Stock trading doesn’t have to be expensive. Using Finder’s proprietary algorithm, we’ve identified the best cheap Canadian and US stocks to buy now.Read more…
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
Looking for the next GameStop? Here are the 10 most shorted stocks
Betting on these 10 shorted stocks could mean big rewards, but it’s important to know the risks.
Note: All dollar amounts on this page are in US dollars unless otherwise stated.
10 most heavily shorted stocks
Here are the 10 most heavily shorted stocks as of this writing by short float percentage. Short float percentage refers to the percentage of a company’s stock that institutional investors have shorted compared to the stock available for public trading.
|Stock||Short float percentage|
|EHang Holdings Ltd (NASDAQ:EH)||52.84%|
|Workhorse Group (NASDAQ:WKHS)||42.19%|
|RA Medical Systems (NYSE:RMED)||39.95%|
|Social Capital Hedosophia Holdings (NYSE:IPOE)||39.88%|
|Altimeter Growth (NASDAQ:AGC)||39.09%|
|Blueknight Energy Partners (NASDAQ:BKEP)||39.08%|
|Tattooed Chef (NASDAQ:TTCF)||38.11%|
|MyMD Pharmaceuticals (NASDAQ:MYMD)||36.44%|
How does shorting stocks work?
Stock shorting has dominated headlines as Redditors hyped up stocks hedge funds were betting against. But what does it mean to short a stock?
When shorting a stock, investors borrow shares they believe will decline in value and sell those shares. These investors hope the stock will continue to fall in value so they can buy back the shares at a lower price and pay off the loan, pocketing the difference.
Essentially, it’s betting that the value of a stock will fall. If you’re right, you make money. And if you’re wrong — well, you could potentially be on the hook for a lot more than you bargained for. And that’s because there are theoretically no limits to how high a stock may rise, and the more it rises, the more you lose.
Taking a contrary position to shorting can be profitable, too. By investing in a shorted stock, you contribute to the stock’s value. As a result, the stock price rises and puts pressure on those with short positions to close positions by buying even more — which drives the price up further.
Either way, investing in shorted stocks can be profitable. In fact, some of the most heavily shorted stocks on the S&P 1500 index have actually climbed this year.
What happened with GameStop?
For evidence of the power of shorted stocks, look no further than GameStop.
In January 2021, when Elon Musk tweeted out support for a short squeeze on GameStop stock, shares of GME went through the roof. The gaming retailer’s shares were up 125% to more than $333 per share after starting the year at just $17.
Musk didn’t start the trend: Participants in the Reddit message board wallstreetbets had been hyping it to raise its price and squeeze hedge funds that had shorted, or bet against, the company. By Wednesday (January 27) the boards were already buzzing about other shorted stocks they might chase, and several were rising. (Editor’s note: By early evening Wednesday the board appeared to have been set to private.)
The moves made GameStop, which is among the S&P 1500 index’s most shorted stocks, one of the hottest names out there. It also led to a lot of buzz around other shorted stocks, with individual investors looking for the next big stock rocket ride. Investors not experienced in this game should be aware that the risks are as high as the potential rewards.
What are the risks of short squeezing stocks?
Before you chase these stocks, take a close look at GameStop’s wild ride.
Internet chatter and Musk’s tweet sent shares of GameStop up more than 300%. In an effort to minimize their losses, short-sellers were forced to sell off their shares at a loss. Short-sellers, you’ll recall, are hoping these stocks will decline in value. When stocks rise, they have to move quickly to stem their losses.
Stocks can be heavily influenced by headlines, certainly something the folks posting on Reddit were counting on. When shares of GameStop went through the roof, many individual investors certainly profited. But at this point, the open question is how long these prices can be sustained.
That’s true of any stock driven upward by trading action rather than fundamental business results. Such stocks are likely to be volatile going forward. Share prices may increase for a while, but they may also dive sharply and suddenly. Proceed with caution, and be prepared to keep a close watch on any position you take.
Compare stock brokerages that offer short selling on Canadian and US stocks
Note: The dollar amounts in the table below are in Canadian dollars.
Short selling is risky — and potentially lucrative. Do the risks outweigh the potential gains? It depends on your investment goals and experience level. To invest in shorted stocks, review your platform options to find the brokerage account that best fits your investment goals.
Image: Getty Images
More on investing
More guides on Finder
Best cheap stocks to buy now
Stock trading doesn’t have to be expensive. Using Finder’s proprietary algorithm, we’ve identified the best cheap Canadian and US stocks to buy now.
Top Canadian stock discussion forums in 2021
We look at 6 popular stock discussion groups from Canada and overseas.
How to short the Nasdaq
Find out how to short the NASDAQ, the world’s second largest stock exchange, with inverse exchange-traded funds (ETFs) or derivatives.
How to master international stock trading with currency hedging
Protect your international stock portfolio from currency fluctuations by hedging your investments.
Electric vehicle (EV) stocks to watch and how to invest
We take a closer look at 6 popular EV stocks and what these stocks can offer Canadian investors.
Investing in pharmaceutical stocks
Benefits and drawbacks to consider before you invest in pharma stocks.
The Best Canadian tech stocks on the TSX
The 10 best TSX tech stocks to buy in Canada based on performance.
Best airline stocks
Check out the best airline and aviation stocks to buy now in Canada based on company performance.
Best Canadian bank stocks
Here are the best bank stocks to buy in Canada based on company performance.
Invest in silver ETFs
Find out about silver ETFs, how they’re traded and where you can buy them in Canada.
Ask an Expert
You must be logged in to post a comment.