Short pain is a metric to show shareholders how much shorts are approximately losing or making on a daily basis. The metric is calculated by taking the most recent short interest data and multiplying it by the daily change in price. Both metrics are taken from the IEX exchange and its third party vendors.
In addition, this website shows short pain in terms of percentages if a short were to initiate a short position 5 days ago, a month ago, and from the beginning of the year. That data is calculated by reversing the appropriate 5-day, one month, and year-to-date returns. Please note that this website does not include the cost to borrow to short (which some shorts have to pay and can be pretty high at times). It does not factor in a short’s option position or convertible bond position that might offset some of its pain. Other shorts may also be pair trading, and again hedge some of their short position.
This website does not factor in where shorts may have initiated their position as well. If a short initiated a short at $50 and the stock fell to $10, and that stock doubled in one day, the short would not be feeling as much pain as a short that initiated his position at $10.
Investors can use the data for informational purposes. Some shorts are weaker than others. Some shorts may have initiated their position at the wrong place. Some shorts may want to take profits if the stock fell to a certain level. To some longs, that informational purpose helps.
Ultimately investors should always use fundamentals at all times, do due diligence, and pay attention to a short’s long term hypothetical return (the one year pain indicator) if one wants to be a long term investor in a stock.
Disclosure: no position