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scale-down buying
scale-down buying definition - finance
Scale-down
buying tends to match up with scale-up selling, which is buying low and trying
to pick a bottom but diversifying the position in time. The lower the price
goes, the more you want to buy. For instance, if a trader bought all the way
down to $12 for a barrel of oil in 1998 and then sold as the market rallied and
kept on selling to $39, one would believe he or she would be rich. However, all
of the margin calls to deposit more money into his or her brokerage account
would put a different spin on the profit picture. Producers of oil-related
products such as gasoline or airlines tend to be scale-down buyers of jet fuel
in order to lower their average cost of fuel. With their large credit line they
can cope with the margin calls. This term is typically used in the futures
market.
Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.
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