What is a Cover-Stop?

A Cover-Stop is a pre-established point at which we are going to feel uncomfortable about continuing to hold a position. This discomfort would occur because the weekly closing price has gone higher (in the case of a Short position) than we really want it to.

Cover-Stops are utilized to represent a point above which we do not want our Short position of a stock to travel – if it does, it is time to Cover.

Cover-Stops are determined initially as part of Step #3 (when we first Short a stock) and are evaluated weekly and occasionally updated as part of Step #4.

Cover-Stops reduce risk -- initially by limiting losses -- ultimately by locking-in profits.