It gives you a sense of how many investors expect prices to fall, and the stocks they expect to be affected. In general, selling short increases when the market is booming. Short sellers believe that a correction , or drop in the market, has to come, especially if the overall economy does not seem to be growing as quickly as stock prices are rising. But short selling is also considered a bullish sign, since the short positions will have to be covered. Average daily volume indicates the average number of shares sold short each day during the month.
Investors watch short interest to judge what other investors are thinking.
For example, an increase in short selling of a stock means investors expect the price to fall. The number of shares held by short sellers, or the short interest, in Consolidated Stores was 1,167,693 on February 12, down from 1,203,362 on January 15. Warrants guarantee, for a small fee, the opportunity to buy stock at a fixed price during a specific period of time. Investors buy them if they think a stock's price is going up. Companies sell warrants if they plan to raise money by issuing new stock or selling stocks they hold in reserve.