BUSINESS

Reviewed by Gordon Scott
Fact checked by Vikki Velasquez

Very few films capture the essence of life as a day trader. The pressure of walking the tightrope between profitability and looming losses is rarely captured in mainstream films.

While movies such as “Wall Street” and “Boiler Room” glamorize the lifestyle of accumulating wealth by any means necessary, they do not capture the essence of actual trading in the trenches. But these five movies illustrate key lessons every trader can take with them to understand more about their career.

Key Takeaways

• It is a good idea to stay informed about the world of finance in order to make sensible trading decisions and understand the economic landscape that can influence your investments.
• While many of us are familiar with big-budget movies depicting the high finance lifestyle like “Wall Street” or “The Big Short,” there are better films for understanding what it is actually like to live the life of a trader.
• Here, we list five movies dealing with certain aspects of finance or markets that every trader should watch at some point.

1. “Rounders”: Money Management and Spotting Fades

This movie is a favorite among poker players, and it exemplifies the parallels that exist between playing poker and trading the markets. The two main characters literally represent the two sides that exist in the psyche of every trader. The contrast of styles between a “grinder” and a cowboy and the repercussions of those styles are illustrated throughout the film. The spotting of “tells” in poker is akin to spotting the “fades” in trading to determine the true order flow pressure behind the price action. “You can’t lose what you don’t put in the pot” resonates with trading and poker equally.

2. “Revolver”: Strategy, Transparency, Lateral Thinking and Ego

The tactical application of chess strategy interwoven throughout this film underscores how lateral thinking is employed to decipher transparency. The greatest enemy hides where you least suspect it: the ego. Purposely appearing weak to camouflage strength and vice versa is the engine behind price action. Traders can identify with how closely trade strategy parallels with chess strategy. What appears on the surface is rarely the true intent. This exemplifies the mentality embodied by seasoned traders.

3. “Rogue Trader”: Stop Losses

This film is the cautionary tale of trader Nick Leeson, who bankrupted Barings Bank in 1995 after accumulating $1.4 billion in hidden trading losses. The movie initially captures the exhilaration of turning a large loss into an equally large win. Ultimately, that false confidence leads toward the collapse of England’s oldest banking institution. The film depicts the consequences of adding a complete lack of trade management to a losing position. Any trader who has blown out an account can attest to the fact that desperate money never wins. This perpetual reminder resonates throughout the film as it places the viewer in the cockpit of a speeding race car heading over a cliff. Traders can identify with all the telltale signs of an impending blowout. A well-managed stop trumps a poorly managed win.

4. “Two for the Money”: Complacency, Humility, and Preparation

This movie covers the rags-to-riches journey of a sports handicapper in the realm of sports betting. Traders can relate to the euphoria that accompanies overleveraged wins and the numbing disbelief in the wake of massive losses thereafter. This cautionary tale depicts the slippery nature of how win streaks can manifest into much larger losing streaks, as complacency creates blind spots in the trader’s psyche.

5. “Floored”: The Emotional Ups and Downs of Trading

This documentary captures all the highs and lows of being a trader moving from the trenches of the trading pits to the electronic trading screens. The repercussions for the old-school floor traders left behind by the electronic trading revolution are clearly portrayed. Their ardent stubbornness illustrates their downfall. Adapt or be eliminated is the universal theme in this film, very much like the markets. Candid interviews with both successful and struggling traders provide rare insights into the impact of this profession on lifestyle, family and overall psyche. Traders will be inspired by many facets of this film, which truly captures the essence of trading for a living.

Reviewed by Thomas J. Catalano
Fact checked by Kirsten Rohrs Schmitt

Short selling is a trading strategy commonly used by experienced traders who use speculation to buy and sell shares, hoping the price will drop at a later date. It involves borrowing shares and selling them on the open market. Investors then purchase the same shares later on and pay off the loan for the original purchase, then keep the profits for themselves.

For general shorting information, such as the short interest ratio—which is the number of a company’s shares that have been sold short divided by the average daily volume—you can usually go to any website that features a stock quotes service. Finance-specific sites are a great option, or you can even find related information through specific stock exchange websites.

If you’re not sure where to start or need a refresher on how to locate this information, we’ve highlighted some of the main sites where you can gain the knowledge you need about short interest data for specific stocks.

Key Takeaways

• Short sellers purchase shares using borrowed capital and sell them on the open market, then purchase shares at a lower price, pay off the loan, and pocket the profits.
• Short interest describes the number of shares shorted but not yet covered or closed out.
• A large change in short interest indicates that investors are becoming more bearish or bullish on a stock.
• For general shorting information about a company’s stock, you can usually go to any website with a stock quote service.
• For more specific short interest info, you would have to go to the stock exchange where the company is listed.

Shorted Stocks and Short Interest

Before we look at some of the places where you can locate short interest data, it’s important to understand the basics of this specialized trading strategy.

Shorted Stocks

As noted above, a short position means selling stocks or other securities that you don’t actually own. Individuals who use this trading strategy believe the price will drop over time, so they borrow shares and sell them to other traders. The borrower then re-buys the shares at a lower price and returns them to the lender. This allows the short trader to close their short position and make a profit.

