Short Covering Explained
5paisa Research Team
Last Updated: 05 Mar, 2025 05:32 PM IST

Content
- What is Short Covering?
- Example of Short Covering in the Futures and Options Market
- When Does Short Covering Happen?
- How to Identify Short Covering in the Market?
- Impact of Short Covering on Stock Prices
- What is a Short Squeeze?
- Difference Between Short Covering and Short Squeeze
- Is Short Covering Bullish or Bearish?
In the stock market, prices are influenced not only by traditional buying and selling but also by different trading strategies. Short covering occurs when traders who previously sold stocks or contracts, buy them back to close their positions. This sudden buying demand can drive stock prices higher, often leading to sharp rallies. Understanding short covering is crucial for traders, as it may cause rapid price swings and impact overall market movements. Let’s understand the concept of short covering in this article.
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