When an investor is unable to take advantage of preferential tax treatment because of time remaining on a required holding period. Also, a commodities position in which the market has a limit up or limit down day and investors are unable to move in to or out of the market.
An investor is locked in when he finds a potential profit is reduced if he disposes of the security, e.g. through imposition of a tax measure. Also where he cannot establish or unwind a position due to a limit move. See Limit Up/Limit Down.
1: Lingo used to indicate that a rate of return on an investment has been guaranteed for a specific length of time. Examples of such investments are certificate of deposits (CDs) and fixed rate bonds. See: Certificate Of Deposit; Fixed Income Investment; Rate Of Return 2: Said of a security whose profits or yields have been secured through use of a hedge. See: Hedging; Yield 3: Said about an investor who does not sell a profitable security because the profit would immediately be subject to capital gains tax. See: Capital Gain
When an investor has a profit on a security owned, but does not sell because of either the absence of a market or some legal restriction on the sale of the security. Also refers to an investor holding a security which has declined below the purchase price who cannot sell without incurring a loss.