Shorting is not a strategy that should be taken lightly, especially by novice investors. It should only be considered by people who are experienced traders. Investors must be able to tolerate a greater degree of risk because there’s leverage or borrowed capital involved to make the original purchase. But there’s also the chance that the security’s price will rise rather than drop, which means the investor may incur a loss instead.

Short Interest

The term short interest refers to the number of shares that are sold short but have not yet been covered or closed out. Short interest is generally expressed as a percentage of the number of shorted shares divided by the total outstanding shares. For example, a company with a 10% short interest might have 10 million short shares out of 100 million shares outstanding. 

Short interest is an indicator of market sentiment. Large changes in the short interest also flash warning signs, as it shows investors may be turning more bearish or bullish on a stock. Extremely high short interest shows investors are very pessimistic or potentially overly pessimistic.

Day traders commonly use short interest as a technical indicator. If there is a high short interest in a particular equity and a breakout occurs, traders could scramble to cover their shorts, creating a snowball effect that day traders use to compound their profits. This is colloquially referred to as a short squeeze.

Important

Shorting is the opposite of taking a long position. In a long position, investors actually own the asset rather than borrowing them. People who take long positions believe the price of the asset will rise in the future.

Finding Short Interest Data for a Specific Stock

If you want more specific information about a particular stock’s shorted shares, such as specific numbers about volume, average daily share volume, or days to cover, you can visit certain websites that provide these details free of charge. Here are some of the most popular sites to visit to get this information to help guide your shorting strategy.

Stock Exchanges

Individual stock exchanges issue general reports at the end of each month, giving investors a short-selling benchmark tool. The free data is generally updated just twice a month. Short interest tables typically show information for the last two reporting dates. Daily short interest data is available but can only be purchased through a subscription.

• New York Stock Exchange (NYSE): According to the NYSE, all of this data is acquired from broker-dealers as part of the exchange’s regulatory requirements. However, the specific site you need to visit depends on the stock exchange where a particular stock trades. The NYSE calculates its own short interest ratio for the entire exchange, which can be a useful metric for determining overall market sentiment. If the stock that you are interested in is found on the NYSE, you can check out the NYSE Group Short Interest File, a semi-monthly archive of uncovered shorts dating back to 1988. However, you must purchase the report to access the information.
• Nasdaq: Nasdaq publishes short interest reports in the middle and at the end of every month. This means the information traders use is always slightly outdated, and the actual short interest may already be significantly different than indicated in the report. If the stock trades on the Nasdaq, you would have to use Nasdaq Trader’s Trading Data, where you can find Nasdaq’s Monthly Short Interest Tool.

Other Sites

There are several financial websites you can use to get access to free information. You just need to know where to look. Here are some of the most common sites where you can find information on short positions for either specific stocks or on a market-wide basis.

• Yahoo! Finance: You can get a list of the most shorted stocks based on the percentage of shares outstanding from the NYSE and Nasdaq by clicking on the Screeners tab on the homepage and going to the Most Shorted Stocks link. You can also find short information for specific stocks. Search for the stock, click on the Statistics tab, and scroll down to Share Statistics, where you’ll find the key information about shorting, including the number of short shares for the company as well as the short ratio.
• The Wall Street Journal: The Wall Street Journal provides short-sale data on any public company that is tracked on the “Market Data” page. Simply search for the ticker symbol of the stock and find the heading “Shares Sold Short” in the right-hand column.
• Other Sites: Many other financial sites track short interest data. You can use sites like MarketBeat.com, which provides the largest short interest positions, increases, and decreases.

What Is Short Interest Data?

Short interest data is information related to the total number of shares that are sold short for a particular stock by investors who have yet to close or cover the position. This data can be expressed as a percentage, which is the total number of shares shorted divided by the total number of outstanding shares.

Who Collects Short Interest Data?

Short interest reporting is required by the Financial Industry Regulatory Authority (FINRA). Under the agency’s regulations, broker-dealers are required to submit details about short positions taken in accounts in all securities to exchanges two times a month. They must be reported by 6 p.m. EST on the second trading day after the settlement date outlined by FINRA.

Is Short Interest Good or Bad?

Large changes in short interest mean that investors are changing their views when it comes to a particular stock and that they’re taking a bullish or bearish view on its direction. Stocks that become very heavily shorted may indicate that investors are becoming much more pessimistic about where it’s headed.

How Do I Use Short Interest Data?

You can use short interest data to determine market sentiment. When expressed as a percentage, short interest data is called the short interest ratio. It is the total number of a company’s shorted shares divided by the total number of outstanding shares.

The Bottom Line

Investors can find general shorting information about a stock on many financial websites, as well as the website of the stock exchange on which the stock is listed. The short interest ratio is calculated by dividing the number of a company’s shares that have been sold short by the average daily volume. The short interest ratio can be an indicator of market sentiment about a particular stock, as heavily shorted stocks reveal a pessimistic outlook on the future of the company.