Covering. In foreign exchange dealings covering ordinarily consists in paying one bill of
exchange (draft) with another. For example, a foreign exchange dealer in New York draws and
sells a bill on London due in 60 days. When the bill matures (falls due) he takes it up (pays it) with
a demand bill (bill payable immediately) which he has purchased. Again: A dealer in New York
draws and sells a bill on London and buys a bill on Paris for an equivalent amount which he
forwards to London in cover or discharge (in payment) of the bill which he sold on London.
Covering also is a speculative term, meaning the act of buying stocks or commodities for the
purpose of closing short contracts—in other words, buying back stocks or commodities previously
sold, but which were not possessed when sold.