What is Shorting (aka Short Selling) and Short Covering?

Shorting (also known as short selling) is an investment method to make money when an asset’s price drops by selling at a high price and then buying it back at a lower price.

Covering a short is the term used for exiting a short trade. To cover you are actually buying back shares that were initially borrowed to sell short using buy to cover orders. Short covering can result in either a profit (if the asset is repurchased lower than where it was sold) or for a loss (if it is higher).

**Please contact your broker directly with further questions regarding shorting (Kraken and Kucoin can short crypto), as each platform is slightly different and things can change over time, therefore it is best to contact them directly. Thank you.

Leave a Comment