Days to cover
What it is
Number of days it would take short sellers to cover all their positions at the average daily volume. Computed as short interest / average volume. The higher, the greater the risk of a short squeeze on good news.
How to read it
Days to cover above 5 signals shorts would be "trapped" for several days if they had to exit urgently. Combined with high short interest, that's the classic recipe for a potential short squeeze — like GameStop or AMC in 2021.
Common reference points
- Comfortable liquidity for shorts< 2 days
- Normal2 – 5 days
- Moderate squeeze risk5 – 10 days
- High squeeze risk> 10 days
Orders of magnitude, not a rule: the same number does not mean the same thing from one sector to the next.
What it does not tell you
High days to cover isn't a buy signal — most heavily shorted stocks are shorted for good reasons (companies in trouble). The squeeze is rare; the drop is the more likely scenario. Use as a volatility risk measure, not a thesis.
Other measures — Positioning
Educational content. Polaris is not a registered investment adviser and makes no recommendation.