Days To Cover

AAA

DEFINITION of 'Days To Cover'

A measurement of a company's issued shares that are currently shorted, expressed as the number of days required to close out all of the short positions. For example, if a company has average daily volume of 1 million shares and 2 million shares are currently short sold, the shares have a cover rate of 2 days (2M/1M).

Days To Cover



Also referred to as the "short-interest ratio".

INVESTOPEDIA EXPLAINS 'Days To Cover'

This ratio is somewhat unique because it measures the future buying pressure on a stock that is virtually certain to happen - short sellers must buy back shares at some point if they are to close out their positions.

If a stock's price begins to rise significantly, investors who have short sold the stock will quickly begin to close out their positions (by purchasing shares off the open market), creating buying pressure for the stock and driving the price up even more. If a previously lagging stock turns very bullish, the buying action of short sellers can result in extra upward momentum and increased losses for short sellers who are slow to close out their positions. The longer the days to cover, the more pronounced this effect can be.

RELATED TERMS
  1. Short-Interest Theory

    A theory which holds that a security with a high degree of short ...
  2. Short Selling

    The sale of a security that is not owned by the seller, or that ...
  3. Short Squeeze

    A situation in which a heavily shorted stock or commodity moves ...
  4. Buy To Cover

    A buy order made on a stock or other listed security that closes ...
  5. Short Interest

    The quantity of stock shares that investors have sold short but ...
  6. Short Interest Ratio

    A sentiment indicator that is derived by dividing the short interest ...
Related Articles
  1. Short Interest: What It Tells Us
    Active Trading Fundamentals

    Short Interest: What It Tells Us

  2. Short Selling Tutorial
    Active Trading Fundamentals

    Short Selling Tutorial

  3. Falling Prices Are Dragging These Gold ...
    Chart Advisor

    Falling Prices Are Dragging These Gold ...

  4. Pick the Right Brokerage Account for ...
    Options & Futures

    Pick the Right Brokerage Account for ...

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center