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Days to cover

Shares sold short divided by average daily volume: a rough estimate of how many sessions of normal trading it would take for every short to buy back.

The ratio is a crude measure of crowding. A high figure means shorts cannot exit without moving the price, which is the fuel in a short-squeeze. It is built from two lagged inputs, though: short-interest reported twice a month with a delay, and a volume average that collapses in relevance the moment a stock starts moving.

In a live squeeze volume can run ten times normal, so a ratio of 9 computed on quiet-period volume may be under 1 in practice. Use it as a screen, not as a countdown.

Example: 24M shares short against 3M shares of average daily volume gives 8 days to cover. If volume jumps to 30M a day during a squeeze, the same short position is under a day of real trading.

Related: short-interest, short-squeeze, utilization-rate, float-rotation, hard-to-borrow

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Bollinger bands squeezing and then expandingA price line between three curves: an average in the middle and a band above and below it that pinch together in the centre of the chart and then spread apart as the price runs higher.PRICE WITH BOLLINGER BANDS (20, 2)SQUEEZEupper bandpricemiddle band20-day averagelower bandbands widen asvolatility risesIllustrative prices. The bands sit two standard deviations from the average.
Bollinger bands: squeeze and expansion. The middle line is a 20-day average and the outer bands sit a set number of standard deviations away, so they measure how far price has recently been straying. When moves are small the bands pinch together; when moves grow they spread apart.

Educational only, not advice. Spotted an error? Post in Site Feedback.