Why Tootsie Roll Stock Is Suddenly Spiking Higher
Shares of Tootsie Roll Industries (NYSE: TR) were spiking on Wednesday -- yes, I said Tootsie Roll. Historically, this is one of the least volatile stocks on the market. But that's changed in recent days. As of noon EST today, the stock was up 13% but had been up 53% earlier in the session. And it's up roughly 45% just this week. Believe it or not, this could be the start of a short squeeze.
You've likely become more familiar with the term over the past few days, but for those who haven't, allow me to briefly explain a short squeeze. As investors, we can bet against a company by shorting the stock, profiting when it goes down. But if it goes up, so too does our loss on paper. Losses are theoretically unlimited when shorting stocks, so brokerages often require you to have enough funds to cover your paper losses. Failure to do so results in short traders covering their position at a loss before they're ready -- they're "squeezed" out. And it can be a snowball effect, with closed short positions sending the stock higher and squeezing even more out.
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Source Fool.com
