Basket Trade

Filed Under »
Dictionary Says

Definition of 'Basket Trade'

An order to buy or sell a group of securities simultaneously. Basket trading is essential for institutional investors and investment funds who wish to hold a large number of securities in certain proportions. As cash moves in and out of the fund, large baskets of securities must be bought or sold simultaneously, so that price movements for each security do not alter the portfolio allocation. In order for a trade to be considered a "basket trade," it must typically involve the sale or purchase of 15 or more securities.
Investopedia Says

Investopedia explains 'Basket Trade'

For example, an index fund aims to track its target index by holding most or all the securities of the index. As new cash comes in that could increase the value of the fund, management must simultaneously buy a large number of securities in the proportion they are present in the index. If it were not possible to execute a basket trade on all of these securities, then the quick price movements of the securities would prevent the index fund from holding the securities in the correct proportions.

Articles Of Interest

  1.

    Institutional Investors And Fundamentals: What's The Link?

    Big-money sponsorship might make a company look good, but it's not always a reliable gauge of stock quality.

  2. Brokers and Online Trading

    How do you find the right broker for your investment needs? Start by reading our broker tutorial.

  3. Index Investing

    Get to know the most important market indices and the pros and cons of investing in them.

  4. The Basics Of The Bid-Ask Spread

    The bid-ask spread is essentially a negotiation in progress. To be successful, traders must be willing to take a stand and walk away in the bid-ask process through limit orders.

  5. Forex: Demo Before You Dive In

    All trading platforms have benefits and drawbacks - master the fake trade before making a real one.

  6. Forget The Stop, You've Got Options

    Using options instead of stop-loss orders adds finesse and control in limiting losses.

  7. The Stop Loss Order

    A stop loss order can protect an investor's portfolio when it is left unattended. Find out more about this market order and how it can work for you.

  8. Introduction To Order Types

    A trade order is an instruction that is sent to a broker to enter or exit a position. Learn about the various types available to investors.

  9. Understanding Order Execution

    Find out the various ways in which a broker can fill an order, which can affect costs.

  10. Intermediate Guide To MetaTrader 4

    Learn how to use MetaTrader 4 software at an intermediate level.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...

  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center