Pairoff

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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.

BREAKING DOWN '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.

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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 >>
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    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 >>
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    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
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    Shares outstanding and floating stock are different measures of the shares of a particular stock. Shares outstanding is the ... Read Full Answer >>
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