Shorting Kinder Morgan: What Short Interest in KMI Indicates
Short interest represents the total shares of a particular stock that have been shorted but haven’t yet been closed out. Short interest as a percentage of float in Kinder Morgan (KMI) stock is 1.4% and has risen from 1.2% at the end of February. The short interest in KMI is on the lower side, as compared to the average of ~1.7% over the past year.
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The above graph shows changes in short interest in KMI since the start of 2017. The current short interest is at the highest level during this period. Remember, a rise in short interest often indicates that more investors expect a stock’s price to fall further soon.
Generally, a high short interest as a percentage of float, as well as any sudden increase in the short interest of any stock, indicates that more investors expect the stock’s price to fall. However, the price may not necessarily fall, either because investors could be wrong or because the price could increase as investors buy the stock to cover their short positions.
Short interest ratio
The short interest ratio indicates the days it will take for the short sellers to cover all their positions. It’s calculated by dividing short interest with the average trading volumes for a particular stock.
For Kinder Morgan, the short interest is ~26.6 million shares, whereas the average daily trading volume over the past 30 days is ~11 million shares. This means that Kinder Morgan’s short interest ratio is 2.4x, which indicates that it will take 2.4 days to cover all open short positions in KMI stock.
Now let’s look at KMI’s valuation.