A short squeeze occurs when investors with large short positions are forced to cover, or buy back, their shorts in the event of a sudden share appreciation- short sellers are essentially being squeezed out of their sort position, typically at a loss.

Related: The First Short Squeeze ETF Strategy Hits the Market

Consequently, the additional buying momentum from short sellers covering their shares helps to bolster the share price even further.

“Heavily shorted stocks already have a tremendous amount of negative news. As long as the fundamentals remain positive, the short seller will have to contend with positive catalysts on the horizon which could fuel potential buying,” Lamensdorf explained.

During the summer, three significant changes occurred in the SQZZ ETF.  First, the SQZZ management fee was lowered from 1.55% to 1.25%. Second, legal interpretations from the SEC on securities now allows the fund to lend up to 50% of the underlying securities for interest. Only 33% was previously permitted.  This change could allow for greater income generation. Third, the annual dividend payout has been changed from an annual payment to a quarterly payment.

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