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Meaning / Definition of

Sell Short

Categories: Strategies, Investing and Trading,

selling short is a trading strategy that's designed to take advantage of an anticipated drop in a stock's market price.To sell short, you borrow shares through your broker, sell them, and use the money you receive from the sale as collateral on the loan until the stock price drops. If it does, you then buy back the shares at a lower price using the collateral, and return the borrowed shares to your broker plus interest and commission. If you realize a profit, it's yours to keep. Suppose, for example, you sell short 100 shares of stock priced at $10 a share. When the price drops to $7.50, you buy 100 shares, return them back to your broker, and keep the $2.50-per-share profit minus commission. The risk is that if the share price rises instead of falls, you may have to buy back the shares at a higher price and suffer the loss.During the period of the short sale, the lender of the stock is no longer the registered owner because the stock was sold to the purchaser. If any dividends are paid during that period, or any other corporate actions occur, the short seller must make the lender whole by paying the amount that's due. However, that income is taxed at the lender's regular rate, not the lower rate that applies to qualifying dividend income.

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Definition / Meaning of

IRA Rollover

Categories: Retirement and Pension, Tax,

If you move assets from an existing individual retirement account (IRA) or an employer sponsored retirement plan to an IRA, you've completed an IRA rollover. You owe no income tax on the money you move if you deposit the full amount into the new IRA within 60 days or arrange a direct transfer from the existing account to the new account. If you're moving money from an employer's retirement plan to a rolllover IRA yourself, the plan administrator is required to withhold 20% of the total.That amount is refunded after you file your income tax return, provided you've deposited the full amount into the new account on time, including the 20% that's been withheld. Any amount you don't deposit within the 60-day period is considered an early withdrawal and you'll have to pay tax on it.You might also have to pay a penalty for early withdrawal if you're younger than 59 1/2. But if you arrange a direct transfer from your plan to the rollover ira nothing is withheld.

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