What is Short Covering

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Short covering refers to buying back borrowed securities in order to close open short positions at a profit or loss.  It requires the purchase of the same security that was initially sold short, since the process involved borrowing the security and selling it in the market.

Short covering is necessary in order to close an open short position.

A short position will be profitable if it is covered at a lower price than the initial transaction and will incur a loss if it is covered at a higher price than the initial transaction