Has anyone studied the ideal short interest percent to short at?

[katty888]

I've noticed that if the short interest is too high -- like above ~20% -- the price will go up (short squeeze lol). However, the price will drop once a good percentage of shorts are squeezed out, like once interest goes down to 12%.

I've also noticed that the lower the float of a stock, the greater the upward impact of a short squeeze, even at the same percentage relative to a stock with higher float. But how does this work when we're talking about percentages? Or is this a spurious observation?

 

[vanzandt]

I've noticed that if the short interest is too high -- like above ~20% -- the price will go up (short squeeze lol). However, the price will drop once a good percentage of shorts are squeezed out, like once interest goes down to 12%.

I've also noticed that the lower the float of a stock, the greater the upward impact of a short squeeze, even at the same percentage relative to a stock with higher float. But how does this work when we're talking about percentages? Or is this a spurious observation?

Its tough to say. I've looked at it for years. Having accurate data is tough since the report only comes out 2X/month.

To answer your second question, your observations are correct. The reason being, if there is a high short interest the market is telegraphing that a company for whatever reason is seriously overvalued. If it has a very high float, obviously there's more shares in the hands of more people. As the price starts going up on a squeeze, I think a lot of those folks just sell into the strength just to get out. On a low float stock where there isn't such a diverse range of ownership and and only a (relative) few hold the most of the shares... they can hold back and let it squeeze away, get it where they want it, buy a ton of puts.... and then start dumping. They make money going up, they make money going down. You can ride their coat-tails when you see it happening. It takes experience to spot it though. In a way.

 

[vanzandt]

Its actually a very astute question on your part.

A recent example of a high float stock undergoing somewhat of a battle would be SNAP. Last month it had an incredible move up on earnings. Its a good stock, I like it for the long haul, but anytime there's a big move like that, the shorts pile on. Earlier this month, it got near $42 again, a level it had rejected a few times. I considered shorting it, but I didn't because I do like the stock. But in my consideration of shorting it, I knew that even if I was wrong, any squeeze would be short lived as it was trading in excess of 50MM shares/day for at least two weeks, so I was confident any short position I opened wouldn't be devastating. It did in fact squeeze, to near $45. Not too bad. And its been a steady decliner since.

Now on the flip-side of that, go back and find our thread about Kodak lol.
I saw that one coming from a mile away. And it went from $8 to $60+ in about two days.

Here ya go. Like I said I saw this one coming from a mile away.
https://www.elitetrader.com/et/thre...le-opportunity-right-now.348122/#post-5166745
That thread is the epitome of what you're saying.