DEFINITION of 'Rollover'
A rollover is when you do the following:
1. Reinvest funds from a mature security into a new issue of the same or a similar security.
2. Transfer the holdings of one retirement plan to another without suffering tax consequences.
3. Move a forex position to the following delivery date, in which case the rollover incurs a charge.
INVESTOPEDIA EXPLAINS 'Rollover'
1. Assuming an option about to expire is favorable to hold, you may decide to buy or sell the later expiring option.
2. Retirement plans may be moved in order to forgo tax consequences when moving from one company to another. The distribution is reported on IRS Form 1099-R and the rollover contribution is reported on IRS Form 5498. Rollovers may be limited to one per annum for each IRA and the assets are generally made payable to the retirement account holder. The assets must then be deposited to the receiving retirement account within 60 days after the account holder receives the assets.
3. The forex fee arises from the difference in interest rates between the two currencies underlying a transaction. Sometimes investors can earn a credit if they are purchasing the currency with the higher of the two interest rates. Investors are often required to maintain certain margin positions with their brokers to earn a credit from rollover.
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