Lock In Profits

DEFINITION of 'Lock In Profits'

Realizing the gains of a position, such as buying a stock, by exiting at a profit. By locking in, that portion of the investment is no longer exposed to risks. All profits are unrealized until the position is closed.

Also known as "realization."

BREAKING DOWN 'Lock In Profits'

When investing it is important to protect your capital and your profits, this can be done by locking in your profits.

For example, if you bought 100 shares of ABC Company for $12 and the price went up to $36 two days later all potential profits are unrealized because the position isn't partially or fully closed. You can lock in the profits by selling 50 shares because 50 x $36 = $1,800. If the stock drops to $1, you will have still made a profit.

RELATED TERMS
  1. Unrealized Gain

    A profit that exists on paper, resulting from any type of investment. ...
  2. Loan Lock

    The securing of a specified interest rate on a mortgage that ...
  3. Lock Limit

    Commonly associated with the futures market, a lock limit occurs ...
  4. Locked Market

    A market in which a stock's bid and ask prices are identical. ...
  5. Profit Taking

    The act of selling a security in order to lock in gains after ...
  6. Realized Gain

    A gain resulting from selling an asset at a price higher than ...
Related Articles
  1. Investing Basics

    Levels Of Security For Investments

    The simple analogy of different kinds of bicycle locks can teach us a lot about investments.
  2. Economics

    Calculating Economic Profit

    Economic profit is the difference between the revenue a firm earns from sales and the firm’s total opportunity costs.
  3. Options & Futures

    Using LEAPS With Collars

    This options strategy will help you lock in profit while keeping your upside potential.
  4. Trading Strategies

    Knowing When To Hold And When To Sell

    When deciding whether to sell or hold on to a stock, use the "partial sell" strategy as a way to minimize risks and ensure that you make some profits.
  5. Investing Basics

    How to Know When it's Time to Sell a Stock

    Knowing when to sell a stock isn't always easy. Keep in mind these tips to help you know when to say when.
  6. Markets

    Profitability Indicator Ratios

    Learn about profit margin analysis, effective tax rate, return on assets, return on equity and return on capital employed.
  7. Investing Basics

    What is Profit?

    Profit is a general term used to denote when earnings exceed the expenses incurred to generate those earnings.
  8. Trading Strategies

    The Multiple Lives Of A Stock Trader

    Any trading career will have its ups and downs. Find out how to maximize the good times.
  9. Forex Education

    Top 10 Forex Trading Rules

    Get some guidelines on how to survive - and thrive - in a variety of markets.
  10. Active Trading

    10 Tips To Clear Your Portfolio's Dead Weight

    Clear the dead weight from your office, your portfolio and your mind to make room for profits.
RELATED FAQS
  1. What are unrealized gains and losses?

    An unrealized loss occurs when a stock decreases after an investor buys it, but he or she has yet to sell it. If a large ... Read Answer >>
  2. What is the difference between profitability and profit?

    Calculating company profit and profitability are not one and the same, and investors should understand the difference between ... Read Answer >>
  3. How can I tell if I'm an emotional investor?

    Successful investors possess the important trait of emotional stability, which means that they base their investment decisions ... Read Answer >>
  4. What is the formula for calculating profit margins?

    Learn about gross, operating and net profit margins, how each is calculated and how they are used by businesses and investors ... Read Answer >>
  5. What does operating profit margin tell a business owner?

    Learn about the operating profit margin, how it is calculated and what it says to both business owners and investors about ... Read Answer >>
  6. What is the difference between gross profit margin and net profit margin?

    Understand the difference between the two profitability measures, gross profit margin and net profit margin, and how to calculate ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center