When investors hunt for heavily shorted stocks, they're usually playing one of two games. Either they agree with the shorts and want to bet on further decline, or they're looking for the next potential short squeeze, where a sudden price spike forces bearish traders to scramble for the exits and accidentally send shares to the moon.

Let's break down which stocks are currently sitting in the crosshairs of the market's most bearish professional traders.

Why Does a Stock Get Heavily Shorted Anyway?

A stock becomes heavily shorted when large numbers of seasoned traders and institutional investors decide the company is fundamentally overvalued and heading for a fall. These short sellers borrow shares, sell them immediately, and hope to buy them back later at a lower price, pocketing the difference.

Heavy short interest often signals that smart money has done its homework and believes the company faces serious headwinds. Maybe the business model is broken, competition is crushing margins, or the balance sheet looks scary.

But here's where it gets interesting. Bullish traders, often retail investors, see high short interest as opportunity. They're not worried about the fundamental problems. They're hunting for a short squeeze.

A short squeeze happens when a stock's price rises unexpectedly, and short sellers who are now losing money panic and rush to buy shares back to cover their positions. That forced buying creates sudden demand, which pushes the price even higher, which forces more shorts to cover, which pushes the price higher still. It's a dangerous feedback loop that can launch a stock into the stratosphere in a matter of hours or days.

The volatility can be extreme, delivering returns that dwarf normal stock movements, but it comes with equally extreme risk.

The Ten Most Shorted Stocks Right Now

Here are the stocks with the highest short interest as of December 29, according to market data. We're looking at companies with market caps above $2 billion and free floats above 5 million shares. The ranking is based on short interest, which is the percentage of publicly available shares that have been sold short and not yet covered.

Lucid Group tops the list with a staggering 54.51% short interest. More than half of the electric vehicle maker's tradable shares are currently sold short, reflecting deep skepticism about the company's ability to compete in the brutally competitive EV market.

Right behind Lucid are Choice Hotels at 50.20% and Avis Budget at 48.80%. Both are in the travel and hospitality sector, where short sellers apparently see significant challenges ahead.

Revolve Group, the online fashion retailer, comes in fourth with 43.14% short interest, followed by Medical Properties Trust at 37.13%.

The crypto mining giant MARA Holdings sits at 36.23%, reflecting ongoing debates about the sustainability and profitability of Bitcoin mining operations. Hims & Hers Health, the telemedicine and wellness platform, has 35.22% short interest despite its growth story.

TransMedics Group, which makes organ transplant technology, has 35.11% of shares sold short. Traditional retailer Kohl's sits at 34.27%, and rounding out the top ten is Northern Oil & Gas at 33.27%.

What This Means for Traders

These heavily shorted stocks are battlegrounds. On one side, you have institutional investors and experienced traders who've researched the fundamentals and concluded these companies are overvalued. On the other side, you have speculative traders looking for the next explosive short squeeze.

Short squeezes can deliver massive gains incredibly quickly, but they come with equally massive risk and volatility. The stocks on this list got here because professional investors believe something is fundamentally wrong with the business. That underlying weakness doesn't disappear just because retail traders pile in hoping for a squeeze.

Monitoring short interest can help identify potential squeeze candidates, but timing these trades is extraordinarily difficult. You're essentially trying to predict when enough buying pressure will emerge to trigger the cascade of forced covering that creates a squeeze. Get it wrong, and you're holding shares in a company that professionals think is heading down.

If you're considering trading any of these heavily shorted names, do your homework. Understand why the shorts are there in the first place. High short interest exists for a reason, and that reason usually involves real business challenges, competitive threats, or financial problems. The volatility in these stocks often reflects genuine uncertainty about whether the company can survive and thrive.

In short, heavily shorted stocks offer the potential for dramatic gains, but they're called battlegrounds for a reason. Both sides have money on the line, and somebody is going to be very wrong.