what the short interest ratio can tell you
the ratio tells an investor if the number of shares short is high or low versus the stock s average trading volume the ratio can rise or fall based on the number of shares short however it can also increase or decrease as volume levels change example of how to use the short interest ratiothe tesla chart below shows the short interest ratio the number of shares short and the daily average trading volume in the example one can see that a rising short interest ratio does not always correspond to rising short interest in july and august 2016 the short interest ratio rose despite the number of shares short falling that was because the daily average volume fell sharply during that time additionally the short interest was steadily declining in 2018 despite short interest being elevated because the average daily volume was steadily rising on the stock the difference between a short interest ratio and short interestit is essential to remember that the short interest ratio and short interest are not the same short interest measures the total number of shares that have been sold short in the market the short interest ratio is a formula used to measure how many days it would take for all the shares short in the marketplace to be covered limitations of using the short interest ratiothe short interest ratio has several flaws the first being that it is not updated regularly short interest is reported every two weeks and is usually as of the 15th and the last day of the month it takes several days before the information is published and by that time the number of shares short in the market may have already changed additionally one must consider how news or events may impact trading volumes and make the ratio expand or contract the ratio should always be compared with the actual short interest and trading volumes to get the full picture 