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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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The desirable properties that are enhanced when larger castings are produced apply the enhanced "cushion theory," reducing atmosphere and the development of oolitic layers on the molding sand rapidly.
* Reducing notice periods due to economic downturns would seem to be the opposite of the cushion theory of notice periods.
The length of notice was not equivalent to the period required to find new employment." This remains faithful to the cushion theory.