Rollover

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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.

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BREAKING DOWN '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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RELATED FAQS
  1. How do I convert a spot rate to a forward rate?

    Think of the relationship between spot and forward rates in the same way as the relationship between discounted present value ... Read Full Answer >>
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    In the forex market, all trades must be settled in two business days. Traders who want to extend their positions without ... Read Full Answer >>
  3. Why can't I have fixed rollover costs in forex?

    In the forex market, trades are made on many foreign currencies around the world. Much like in the equities market, in the ... Read Full Answer >>
  4. How do I get credit for my retirement plan contributions?

    There is an added incentive for adding to your retirement nest egg, if your income falls within certain limits. Under this ... Read Full Answer >>
  5. Can you buy penny stocks in an IRA?

    It is possible to trade penny stocks through an individual retirement accounts, or IRA. However, penny stocks are generally ... Read Full Answer >>
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