What Is NASDAQ Short Interest?

NASDAQ short interest is a financial metric that is used by many investors as a way to tell if the market is going to move up or down in the near future. This is a statistic that is used to determine the number of shares that are involved in a short sale and will be settled soon. 

Short Selling

When an individual uses a short sale, she is betting on the price of securities decreasing in value. When this transaction is set up, there is a settlement date in the future on which she will buy the securities and complete the transaction. 

Short Interest

The short interest is the total number of shares of a particular company that are sold short by the market and have not yet been settled as of the settlement date. 

How Investors Use This

Owners of the stock know that this will mean that a certain number of those shares will have to be bought that day, which can bump up the price. They use a metric called "days to cover" in order to determine the sentiment of the market. They will take the short interest for the month and divide it by the average daily volume. This gives them a ratio to use to help with trading decisions. 

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