It's been a while since short squeezes were in the news, but they're seemingly back. The market has built solid momentum in recent weeks, and troubled online car dealer Carvana (NYSE: CVNA) has seen its stock nearly triple year to date, with the bulk of its gains coming in the past week.

The stock is still down a whopping 96% from its all-time high, so there is room for it to continue running. But does that mean you should chase the potential returns?

Investors can borrow shares (typically from a broker) to sell them, a process known as shorting. A short seller's goal is to buy the shares later at a lower price, profiting from the difference. Buying shares to repay the broker is called covering a short. When many investors have shorted a stock, a rising share price can result in those investors scrambling to cover their short positions, resulting in a surge of demand for that stock. This is known as a short squeeze.

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Source Fool.com