“Going in” is a financial strategy where investors delay buying or selling until someone else has assumed the initial risk associated with the investment. Legging involves gradually increasing investment in a position, while entering involves taking a wait-and-see approach to determine if it’s a good idea to buy or sell. The goal is to wait until there is more evidence that the investment is within reason to lower risk and achieve a higher return.
“Going in” is a type of financial strategy that generally refers to taking a chance after the deal is already up and running. Considered a viable approach, especially among more conservative investors, this method allows the investor to delay buying or selling until someone else has assumed the initial risk associated with the investment, and then to get involved once that risk is partially offset. Getting in is not uncommon with various types of futures contracts involving commodities, with investors buying those contracts when the contracts are more likely to actually make a profit.
With legging, the process can be somewhat detailed or very simple in nature. For example, one use of this strategy requires establishing and executing a series of purchases or sales that allow you to gradually increase the investment in a certain position. This is in contrast to choosing to buy or sell in bulk to create that position. An advantage of using this continuous series of orders is that, at any time, the investor can stop the process if some new events or information threaten to derail the profitability of continuing.
In other situations, entering involves taking a wait-and-see approach to a given opportunity, only choosing to buy or sell when there is evidence that doing so is a good idea. For example, the investor may refrain from buying a futures contract at the start of issuance. Instead, he or she can wait a period of time to determine whether the commodity involved in the contract is likely to appreciate by the contract’s expiration date, at least at a rate that is considered fair. At that point, the investor approaches the current owner and offers to buy part or all of the contract at the current rate.
The general idea behind entry is to wait until there is more evidence that the volatility associated with the investment is within reason before choosing to get involved. This process can be used to evaluate new futures contracts or even new stock offerings, giving the investor a little more time to see how prices are moving in the market. While the process can take some time and require attention to detail, a successful introduction can result in lower risk of the amount of return that is ultimately achieved.
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