What does “take a flyer” mean?

The term “take a flyer” is a colloquial term that refers to the risk that an investor takes when he knowingly makes a investment which can result in significant loss. Simply put, it is financial slang for the actions of an individual who knowingly engages in risky investment activity. Investors who take a flyer are usually speculators who make moves in high-risk securities. There is no guarantee that these risks will pay off. Investors can make big profits if they are profitable, but the ability to lose is just as big when things are moving in the opposite direction.

Key points to remember

  • Taking a flyer is a slang term that refers to actions an investor knowingly takes in hopes of an even greater return from a high-risk investor.
  • This often implies that the investor has no intention of getting any money back if the investment does not yield an unusually high payout.
  • The term take a flyer can also be used to refer to the case of a large loss.
  • These strategies are best suited for experienced investors, not novices.
  • Common circumstances of use of this phrase may include IPO investments, leveraged trades, or low probability bets on an investment that could unexpectedly turn around.

Understand take a flyer

The financial world is full of jargon and slang terms used by professionals and investors. Some of these terms include:

  • sushi linkwhich refers to a bond of a Japanese issuer outside the country in a currency other than yen
  • ankle biters or small cap stocks with market caps below $500 million
  • killer beewhich is a company that helps a target company fight a takeover

Taking a flyer is another slang term used in the investment world. It describes the actions of an investor who buys and sells highly speculative investments and is fully aware that he may lose all his money. This expression can also be used to refer to the event of a major loss. For example, saying “the company took a flyer on this investment” usually means that the company took an excessive risk or did not do its due diligence.

This phrase is used because when an investor picks up a flyer, the sense of investment risk is mitigated by the potential for a significantly higher return. come back if and when the investment pays off. An investor can also pick up a flyer about an investment they believe in, but which may not result in a significant return. For example, an investor who backs a emerging industry can invest on the basis of a personal obligation. It sometimes comes with the expectation of profiting or breaking even at some distant date.

There can be a number of circumstances that make a particular investment more risky, and in most cases these strategies are only recommended for experienced investors who have carefully calculated the potential results. Although all types of investments carry some risk, those who take a flyer on an investment are usually prepared to see no return on that investment, and possibly suffer a total loss.

Many investors who take a flyer are experienced investors. But in some cases, people buying and selling high-risk assets are doing so for the very first time.

Special Considerations

There are four common situations in which an investor may be tempted to take a flyer. They understand initial public offerings (IPOs), futures trading, options trading, and penny stocks. We have described how they work below.

Initial public offerings (IPO)

IPOs offer investors the opportunity to invest in a company that is entering the public market for the first time. These offers work as a method for a growing business (usually a start) to attract a large number of Capital city in a short period of time and often arouse enthusiasm both in the market and in the press. But risks abound in IPO investing.

A company emerging in the stock Exchange always involves a degree of uncertainty as to its long-term viability in the marketplace. Strong publicity can distort Evaluation of a company, sometimes leading to an overvaluation of this company and a less advantageous return on investment.

Alternatively, an IPO without much public attention can result in stocks that are undervalued as it appears on the market, and therefore a better return for investors. Analysts have shown that 80% of IPOs trade below their initial price.

Futures trading

Futures Trading involves the investor agreeing to buy an asset at a specified price at a future date. Frequently used in commodity trading, this type of investment initially emerged as a way for farmers to hedge against the value of crops between planting and harvest. Futures trading forces the buyer to buy the asset at the specified time at the predetermined price.

Options trading

Trading in these investments provides the buyer with a contract giving the right, but not the obligation, to buy a security at a specific price at a future date. Futures and options are risky because they each specify a time requirement on a trade, and if the actual price of the security at the time set by the buyer is disadvantageous, the buyer will suffer a loss, especially in volatile markets.

Penny Stocks

penny stocks are stocks of companies that trade for less than $5 per share. These shares normally trade on the over-the-counter (OTC) market or on the pink sheets. Trading these types of stocks is done electronically and can result in significant profits. The performance of stocks in this category is highly unpredictable, and this sector of the market is most exposed to the risk of fraud.

Some other common high-risk strategies include venture capital investments, emerging and frontier markets, leveraged exchange-traded funds (ETFs), limited partnerships, currency trading, junk bondsand hedge funds.

Example of taking a flyer

Here is a hypothetical example to show what it means to take a flyer.

Let’s say a colleague tells you that there is a penny stock with the potential for good returns. You do a little research and discover that the company is working on a new development that could change the industry, which promises to help the company become the next Meta (META).

Keep in mind that you know the risks of investing in penny stocks, namely a lack of liquidity, very little financial history and a lack of information. Buying shares in this company does not guarantee you a positive result. In fact, you run the risk of losing your entire investment. Despite all this, you are still investing in the business. By doing this, you take a flyer.

Investopedia does not provide tax, investment or financial advice and services. The information is presented without taking into account the investment objectives, risk tolerance or financial situation of any specific investor and may not be suitable for all investors. Investing involves risk, including possible loss of principal.

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Read More:   https://cointelegraph.com/news/what-is-an-nft-and-why-are-they-so-popular

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