Flip

Reviewed by Bhavana | Updated on Aug 27, 2020

Definition of the Term “Flip”

Generally, a flip refers to a sudden directional change in investment positioning. The term can have different meanings, depending on the type of investment. When it comes to the usage of this word, there can be at least four different examples which include: real estate investment, technical trading, professional fund management, and IPO investment.

What is the Relevance of a Flip With Regards to Real Estate Investment?

Broadly, the term “flip” applies to an investment strategy for real estate in which the investor can acquire or manage assets for a short time, add some improvement to the assets, and then sell or flip the assets for profit.

An investor is trying to buy a home at the lowest possible price in the case of residential house flipping. Often, this buyer has the desire and willingness to renovate the home to increase its value. The buyer relists the home for a higher price after the renovation is complete; retains the difference amount as profit.

What is a Flip When It Comes to Technical Trading?

An investor can change his or her position from net long to net short in technical trading, or vice versa depending on price action. They might consider doing this to benefit from a new trend. Depending on the trader and their strategies, the trend may last for a few weeks or beyond a year.

To net short flip in a net long, an investor may sell out options on their underlying securities at various strike prices to profit from falling prices. In the opposite scenario, an investor will increase their long positions by betting on price increases in security. These strategies allow traders to take advantage over time of price setbacks resulting from a security investment.