Institutional investors and the companies themselves will keep running
shorts to protect their stock holdings. They are cheap enough that you can get
a far enough out of the money strike price that is essentially
insurance. Any major loss of equity in the stock is made up
in gains in the option. How far out you buy the options depends
upon how much you are willing to lose. In short, the number of outstanding
shorts is not a reliable metric for predicting stock prices.
Greg