why short squeezes happen
short sellers open positions on stocks that they believe will decline in price however sound their reasoning a positive news story a product announcement or an earnings beat that excites the interest of buyers can upend this the turnaround in the stock s fortunes may prove to be temporary but if it s not short sellers can face runaway losses as the expiration date on their positions approaches they generally opt to exit their positions immediately even if it means taking a substantial loss that s where the short squeeze comes in every buying transaction by a short seller sends the price higher forcing another short seller to buy the percentage of tesla stock that represented short interest in late 2019 its stock price quadrupled and short sellers lost billions 1