Selling a security or commodity quickly without regard to the price received. An investor bails out of a position if losses are mounting quickly and he or she is no longer able to sustain further losses. For example, someone who has sold a stock short may bail out by covering his or her position at a loss if the stock rises sharply.
The term is also used to describe the act of rescuing a person or corporate or government entity in financial distress. For example, the federal government bailed out the Federal Deposit Insurance Corporation with hundreds of billions of dollars when it had to pay for closing down hundreds of bankrupt savings and loans through the Resolution Trust Corporation. When the Chrysler Corporation was teetering near bankruptcy in the early 1980s, the federal government bailed it out by providing loan guarantees.
