Crystallization

What is 'Crystallization'

Crystallization is the act of selling and buying stocks almost instantaneously in order to increase or decrease book value. This is a routine method used by many investors and companies to change book values without changing beneficial ownership.

BREAKING DOWN 'Crystallization'

An example of this occurs when an investor needs to take a capital loss for a particular stock, but still believes the stock will rise. Thus, he/she would crystallize the paper loss by selling the stock and buying it back right away.

Most tax agencies have regulations (such as the wash-sale rule) to prevent taking a capital loss in this fashion.

RELATED TERMS
  1. Tax Swap

    A method of crystallizing capital losses by selling losing positions ...
  2. Order Book

    An electronic list of buy and sell orders for a specific security ...
  3. Buy The Book

    An order to purchase all shares available in the market for a ...
  4. Public Book (Of Orders)

    A book containing all of the buy and sell orders for a specific ...
  5. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  6. Book Value Per Common Share

    Book value per common share is a measure used by owners of common ...
Related Articles
  1. Markets

    Book Value: How Reliable Is It For Investors?

    In theory, a low P/B ratio means you have a cushion against poor performance. In practice, it is much less certain.
  2. Investing

    The Difference Between Book and Market Value

    Book value is the price paid for an asset. It never changes as long as the asset is owned. Market value is the current price at which the asset can sell.
  3. Markets

    Market Value Versus Book Value

    Understanding the difference between book value and market value is a simple yet fundamentally critical component to analyze a company for investment.
  4. Trading

    Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
  5. Personal Finance

    7 Year-End Tax Planning Strategies

    Do you have a capital loss that could be booked and used to offset future tax liabilities? If so, it may be time to sell.
  6. Investing

    How The Stock Market Works

    When you buy a stock, you buy a piece of a company.
  7. Investing

    Who is a Beneficial Owner?

    A beneficial owner enjoys the benefits of owning an asset even though its title is in another’s name.
  8. Trading

    The Art Of Cutting Your Losses

    Taking corrective action before your losses worsen is always a good strategy. Find out how to keep your capital losses small and let your winners run.
  9. ETFs & Mutual Funds

    Value Investing Strategies in a Volatile Market

    Volatile markets are a scary time for uneducated investors, but value investors use volatile periods as an opportunity to buy stocks at a discount.
  10. Managing Wealth

    The Art Of Selling A Losing Position

    Knowing whether to sell or to hold is tough. And no rule fits all. Find out what to consider.
RELATED FAQS
  1. What's the difference between book and market value?

    Book value is the price paid for a particular asset. This price never changes so long as you own the asset. On the other ... Read Answer >>
  2. What is the difference between book value and market value

    Learn the differences between book value and market value, and see how investors use each type to determine if a company ... Read Answer >>
  3. What is the difference between book value and carrying value

    Dig deeper into the definitions of carrying value and book value, and learn to differentiate between their various financial ... Read Answer >>
  4. What does it mean if a share's market value is significantly higher than its book ...

    Learn how investors and analysts compare the market value of stock shares to the book value per common share; discover what ... Read Answer >>
  5. What is the difference between a company's book value per share and its intrinsic ...

    Book value and intrinsic value are two ways to measure the value of a company.In simple terms, book value is based on the ... Read Answer >>
  6. Who uses book value to estimate the value of a company?

    Understand the meaning of the term "book value" and how it is used by market analysts to estimate the worth or market value ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center