when creating a short position one must understand that the trader has a finite potential to earn a profit and infinite potential for losses that is because the potential for a profit is limited to the stock s distance to zero however a stock could potentially rise for years making a series of higher highs one of the most dangerous aspects of being short is the potential for a short squeeze 
a short squeeze is when a heavily shorted stock suddenly begins to increase in price as traders that are short begin to cover the stock one famous short squeeze occurred in october 2008 when the shares of volkswagen surged higher as short sellers scrambled to cover their shares during the short squeeze the stock rose from roughly 200 to 1 000 in a little over a month image by sabrina jiang investopedia 2022