Several stocks that have enjoyed extraordinary pops lately, such as Avis Budget and Bed Bath & Beyond , have become so-called meme stocks that many professional investors have bet against ... and have gotten burned for because of what's known as a short squeeze.Avis Budget reported solid earnings last week. But the strength of the stock's 108% surge the day after reporting results surprised many. Shares were up as much as 218% at one point.
It's known as covering their short position. But here's where short sellers can run into trouble. If a stock that's being shorted starts to go up for some reason — such as a good earnings report or news of a strategic partnership — short sellers may be forced to buy back shares en masse or risk incurring massive losses.
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