Glossary
Average Daily Volume
The average number of shares traded in a security or market over a specific period, typically calculated on a daily basis.
Borrow Rate
The interest rate charged by brokers or other lending institutions for borrowing shares to support short selling.
Breakout
A price movement in which a security moves above a significant resistance level or below a significant support level, potentially signaling a trend reversal or continuation.
Buy-to-Cover
The process of closing a short position by purchasing the same security that was initially borrowed and sold short.
Candlestick Chart
A popular charting technique used in technical analysis that represents price movements of a security with rectangular blocks called "candlesticks."
Circuit Breaker
A regulatory mechanism that halts trading in a particular stock or the broader market temporarily to manage excessive volatility or sharp price declines.
Consolidation
A period in which a security's price moves within a relatively narrow range after a significant price advance or decline.
Covering Ratio
The percentage of short interest that would be covered by the average daily trading volume of a stock, providing an estimate of the time required to buy back all the shorted shares.
Day Trading
The practice of buying and selling financial instruments within the same trading day, aiming to profit from short-term price movements.
Float Rotation
The turnover or rate at which shares of a company's float are being bought and sold, indicating the level of market activity and investor interest.
Float
The total number of shares available for trading in the open market, excluding closely held shares owned by insiders, institutional investors, or restricted stock.
Gap
A price level at which a security opens significantly higher or lower than its previous closing price, creating a visible "gap" on the price chart.
Hard-to-Borrow
Refers to securities that are difficult or costly to borrow due to limited availability or high demand for short selling.
Limit Order
An order to buy or sell a security at a specified price or better, providing a maximum buying price or minimum selling price.
Liquidity
The degree to which a financial instrument or market can be bought or sold without causing significant price movements.
Long Squeeze
The opposite of a short squeeze, where a heavily owned long position experiences a rapid decline in price, leading long investors to sell their positions, further exacerbating the downward price movement.
Margin Account
A brokerage account that allows investors to borrow funds from the broker to trade securities, including engaging in short selling.
Margin Call
A demand from a broker or lender for an investor to deposit additional funds or securities to meet the required margin (collateral) on a short position due to adverse price movement.
Market Maker
A brokerage firm or institution that provides liquidity to the market by buying and selling securities, including facilitating short selling.
Market Order
An order to buy or sell a security at the current market price, executing the trade immediately.
Market Sentiment
The overall attitude or consensus of market participants toward the direction of prices in a particular market or security.
Naked Short Selling
A controversial practice where investors sell shares short without first borrowing the securities or ensuring their availability, potentially leading to market manipulation.
Overbought
A condition where the price of a security has risen sharply and is considered to be trading at a level above its intrinsic value, potentially indicating a selling opportunity.
Oversold
A condition where the price of a security has declined sharply and is considered to be trading at a level below its intrinsic value, potentially indicating a buying opportunity.
Put Option
A financial derivative that gives the holder the right, but not the obligation, to sell an underlying security at a specified price within a specific period.
Reg SHO
Regulation SHO, a set of rules imposed by the U.S. Securities and Exchange Commission (SEC) to govern short selling and prevent abusive practices.
Resistance Level
A price level at which selling pressure is historically strong enough to prevent or limit further price increases.
Short Covering
The process of closing out a short position by buying back the shares that were initially borrowed and sold short.
Short Exempt
Certain institutional investors, market makers, and broker-dealers are exempt from certain short sale restrictions imposed during volatile market conditions.
Short Interest Ratio
The ratio of the total short interest in a stock to its average daily trading volume, often used as an indicator of investor sentiment.
Short Interest Ratio
The ratio of the total short interest in a stock to the stock's total outstanding shares, providing an estimate of the number of days it would take for short sellers to cover their positions.
Short Interest
The total number of shares of a particular security that have been sold short by investors.
Short Ratio
Also known as the "days to cover ratio," it represents the number of days it would take for short sellers to cover their positions based on the average daily trading volume of a stock.
Short Selling
The practice of selling borrowed securities with the expectation of buying them back at a lower price in the future, aiming to profit from a decline in the security's value.
Short Squeeze
A situation where a heavily shorted stock experiences a rapid increase in price, forcing short sellers to cover their positions by buying back shares, further driving up the price.
Support Level
A price level at which buying pressure is historically strong enough to prevent or limit further price decreases.
Technical Analysis
A method of analyzing securities based on historical price and volume data, focusing on identifying patterns and trends to predict future price movements.
Threshold List
A list of securities published by exchanges that have substantial levels of failed trades, triggering additional regulations and requirements for short sellers.
Volume Profile
A graphical representation of trading activity over a specified time period, showing the volume traded at various price levels.
Volume
The number of shares or contracts traded in a security or market during a given period.