Trading (Theories, Ideas, and Vocabulary)

Question 1

Short Interest Ratio (SIR)

Answer 1

Also known as short float, measures the ratio of shares that are currently shorted compared to shares available or “floating”.

A high SIR is associated with falling or overvalued stocks.

Question 2

Margin Interest (Trading on Margin)

Answer 2

Trading on margin is a common strategy, and makes it easier for traders to enter opportunities without giving lots of cash.

Question 3

Short Seller Responsibilities

Answer 3

Margin interest, stock borrowing cost (“hard-to-borrow”), dividend payments, payments on account of other events (share splits, spin-offs, bonus share issues).