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What Does 'Buy to Cover' Mean?

‘Buy to Cover’ is a term that applies when an investor buys shares of a security that they had previously sold short.

When an investor sells a security short, it means they are selling shares they do not actually own, in hopes that the price of the stock falls. If the price does fall, an investor could then ‘buy to cover’ at a lower price and then return the shares to the broker that lent them, thus realizing the profit in the price difference.

In some instances, an investor has to ‘buy to cover’ if the short sale looks like it’s going in the wrong direction, and the broker wants the investor to cover it.

What does 'Short Covering' mean?
What Does Having a Long Position Mean?

Keywords: profit, security, Stock, short sell,