Sunday, October 23, 2016

What is Short-Covering?

Short covering is the corrective action for short selling. It is the reverse of short selling. A speculator makes a bet that the price of a particular scrip or share is likely to fall and short sells. The price may go against his or her expectations and may instead rise. In this situation he or she will now have to buy the shares immediately, to honour previously short sold (cover the sale) as well as minimise the loss - as if the buy decision is delayed the price may climb even higher increasing the loss. 

Man running to buy and cover stocks short-sold

Short selling, short covering and so on are purely speculative activities and are NOT-AT-ALL considered as investing.
Please learn value investing at ‘Wealth Vidya’ and gradually but surely progress towardsfinancial freedom and become rich and wealthy over a long period of time.

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