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.

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