Quarterly earnings reports are often some of the most volatile catalysts of the year for stocks. But as much as the typical stock can jump on good or bad earnings, the stakes are even higher for stocks with high short interest.
Short sellers love earnings season because it provides the chance at quick profits if they can predict a big earnings miss ahead of time. However, if short sellers guess wrong, a stock with high short interest can have explosive short squeeze potential if it delivers a surprise earnings beat.
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Markit analyst Simon Colvin recently reported the most popular short trades among stocks expected to report earnings this week.
These are the four U.S.-listed names with the highest percent of shares outstanding on loan:
In addition, Colvin notes that short sellers also seem to be abandoning their positions in certain stocks ahead of earnings. The percent of shares outstanding on loan for Tiffany & Co. (NYSE:TIF) is down 19 percent in the past month. Tiffany reports earnings on Friday.
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