Cushion Theory

Cushion theory

The theory that a stock with many short positions taken in it will rise, because these positions must be covered by the stock.

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cushion theory

The theory that holds that a large short position in a stock will eventually exert upward pressure on the stock's price as investors purchase the stock to cover their short positions. The rise in the price of a stock that has been the object of substantial short selling will become more rapid as investors cover short positions to stem losses.

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Cushion Theory

In investing, a theory stating that a stock on which there are a large number of short positions will eventually rise in price as investors move to cover the short positions. That is, a stock that many investors have sold over a period of time eventually has upward pressure build as buyers move to buy the shares being sold, creating demand. See also: Short selling.