Top 5 Most Shorted Stocks on the ASX

The Australian Securities Exchange is Australia's primary securities exchange. It is owned and operated by ASX Limited, with the exchange also commonly referred to as the ASX. While the exchange and the operating companies are separate, they are often considered synonymous due to the complex interrelated nature.

Source: Wikipedia contributors. (2020, December 17). Australian Securities Exchange. In Wikipedia, The Free Encyclopedia. Retrieved 11:47, February 2, 2021, from https://en.wikipedia.org/w/index.php?title=Australian_Securities_Exchange&oldid=994683792

In finance, being short in an asset means investing in such a way that the investor will profit if the value of the asset falls. This is the opposite of a more conventional "long" position, where the investor will profit if the value of the asset rises.

There are a number of ways of achieving a short position. The most fundamental method is so-called "physical" short-selling, which involves borrowing assets (often securities such as shares or bonds) and selling them. The investor will later purchase the same number of the same type of securities in order to return them to the lender. If the price has fallen in the meantime, the investor will have made a profit equal to the difference. Conversely, if the price has risen then the investor will bear a loss. The short seller must usually pay a fee to borrow the securities (charged at a particular rate over time, similar to an interest payment), and reimburse the lender for any cash returns such as dividends they were due during the period of lease.

Source: Wikipedia contributors. (2021, February 1). Short (finance). In Wikipedia, The Free Encyclopedia. Retrieved 11:56, February 2, 2021, from https://en.wikipedia.org/w/index.php?title=Short_(finance)&oldid=1004120227

In the stock market, a short squeeze is a rapid increase in the price of a stock owing primarily to technical factors in the market rather than underlying fundamentals. A short squeeze can occur when there is a lack of supply and an excess of demand for the stock due to short sellers covering their positions, buying back stocks.

Short selling is a finance practice in which an investor, known as the short-seller, borrows shares and immediately sells them, hoping to buy them back later ("covering") at a lower price. As the shares were borrowed, the short-seller must eventually return them to the lender (plus interest), and therefore makes a profit if they spend less buying back the shares than they earned when selling them. However, an unexpected piece of favorable news can cause a jump in the stock's share price, resulting in a loss rather than a profit. Short-sellers might then be triggered to buy the shares they had borrowed at a higher price, in an effort to keep their losses from mounting should the share price rise further. Short squeezes result when short sellers of a stock move to cover their positions, purchasing large volumes of stock relative to the market volume. Purchasing the stock to cover their short positions raises the value of the shorted stock, thus triggering more short sellers to cover their positions by buying the stock. This dynamic can result in a cascade of stock purchases and an even bigger jump of the share price. Borrow, buy and sell timing can lead to more than 100% of a company's shares sold short. This does not necessarily imply naked short selling, since shorted shares are put back onto the market, potentially allowing the same share to be borrowed multiple times.

Source: Wikipedia contributors. (2021, February 2). Short squeeze. In Wikipedia, The Free Encyclopedia. Retrieved 12:18, February 3, 2021, from https://en.wikipedia.org/w/index.php?title=Short_squeeze&oldid=1004492713

In January 2021, a short squeeze of the stock of the American video game retailer GameStop (NYSE: GME) and other securities took place, causing major financial consequences for certain hedge funds and large losses for short sellers. Approximately 140 percent of GameStop shares had been sold short, and the rush to buy shares to cover those positions as the price rose caused it to rise even further. The short squeeze was initially and primarily triggered by users of the subreddit r/wallstreetbets, an Internet forum on the social news website Reddit. At its height, the short squeeze caused the retailer's stock price to reach a pre-market value of over US$500 per share, nearly 200 times the stock's one-year low of $2.57. Many other heavily shorted securities also saw price increases.

On January 28, multiple brokerages, including Robinhood, halted the buying of GameStop and other securities, later citing their inability to post sufficient collateral at clearing houses to execute their clients' orders. This decision attracted criticism and accusations of market manipulation from prominent politicians and businesspeople from across the political spectrum, and dozens of class action lawsuits were filed against Robinhood in U.S. courts. In reaction to brokerages halting the buying of GameStop and other securities, the total market capitalization of cryptocurrencies and metal futures increased.

Wikipedia contributors. (2021, February 3). GameStop short squeeze. In Wikipedia, The Free Encyclopedia. Retrieved 15:08, February 3, 2021, from https://en.wikipedia.org/w/index.php?title=GameStop_short_squeeze&oldid=1004619610