Cushion Theory

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Dictionary Says

Definition of 'Cushion Theory'

The theory used when many investors have taken a short position in a stock. It is based on the idea that the price of the stock must eventually go up because those short positions must eventually be covered by actual purchases of the stock. As investors rush to cover short positions to stop losses, the price of the stock will rise sharply.
Investopedia Says

Investopedia explains 'Cushion Theory'

Technical analysts project price trends in the market based on trading volume and demand. Some consider it a bullish move if the short positions in a stock are twice as high as the number of shares traded daily. If you have a hunch that investors in short positions will soon need to cover those positions to minimize losses, then you should buy the stock to make a profit during the run up.
Search results for

'Cushion Theory'

  • Book Value: How Reliable Is It For Investors?

    http://www.investopedia.com/articles/fundamental-analysis/09/book-value-basics.asp
    In theory, a low P/B ratio means you have a cushion against poor
    performance. In practice, it is much less certain. ...

  • The Best And Worst Investing Advice

    http://www.investopedia.com/articles/financial-theory/10/best-worst-investing-advice.asp
    ... portfolio. A global recession can override that theory. 2 ... ideas. 2. Have a Cash
    Cushion The emergency fund is always a classic fashion. Like ...

  • Where does stimulus economics come from?

    http://www.investopedia.com/ask/answers/09/stimulus-economics.asp
    ... the government to use tax revenues and deficit spending to put a cushion under the
    economy to try and avoid hitting a true bottom. The General Theory tends to ...

  • 8 Reasons To Never Borrow From Your 401(k) Slideshow ...

    http://www.investopedia.com/slide-show/never-borrow-401k/cushion.aspx
    ... loan balance as a withdrawal and pay the 10% penalty. 6. You Lose Your Cushion.
    Taking a loan from your 401(k) plan should only be ...

  • Finding Deep Value In The Meat Department

    http://stocks.investopedia.com/stock-analysis/2009/Finding-Deep-Value-In-The-Meat-Department-SEB-PDA-HRL-TSN-SFD0918.aspx
    ... (In theory, a low P/B ratio means you have a cushion against poor performance. In
    practice, it is much less certain, read Book Value: Theory Vs. ...

  • 5 Hail-Mary Stocks

    http://stocks.investopedia.com/stock-analysis/2010/5-Hail-Mary-Stocks-TA-JTX-HPT-INTU-HRB0625.aspx
    ... safety. (In theory, a low P/B ratio means you have a cushion against poor
    performance. In practice, it is much less certain. To ...

  • Options For Investing In Italy

    http://stocks.investopedia.com/stock-analysis/2010/Options-For-Investing-In-Italy-EWI-LUX-NTZ-E-TI1208.aspx
    ... (In theory, a low P/B ratio means you have a cushion against poor performance. In
    practice, it is much less certain. Check out Book Value: Theory Vs. Reality.). ...

  • The 6 Most Common Portfolio Protection Strategies

    http://www.investopedia.com/articles/basics/11/5-portfolio-protection-strategies.asp
    ... Check out Modern Portfolio Theory: Why It's Still Hip.) Leap Puts and Other ... When
    markets are declining, the cushion dividends provide is important to risk ...

  • Option Price-Volatility Relationship: Avoiding Negative Surprises

    http://www.investopedia.com/articles/optioninvestor/05/020205.asp
    ... March 03 2011 | Filed Under » Derivatives, Financial Theory, Futures, Options. Whether ...
    volatility has on option price behavior can help cushion against losses ...

  • How can I use an "airbag swap"?

    http://www.investopedia.com/ask/answers/08/airbag-swap.asp
    ... More Categories; Bonds; Economics; Markets; Taxes; Financial Careers; Financial
    Theory; ... swap is an interest rate swap designed to provide a cushion against rising ...

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