days to cover

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. The number is calculated by dividing the aggregate short interest on a stock for the month by the average daily share volume for the same period. Also referred to as the "short-interest ratio".

Notes:

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), thus creating buying pressure for the stock and driving the price up even further. If a previously lagging stock turns very bullish, the buying action of short sellers can result in extra upward momentum for a stock 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.

See also: Buy To Cover, Short Interest, Short Selling, Short Squeeze

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days to cover

See short-interest ratio.