3 month) move?
  10. Short interest has become pretty meaningless for directional purposes, since the days of derivative products. Not many "naked shorts" in the industry, mostly those with conversions, reverse conversions in this case. Collecting interest on money generated from short stock sales. Much better/easier now with no uptick rule.


    #10     Mar 27, 2008