If the shares rise to that price, it'll automatically trigger a purchase, closing out your position. For example, if you short a stock at $50 per share, put in a buy-limit order at a certain percentage (5%, 10%, or whatever your comfort level is) above that amount. Place stop-loss or buy-limit orders on your short positions to curb the damage.There are specific actions you can take to try to protect yourself against a short squeeze or to at least alleviate its grip. Protecting yourself against a short squeeze You have the same choices as above, only the stakes keep mounting, and so do your potential losses. This forces even more short-sellers like yourself into a tighter vise. All this increased buying causes the stock to keep going up.At this point, you must either buy replacement shares at a higher price and pay back your broker at a loss, or buy even more shares than you need - in hopes that selling them for profit will help cover your losses. Instead of sinking, it's climbing - and it exceeds the price you bought it for. You realize you're unable to buy the stock back at a low price.That "something" can be the company issuing a favorable earnings report, some sort of favorable news for its industry - or simply many other investors buying the stock (as happened with GameStop). Instead, something happens causing the price of the stock to start going up.Borrowing and selling shares at today's high price in anticipation the price will go down and you will be able to buy replacement shares at a much lower price. You identify a stock you believe is overvalued and take a short position.Here is how a short squeeze scenario unfolds: Quick tip: If you want to know more, a GameStop analyst shares how you can successfully spot a short squeeze. While a majority of Markets Insider analysts had a Sell rating on the stock, it held up well on July 19, 2021, during a selloff sparked by an increasing number of cases of the delta COVID variant.
In mid-July 2021, GME hovered around $185 per share.
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