Short-Covering
Short-covering is a trading strategy used by investors to close out a short position in a security. A short position is a bet that the price of a security will go down. When the price of the security rises, the investor must buy back the security to close out the position. This is known as short-covering. Short-covering is a way to limit losses on a short position and can be used to take advantage of a sudden rise in the price of a security.
History of Short-Covering
Short-covering has been used by investors since the early days of the stock market. In the late 19th century, short-covering was used to take advantage of sudden price movements in the stock market. As the stock market became more sophisticated, short-covering became a more common trading strategy. Today, short-covering is used by investors to limit losses on short positions and to take advantage of sudden price movements.
Comparison of Short-Covering to Other Strategies
| Strategy | Risk | Reward |
|---|---|---|
| Short-Covering | Low | Low |
| Long Position | High | High |
| Options Trading | High | High |
Summary
Short-covering is a trading strategy used by investors to close out a short position in a security. It is a way to limit losses on a short position and can be used to take advantage of a sudden rise in the price of a security. For more information on short-covering, investors can visit websites such as Investopedia, The Balance, and Yahoo Finance.
See Also
- Long Position
- Options Trading
- Short Selling
- Margin Trading
- Hedging
- Arbitrage
- Day Trading
- Scalping
- Swing Trading
- Position Trading
