Follow-Up Action


DEFINITION of 'Follow-Up Action'

Any subsequent trading that affects an established position in a security or derivative. Follow-up actions are taken to change the amount of exposure an investor has in a position, or to limit a strategy's losses or profits.

BREAKING DOWN 'Follow-Up Action'

For example, an investor who is long in shares of Company XYZ may be nervous about future losses. He or she could take the follow-up action of purchasing a put option for the stock, which would minimize losses in the event of a downturn.

  1. Derivative

    A security with a price that is dependent upon or derived from ...
  2. Security

    A financial instrument that represents an ownership position ...
  3. Economic Exposure

    A type of foreign exchange exposure caused by the effect of unexpected ...
  4. Market Exposure

    The amount of funds invested in a particular type of security ...
  5. Put Option

    An option contract giving the owner the right, but not the obligation, ...
  6. Investment Strategy

    An investor's plan of attack to guide their investment decisions ...
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  1. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  2. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  3. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  4. How can an investor profit from a fall in the utilities sector?

    The utilities sector exhibits a high degree of stability compared to the broader market. This makes it best-suited for buy-and-hold ... Read Full Answer >>
  5. What are the main risks associated with trading derivatives?

    The primary risks associated with trading derivatives are market, counterparty, liquidity and interconnection risks. Derivatives ... Read Full Answer >>
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