RE: Can anyone tell me?21 Feb 2025 18:11
NMH21
"Is a short reducing their holding a positive sign for the SP"?
Well! People or institutions who short sell shares they do not have with expectation of buying them back at a lower price. They gamble on the idea as the price is falling, they can profit by buying back cheaper. Basically they can also borrow shares then sell them. As they think the price will fall. When it does they buy back the shares and then give back the shares they borrow. Many institutions lend out their share for people to short for a price.
The fact is for a shorter to close, he has to buy shares. It basically means the shorter no longer believe the share price is going to fall. So they want out. They close their position. (buy buying back what they sold) The funny thing is though if other people see the share price is going to rise it can create what is called a bear squeeze. (when there are few shares to buy as other have also bought. It is where the price moves so fast it becomes hard to buy back as there are less and less shares, forcing the price higher. In these circumstances share prices can rise very quickly. These people do not want to be caught out in a squeeze so many will close before they are squeezed. ( and forced to closed at higher and higher prices) Shorters can lose a lot of money when this happens. They can lose more than 100% which is the maximum you can lose by holding shares.
So yes it is a good thing that a shorter closes his position. A good sign the share price will rise. Good luck. Your friend could do well to buy. Not all shorts are closed yet but these institutions do take the lead from others and may also close forcing the share price higher. Lets hope for a bear squeeze. Good luck
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