what is buy to cover 
buy to cover refers to a buy order made on a stock or other listed security to close out an existing short position a short sale involves selling shares of a company that an investor does not own as the shares are borrowed from a broker but need to be repaid at some point understanding buy to covera buy to cover order of purchasing an equal number of shares to those borrowed covers the short sale and allows the shares to be returned to the original lender typically the investor s own broker dealer who may have had to borrow the shares from a third party a short seller bets on a stock price going down and seeks to buy the shares back at a lower price than the original short sale price the short seller must pay each margin call and repurchase the shares to return them to the lender specifically when the stock begins to rise above the price at which the shares were shorted the short seller s broker may require that the seller execute a buy to cover order as part of a margin call to prevent this from happening the short seller should always keep enough buying power in their brokerage account to make any needed buy to cover trades before the market price of the stock triggers a margin call buy to cover and margin tradesinvestors can make cash transactions when buying and selling stocks meaning they can buy with cash in their own brokerage accounts and sell what they have previously bought alternatively investors can buy and sell on margin with funds and securities borrowed from their brokers thus a short sale is inherently a margin trade as investors are selling something they do not already own trading on margin is riskier for investors than using cash or their own securities because of potential losses from margin calls investors receive margin calls when the market value of the underlying security is moving against the positions they have taken in margin trades namely the decline of security values when buying on margin and the rise of security values when selling short investors must satisfy margin calls by depositing additional cash or making relevant buy or sell trades to make up for any unfavorable changes in the value of the underlying securities 