These 10 Stocks Could Be Short Squeeze Targets: Lucid, Kohl's, Avis and More

Traders targeting heavily shorted stocks are looking to play one of two sides: betting on a company's downfall or hunting for a short squeeze.

Here is a breakdown of why these stocks attract so much attention and a look at the current market landscape.

• LCID stock is heavily shorted. See the chart and price action here. 

Why Do Stocks Get Heavily Shorted?

Investors and traders often maintain a high level of short interest whenever a stock is overvalued.

They are betting that the company faces significant risks—such as poor earnings, a failing business model or industry headwinds—that will eventually drive the stock price down.

The Two Sides of the Trade

• The Bear Case: Short sellers rely on meticulous research to identify companies they believe are ticking time bombs.
• The Bull Case: On the flip side, retail traders often view high short interest as a coiled spring. If the stock price starts to rise, it can trigger a short squeeze. 

The Mechanics of a Short Squeeze

A short squeeze is a volatile feedback loop that can lead to explosive gains in a very short window. 

It begins when a stock's price rises unexpectedly, forcing short sellers to frantically buy shares back to cover their positions. 

The forced buying creates a sudden spike in demand, which pushes the price even higher, trapping more short sellers in the feedback loop. 

The volatility of a short squeeze can lead to returns that far exceed typical stock movements in a very short time frame.

Top 10 Most Shorted Stocks 

Here are the most heavily shorted stocks (with market caps above $2 billion and free floats above 5 million) as of Feb.2, according to data from Benzinga Pro. 

In the table below, stocks are ranked by short interest — the total number of shares sold short and not yet covered, expressed as a percentage of shares available for public trading.

Reminders:

• Highly shorted stocks are battlegrounds where negative fundamentals meet speculative trading.​
• Short squeezes can deliver huge, fast gains, but at very high risk and volatility.​
• Monitoring the short interest leaderboard can help identify which stocks might be the next short squeeze, but timing such trades remains extremely challenging.​
• Always conduct due diligence, as the volatility often reflects deep underlying risks and business uncertainty.

Photo: Shutterstock