Dictionary › Market & trading
Days to cover
Also called: short ratio, days-to-cover ratio
Short interest divided by average daily trading volume: roughly how many days it would take short sellers to buy back their shares.
Explanation
If 5 million shares are short and the stock trades 1 million shares a day, days to cover is 5. The ratio turns a short position into time: the longer it would take to close out, the more a rush to buy back could move the price.
It moves with volume as much as with shorting. A burst of trading on news makes it fall even if no one covered; a quiet stretch makes it rise. Readings above roughly 5 to 10 days are generally seen as crowded.
Why it matters
High short interest with high days to cover is the classic setup for a squeeze; high short interest with heavy volume can usually be covered in an orderly way.
How Equity Dictionary measures it
Shown under short interest on the Overview tab, from the latest settlement-date data in Yahoo Finance market data.
Related terms
- Short interest: The number of a company’s shares that have been sold short and not yet bought back, usually shown as a percentage of the float.
- Fails to deliver (FTD): Shares that a seller did not deliver to the buyer by the settlement date, which the SEC publishes twice a month.
- Public float: The market value of shares held by non-affiliates, meaning everyone except officers, directors and controlling holders: the SEC’s yardstick for company size.
Plain-English summary for research; not legal or investment advice.