Pairoff

AAA

DEFINITION of 'Pairoff'

1. A purchase of securities to offset a previously transacted sale of the same security.

2. A transaction in securities markets where off-setting buy and sell trades are settled in cash, based on the difference in the prices between the off-setting trades. No securities trade hands; instead the settlement difference between the trades is calculated, and a money wire is sent to the appropriate party.

INVESTOPEDIA EXPLAINS 'Pairoff'

1. The offsetting position is usually transacted within the same day of the original purchase. This is also referred to as crystallization.

2. Matching trades for pairoff can reduce settlement risks and security wire transfer fees. It is ultimately a form of speculation.

RELATED TERMS
  1. Speculation

    The act of trading in an asset, or conducting a financial transaction, ...
  2. Settlement Price

    In derivatives markets, the price used for determining profit ...
  3. Crystallization

    The act of selling and buying stocks almost instantaneously in ...
  4. Sell

    The process of liquidating an asset in exchange for cash. The ...
  5. Buy

    1. A recommendation to purchase a specific security. A buy rating ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value ...
RELATED FAQS
  1. What is the difference between hedging and speculation?

    Hedging involves taking an offsetting position in a derivative in order to balance any gains and losses to the underlying ... Read Full Answer >>
  2. How do speculators profit from options?

    As a quick summary, options are financial derivatives that give their holders the right to buy or sell a specific asset by ... Read Full Answer >>
  3. Will technology ever disrupt the role of the custodian bank?

    Custodian banks, along with other financial institutions that hold custodian accounts, are likely to be disrupted but not ... Read Full Answer >>
  4. What is the average range for the price-to-earnings ratio in the electronics sector?

    Investors purchase shares of company stock and other traded securities through capital markets in either primary or secondary ... Read Full Answer >>
  5. What are the benefits and shortfalls of the Herfindahl-Hirschman Index?

    Equity and debt are the two sources of financing accessible in capital markets. The term "capital structure" refers to the ... Read Full Answer >>
  6. What is the difference between open interest and volume?

    In the options market, two measurements describe the liquidity and activity of option contracts. Volume is the amount of ... Read Full Answer >>
Related Articles
  1. Options & Futures

    The Secret To Finding Profit In Pairs Trading

    Read about a market-neutral trading strategy using relatively low-risk positions.
  2. Investing

    Too Late To Invest In EM?

    Investors have flocked to developing markets amid continued low U.S. interest rates & hopes of further economic stimulus from emerging world central banks.
  3. Investing

    How Nasdaq Makes Money

    NASDAQ provides a marketplace which offers money-making opportunities to investors. Investopedia explains how NASDAQ makes money.
  4. Investing

    How The NYSE Makes Money

    We examine how the New York Stock Exchange, the leading US stock exchange, makes money.
  5. Investing Basics

    What is a Financial Market?

    “Financial market” is a broad term used to describe any forum where buyers and sellers meet to trade assets.
  6. Investing Basics

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  7. Mutual Funds & ETFs

    Which ETF is the Best Bet: VTI or IWV?

    A look at two quality ETFs that offer diversification, low expense ratios, and exposure to the total market.
  8. Economics

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  9. Markets

    Capital Markets

    Capital Markets are financial markets where organizations that need money for productive long-term purposes.
  10. Bonds & Fixed Income

    Spotting A Market Bottom

    Recognizing a market bottom can lead to huge opportunities for an investor. We go over how you can spot the bottom so that you can reap the rewards.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center