Short Sellers Suffer Steep Losses in 2025 Amid Surging Stock Market

Traders betting against stocks have endured a challenging start to 2025. According to data from S3 Partners, short sellers in US and Canadian markets have lost an estimated $73 billion year-to-date.

Market Rally Punishes Short Sellers

"The market rally has been punishing short sellers," said Ihor Dusaniwsky, head of predictive analytics at S3 Partners. The S&P 500 (^GSPC) has surged approximately 4% this year, with many companies within the index posting even more impressive gains, partly driven by short squeezes.

Short Squeeze Dynamics

Short squeezes occur when a significant number of investors bet against a stock. If the stock price rises instead, these traders are forced to buy back shares to cover their positions, exacerbating the price increase. Notably, short squeezes played a pivotal role in the meme stock craze of 2021.

High Squeeze Risk for Certain Stocks

S3 Partners employs a model to determine the "squeezability" of stocks. A squeeze score above 70 indicates vulnerability to a short squeeze, while a score of 90 signals extreme susceptibility. Super Micro Computer (SMCI) currently has a squeeze score of 100, but it is not the only stock experiencing significant gains due to short squeezes.

Notable Squeezes and Losses

Other companies with high squeeze scores include Hims & Hers Health (HIMS), Oklo (OKLO), and BigBear.ai (BBAI). All three stocks have rallied 80% or more in 2025. The losses for short sellers have been substantial, with Hims & Hers alone costing them nearly $2 billion in year-to-date losses.

Forced Liquidations Fuel Rally

JC Parets, chief markets strategist at All Star Charts, emphasizes that short sellers are guaranteed future buyers. When short squeezes occur, these buyers can trigger forced liquidations, further boosting stock prices.

Bull Market Characteristics

Parets views the current market environment as characteristic of healthy bull markets, where short sellers who overstay their positions are punished. Josh Schafer, a reporter at Yahoo Finance, provides comprehensive coverage of the latest stock market news and analysis, including events that impact stock prices.