A situation in which investors who sold short near the bottom of a down cycle find themselves trapped when the market unexpectedly reverses. As longs begin to enter the market, the shorts start buying their way out of their losing positions, which further fuels the upward price momentum and panic buying for the remaining short-sellers who are still in the market. When the short covering is complete, the upward momentum slows and the market often resumes its downward trend. Compare to bull trap. See whipsaw.
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Intrinsic value of an option
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