Buy to cover

For short traders, buy to cover is the act of taking profits on their short position or a way to exit the trade at a loss. Since short traders sell stocks they do not own, they have to eventually buy back the shares at a later date to replace the borrowed share. If a trader shorts a stock at $5, buying it to cover at $4 will give him a $1 profit. The same goes in reverse should the stock move up instead which he will cover at a loss out of his own pocket.

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