Showing posts with label Short-Covering. Show all posts
Showing posts with label Short-Covering. Show all posts

Sunday, October 23, 2016

What is Short-Covering? - Slide

Man runs to buy stocks previously shortsold
Man running to Buy or  Cover-up Stocks Short-Sold Earlier

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.
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