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Days To Cover Risk Premium Short

Updated dailyData needs: lowshort only

2015

Hong, H., Li, F.W., Ni, S.X., Scheinkman, J.A., Yan, P. (2015). Days to Cover and Stock Returns. NBER WP 21166.

In plain terms

Hong-Li-Ni-Scheinkman (2015): days-to-cover (SI / ADV) measures how many days of normal trading volume it would take crowded shorts to exit. Hard-to-exit (high-DTC) names earn LOW subsequent returns (~1.2%/mo spread), separate from how heavily shorted they are. We proxy DTC as a quarter of accumulated short-sale volume divided by recent average daily volume and short the names at the top of their own one-year DTC range.

How it works

Hong-Li-Ni-Scheinkman (2015): days-to-cover (SI / ADV) measures the cost of unwinding a crowded short; high-DTC names earn LOW returns (~1.2%/mo on the long-low/short-high spread), orthogonal to the raw short-interest level. Bi-monthly SI stock is not in the data lake, so DTC is proxied in day units: trailing-63d cumulative FINRA daily short volume (shares, a stock-like flow accumulation) divided by trailing-21d mean total volume (ADV). The distinct 63d/21d windows are load-bearing: equal windows cancel algebraically to the volume-weighted mean of short_pct (raw intensity, already traded by short_interest_ratio_drift), not DTC. Rank vs the ticker's own 252d history; SHORT top-decile/quintile DTC, hold 21/42/63d.

Live results

0 times picked on its own · 137 times inside a blend (120 beat the stock) · updated 2026-07-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 137 such blended picks (120 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

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Data dependencies

Finra short volume
A data feed this strategy reads, refreshed on its normal schedule.
Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.

Expected edge

Tested over: Modern daily equity data

risk-premium premium; decay risk 3/5.

Example tickers where this is likely to fire

SPY AAPL NVDA TSLA

Illustrative only, the signal fires based on the live data, not a fixed list.

Related families

Days To Cover Squeeze LongPrice & Market Behavior

When an unusually large share of a stock's recent trading volume is short (high for that stock versus its own past year) and the price is starting to reverse upward, you have a squeeze setup. Go long for 1-4 weeks.

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