What is Daily Short Volume?
What is daily short volume?
That’s a question almost everyone in the microcap space has asked themselves at least once. Usually, asking that question is the result of seeing someone share a link to a website like OTCshortreport.com on a stock message board.
Did you know the daily short volume (especially when presented in places like stock message boards) can be misleading?
According to Coulson, “the most frequently misinterpreted data is the Daily Short Volume, sometimes referred to as Naked Short Interest.”
Coulson explains it simply like this;
The daily short selling volume is misleading because market makers and principal trading firms report a large number of trades as short sales in positions that they quickly cover. For market makers with a customer order to sell, they will temporarily sell short (which gets published to the tape as a media transaction for public dissemination) and then immediately buy from their customer in a non-media transaction that is not publicly disseminated to avoid double counting share volumes. SEC guidance also mandates that almost all principal trading firms that provide liquidity at multiple price levels, or arbitrage international securities, must mark orders they enter as short, even though those firms might also have strategies that tend to flatten by end of day.
Learn more HERE.