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Consolidate Stock Gains
Consolidating stock gains typically refers to a stock market advance after which stock prices continue at the new level, thus “consolidating” gains. However, the dictionary definition of consolidation is to strengthen gains or make them secure. An investor whose stock picks have paid off during a market rally will also want to consolidate stock gains as the market is consolidating its gains. To consolidate stock gains an investor can sell stock and take profits, use options trading and buying puts on the stock to protect gains, or a combination of the two. To consolidate stock gains an investor should remember the old adage that you don’t have a stock profit until you take a profit. The guaranteed way to profit from a stock, to consolidate stock gains, is to sell your stock. The problem with that approach is that the investor then loses out on subsequent stock price advances. For example, after Microsoft went public in 1986 there were any number of times in the first decade or so when an investor could have taken profits by selling the stock and then would have missed out on further advances. Thus trading options can be an attractive approach to consolidate stock gains in short or long term investing.