What is Puke
Puke is slang for selling a security or other asset despite the fact that you will be doing so at a loss.
BREAKING DOWN Puke
Puke, or the puke point, is when an investor decides to sell even if the sale is not in their best financial interest. The phrase may also be used to describe the time an investor has realized they will be unable to recoup costs after the value of an asset has plummeted. They are said to puke at the occurrence, or even the thought of the occurrence.
These sales often take place when an asset is plummeting in value and an investor wants to cut their losses before an even more significant depreciation occurs.
Some shrewd investors may hold out until certain assets reach their puke point, in the hopes that scared asset holders will sell them off at a reduced rate instead of holding onto them and waiting until they rebound.
Puke is also more commonly known as slang for vomit, or throwing up.
An Example of Puke
Take, for example, Kevin Jones. He has been actively purchasing shares of a company he was told was on the rise called Hammers, LTD. Over the years Kevin has invested heavily in this company, purchasing shares every time he had extra money to invest. He has invested widely over time, but a significant amount of his money is tied up in Hammers, LTD.
Suddenly, the stock begins to plummet. Kevin watches as the shares drop from $45 to $35. As they near another large drop off point, Kevin begins to realize that if he doesn’t sell these shares soon, he may not be able to find a willing buyer. Although he originally purchased them for $50, they are now worth half of that at $25. This is Kevin’s puke point. Although it makes him sick to do so, he wants to sell the shares before they drop any lower. He feels that a 50 percent loss is preferable to further loss.
Kevin finally manages to offload all of his shares of Hammers, LTD at $20 per share. He sells them to a broker at Spring and Garden. They purchase each share at $20 in the hope that the prices will rebound and their shrewd investment will pay off. Over the next few months, Hammers, LTD's share price begins to climb back up and eventually plateaus at $35 a share. Although Kevin’s puke point cost him $15 a share, the comfort of knowing that he wasn’t going to experience a total loss was worth it to him.