Explain the Role of Open Interest in Predicting a Potential Short Squeeze ▴ Learn

Explain the Role of Open Interest in Predicting a Potential Short Squeeze.

Open interest is the total number of outstanding futures or options contracts that have not been closed or exercised. High open interest, especially when combined with a skewed long/short ratio towards short positions, indicates a large number of potential forced buyers.

If the price moves against these short positions, the high open interest translates to massive buying pressure, fueling a squeeze.

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