How To Calculate The Short Ratio, Short Float, & Number of Shares Shorted | Summary and Q&A

TL;DR

This video provides a step-by-step guide on how to calculate the short ratio and short float for a company's stock.

Key Insights

• 🍰 The short ratio helps investors gauge the potential impact of short sellers on a stock's price.
• 🍰 The short float indicates what fraction of available shares have been shorted.
• 🔇 Price fluctuations are influenced by the relationship between the share float and average daily trading volume.
• 🍰 A high short ratio suggests a longer time for short sellers to cover their positions, potentially leading to a short squeeze.
• 🍰 A low short float indicates a smaller portion of available shares being shorted, which may indicate investor confidence in the stock.
• 🍰 The share float and short float have different units of measurement, with the former representing the number of shares and the latter representing a percentage.
• 🔈 Price fluctuations tend to be higher with lower share floats and lower average daily trading volumes.

Transcript

in this video we're going to talk about how to calculate the short ratio and the short flow so in this example problem stock xyz has 50 million shortage shares and the share float of 400 million shares the average daily trading volume is 10 million shares so what is the short ratio for this company the formula that we need in order to calculate the... Read More

Questions & Answers

Q: How is the short ratio calculated?

The short ratio is determined by dividing the number of shortage shares by the average daily trading volume. It represents the number of days it will take for short sellers to buy back their shares if the stock price increases.

Q: What information does the short ratio provide to investors?

The short ratio indicates how quickly short sellers can cover their positions when the stock price rises. A higher short ratio suggests it may take longer to buy back shares, potentially causing a spike in the stock price.

Q: How is the short float calculated?

The short float is calculated by dividing the number of shortage shares by the share float and multiplying it by 100 to express it as a percentage. It represents the proportion of shares available for trading that have been shorted.

Q: How does the share float impact price fluctuations?

A higher share float leads to lower price fluctuations, as the stock price is less sensitive to buying and selling pressures. Conversely, a lower share float can result in higher price fluctuations due to a smaller number of available shares.

Summary & Key Takeaways

• The short ratio is calculated by dividing the number of shortage shares by the average daily trading volume and represents the number of days it will take for short sellers to cover their positions.

• The short float is calculated by dividing the number of shortage shares by the share float and represents the percentage of shares that have been shorted.

• The share float and short float have an inverse relationship with price fluctuations, where a high share float leads to low price fluctuations and vice versa.