Days to cover

Days to cover estimates how many trading days it would take for all the short sellers in a stock to buy back their borrowed shares, based on current trading volume. It is calculated by dividing short interest, the total number of shares currently sold short, by the stock's average daily trading volume. A days to cover figure of five means that, at the stock's typical volume, it would take roughly five full trading days of buying for every short seller to close out their position.

The formula is:

A high days to cover number signals that a large short position exists relative to how actively the stock normally trades, meaning short sellers could have real difficulty exiting quickly if the stock started moving against them. This is one of the key ingredients behind a short squeeze, since a stock with a high days to cover and a sudden price spike can force short sellers into a scramble to buy to cover, and that forced buying itself pushes the price higher because there simply is not enough normal daily volume to absorb it smoothly.

A low days to cover figure suggests the opposite, short sellers could unwind their positions relatively easily without needing several days of buying pressure, so the stock is less prone to a supply driven short squeeze even if it is heavily shorted in absolute terms. Traders and researchers watch changes in days to cover over time, since a rising figure can indicate that short interest is building faster than trading volume can support it.