mrm - chart, page-27

goroos,

When a trader short sells an equity (ie sells borrowed stock or a short CFD), they must eventually "cover" their position (ie buy back the stock/CFD they have sold).

If it is done through an option trade, you buy a "put" option, enabling you to sell at a known fixed price, at some pre-set time in the future. If the price falls below the option exercise price, one can buy the stock on the market, and exercise the option, to profit from the difference. If the option is not profitable to exercise, it is simply allowed to lapse.

T91