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Answer: A short squeeze is most likely when the short interest (or short interest ratio) is low and the security price is dropping
A **short squeeze** is most likely when: - short interest is **high**, and - the price of the security is **rising**, forcing short sellers to cover. Option **A** is therefore false because it says a short squeeze is most likely when short interest is **low** and the price is **dropping**. The other statements are true: - Short positions can have **unlimited downside**. - The SEC replaced the old uptick rule with an **alternative uptick rule** triggered by a 10% intraday decline in a security.
Author: Manit Arora
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Q-164.4. With respect to short sales, EACH of the following is true EXCEPT:
A
A short squeeze is most likely when the short interest (or short interest ratio) is low and the security price is dropping
B
A loss in a short position leads to larger exposure such that, unlike a long position, a short position implies an inverse relationship between performance and exposure
C
While a long position has a limited downside, a short position has an unlimited downside
D
The SEC abolished the uptick rule in 2007, but recently adopted the “alternative uptick rule” which is triggered if a security declines by 10% during the day
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