Short interest ratio, known also as days to cover, is a metric used to evaluate the levels of bearish pressure affecting a stock. The greater the value, the heavier is the pressure. In order to calculate the short interest ratio, the average daily trading volume of the stock is divided by the number of shares that are shorted. Simply defined, by comparing a stock's short interest to its average daily trading volume, the ratio can instantly inform an investor if a stock is highly shorted or not. At some point stocks that are heavily shorted will start attracting buyers. If the buying pressure keeps growing, it will trigger what's called a short squeeze, a situation where short sellers are trying to get out of their short position as quickly as possible. A short squeeze will generally create a bullish wave that will lift the price significantly.
This week we are going in with the Vertical option strategy on QQQ (Nasdaq ETF). The reason for choosing this option trade is that we are learning to choose a direction and how to trade that choice. QQQ has been on a crash course recently to the downside. As contrarians, we will bet the stock stops and heads up from here over the next 45 days and use a Short Put Vertical to trade that assumption. Watch this video to get the trade details. Hope you enjoy it! Kal Trading Risk Disclaimer All the information shared is provided for educational purposes only. Any trades placed upon reliance of SharperTrades, LLC are taken at your own risk for your own account. Past performance is no guarantee. While there is great potential for reward trading stocks, cryptos, commodities, options, forex and other trading securities, there is also substantial risk of loss. All trading operations involve high risks of losing your entire investment. You must therefore decide your own suitability