A short squeeze occurs when investors with heavy short positions are forced to cover, or buy back, their shorts in the event of positive reports that result in a share appreciation – short sellers are essentially being squeezed out of their short positions, typically at a loss. Consequently, the additional buying momentum from short sellers covering their options contracts help bolster share prices even further.
Investors can identify securities at risk of a short squeeze by monitoring short interest -the total number of shares sold short as a percentage of total shares outstanding – and the short-interest ratio – the total number of shares sold short divided by average daily volume.
For the fund’s secondary income objective, SQZZ can lend out securities from the fund’s underlying portfolio to short sellers and other market participants for a fee. [Making Sense of ETF Securities Lending]
For more information on new fund products, visit our new ETFs category.