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English is not my native language and I'm so confused to this term Short interest.

Why is it not the interest that you need to pay (when you borrow stocks from others), but the volume?

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2 Answers 2

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"Interest" is a heavily overloaded word in English. Merriam Webster has 5 broad meanings. You are thinking of number 3 of those:

3a : a charge for borrowed money generally a percentage of the amount borrowed
b : the profit in goods or money that is made on invested capital

but the relevant sense here is in fact number 1:

1a : a feeling that accompanies or causes special attention to something or someone : concern

'Short interest' is a measure of how interested people are on the short side.

  • Not much money is on the short side => Not many people are interested in the short side => low 'short interest'

  • A lot of money is on the short side => A lot of people are interested in the short side => high 'short interest'

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  • Thanks for the answer. Just wondering why not use Short volume to replace Short interest? Nov 4, 2021 at 9:25
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    Just the force of convention, no other reason.
    – AakashM
    Nov 4, 2021 at 9:37
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    @AGamePlayer "volume" typically refers to the amount of trading in a period - "interest" means the total amount of positions held ("open interest" is a common term in options trading and means something similar)
    – D Stanley
    Nov 4, 2021 at 12:42
  • @DStanley Yes - and it's related to M-W's definition 4a(1) "right, title, or legal share in something" - having an "interest" in some sort of property means owning it (partially or fully).
    – psmears
    Nov 5, 2021 at 11:23
  • I like your explanation except in the last two bullets' reference to "people". All my friends and family might be short some stock but that doesn't really mean anything. If Warren Buffet is short then that means something. In the first scenario it's a lot more people than the second. Maybe I misunderstand your meaning. Nov 5, 2021 at 13:01
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Actually the most relevant definition is, from OED:

interest n. 1.e. A pecuniary share or stake in, or claim upon anything; the relation of being a part-owner of property, a shareholder or bondholder in a commercial or financial undertaking, or the like.

That is, "interest" is roughly synonymous with "ownership" or "holding", but using those words would be a bit strange in the context of a short position, so we say "short interest" instead of "short holdings" instead.

The sense you cite is related, because loan-interest is a kind of rent due to the owner of money.

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