What to buy to cover’
To buy cover is a buy order made on a stock or other security that is listed to close an existing short position. A short sale involves selling shares of the company, the investor does not own, since shares can be borrowed, but they must be repaid at some point.
Breaking down the ‘kupit cover
Buy to cover order of acquisition is equal to the number of shares to those borrowed, “covers” the short sale and allows the stock to be returned to the original creditor, usually the investor’s own broker/dealer, which may have had to borrow the shares from a third party.
A short seller bets on a stock price goes down and seeks to buy the shares back at a lower price than the original short sale price. A short seller must monitor every margin call and redemption of shares to return. In particular, when the stock begins to rise above the price at which the shares were shorted, the broker, the short seller can require the seller to make a purchase on the lid as part of the margin. To avoid this, the short seller should always keep enough buying power in their brokerage account to do everything necessary “to purchase coverage” of the transaction to the market price of shares triggers a margin call.
Buy to cover and Margin transactions
Investors can make cash transactions when buying and selling stock, meaning they can buy for cash in private brokerage accounts and to sell what they already bought. Alternatively, investors can buy and sell on margin funds and securities, who has taken a loan from their brokers. Thus, a short sale is essentially a margin trade, as investors sell what they do not own.
Margin trading is more risky for investors than using cash or its own securities because of the potential losses from the margin. Investors get margin calls when the market value of the underlying asset moves against the position which they occupied in marginal transactions, namely the reduction of the value of safety when buying on margin, and the increasing importance of security in several. Investors must satisfy margin requirements by depositing additional funds or by making appropriate transactions on the buy and sell, to offset any adverse changes in the value of the underlying securities.
When an investor sells short and the market value of the underlying asset has risen above the sales price obtained from informed short sales will be less than what you need to buy it back. This will lead to a losing position for the investor. If the market value of the securities continues to grow, the investor will have to pay more to redeem the collateral. If the investor expects the security to fall below the initial short sale price in the near future, they should consider covering short positions sooner or later.