A look at the most shorted stocks can be helpful to investors, whether they are betting in favor of the stock rising or trying to profit from its decline.
That’s because when short interest is high, there’s also a high chance of volatility. Obviously if a lot of bearish investors are piling into short positions, that is a measure of negative sentiment … but if a stock with high short interest just manages to post a glimmer of hope, a “short squeeze” can prompt a spectacular rally as short sellers rush to cover their positions and buy back the stock.
Depending on which side of the trade you’re on, you can either make a big profit or feel a lot of pain in a stock that has high short interest.
But one thing that’s universally true is that if you have any stake whatsoever in these heavily shorted S&P 500 stocks, either through a direct investment or through an index fund, you should be aware of what is going on and the potential for big volatility in these companies.
The following is a list of the most heavily shorted stocks in the S&P 500, as measured by short interest (that is, shares held short as a percentage of total shares available for trading) as of mid-July: