– what is short squeeze in stocks
In: Economics
When you short a stock, you are basically borrowing some stocks now and selling them with the promise to return those stocks later. When the short is due, you have to buy back the stock at whatever the price is and return it to whoever loaned it to you.
A short squeeze happens when too many people are shorting a stock. The huge influx of people buying the stock as their shorts come due causes the price to rapidly inflate, and all of a sudden some of the people who shorted the stock now have to spend significantly more money buying them back than they sold the original shares for.
This is what happened with GameStop in 2021. That incident even has a Wikipedia page about it! https://en.wikipedia.org/wiki/GameStop_short_squeeze
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