Definition

Noun: - The purchase of securities or commodities to close out a short position: "Short covering" refers to the act of buying back the same asset that was initially sold short. This action closes the short position and is necessary to complete the short-selling transaction.

Usage

• This term is used exclusively in financial and trading contexts.
• It describes a specific, mandatory action taken by an investor or trader who has previously sold an asset they did not own (sold short).
• The process involves buying the asset in the market to return it to the lender from whom it was borrowed.

Examples

Advanced Usage

• "Trigger a short squeeze": A rapid price increase can force widespread short covering, which in turn drives the price even higher in a feedback loop known as a "short squeeze."
  • The positive earnings report triggered a short squeeze, leading to frantic short covering.

Variants and Related Words

• To cover a short (Verb phrase): The action of buying back the borrowed shares or contracts.
  • He decided to cover his short before the company's announcement.
• Short sale (Noun): The initial transaction of selling a borrowed security.
• Short squeeze (Noun): A rapid price increase exacerbated by forced short covering.

Synonyms

• Buying to cover: A direct synonym describing the same action.
• Closing a short position: A more descriptive phrase with the same meaning.

Related Phrases

• Forced covering: When short covering is compelled by rising prices or margin calls, rather than being a voluntary decision.
  • The margin call resulted in forced covering of his short bets.

Noun

1. the purchase of securities or commodities by a short seller to close out a short sale