Short Covering

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Short Covering
Short covering refers to the process of purchasing securities in order to close out a short position.

A short position is a type of investment strategy where an investor borrows shares of a stock and sells them, with the expectation that the stock’s price will decrease.

If the stock’s price does decrease, the investor can then purchase the shares at the lower price, return them to the lender, and make a profit.

Short covering occurs when the stock’s price starts to rise instead of fall, and the investor needs to buy the shares in order to close out the short position and limit their losses.

This buying can increase the demand for the shares and drive the price up even further.