Unwind

What does 'Unwind' mean

To unwind is to close out a position that has offsetting investments or the correction of an error. Unwinds occur when, for example, a broker mistakenly sells part of a position when an investor wanted to add to it. The broker would have to unwind the transaction by selling the erroneously purchased stock and buying the proper stock. Generally, the term "unwind" refers to more complicated and layered trades.

BREAKING DOWN 'Unwind'

One type of investing that features unwind trading is arbitrage investing. If, for the sake of illustration, an investor takes a long position in stocks, while at the same time selling puts on the same issue, he or she will need to unwind those trades at some point. Of course, this entails covering the options and selling the underlying stock. A similar process would be followed by a broker attempting to correct a buying/selling error.

RELATED TERMS
  1. Erroneous Trade

    A stock transaction that deviates so much from the current market ...
  2. Cancellation

    Notice by a broker informing his or her client that an erroneous ...
  3. Each Way

    A slang phrase used when a broker earns commissions from both ...
  4. Legging In

    1. Setting up the entry position of a complex financial investment ...
  5. Business Broker

    A professional who specializes in the purchase and sale of companies. ...
  6. Give Up

    A procedure in securities or commodities trading where the executing ...
Related Articles
  1. Investing Basics

    Picking Your First Broker

    If you're a rookie investor, your first big investment decision should be an informed one.
  2. Forex Education

    Is Your Forex Broker A Scam?

    While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business.
  3. Investing Basics

    How To Choose The Right Online Trading Broker

    The online broker market is becoming more competitive, but differences exist in services that can help traders choose the broker that’s right for them.
  4. Brokers

    Is Your Broker Acting In Your Best Interest?

    Learn the clues you'll need to determine whether you've chosen a reputable professional.
  5. Options & Futures

    Broker Or Trader: Which Career Is Right For You?

    A day in the life of a broker or trader is an exciting and varied one. Find out how to decide between these two financial professions.
  6. Forex Education

    Avoid Shady Brokers

    Here we will cover the preliminary steps you need to take to find your footing in the FX market.
  7. Trading Strategies

    The Best Low-Cost, Web-Based Trading Brokers

    With this table, investors can differentiate between top low-cost, web-based trading brokers by price, capabilities, and offerings.
  8. Investing Basics

    Why Use a Discount Broker?

    A discount broker is a stockbroker that does not offer clients investment advice, but trades shares for a smaller commission than a full-service broker.
  9. Active Trading Fundamentals

    Short Selling: What Is Short Selling?

    Investopedia Explains: The fundamentals of short selling and the difference between going long or short on an investment.
  10. Forex

    How Forex Brokers Make Money

    Forex brokers set their prices based on commission, spread, or a combination of both. Traders have to be cautious in the thinly regulated forex market.
RELATED FAQS
  1. Does a broker always have to buy a stock if I want to sell it?

    There are certain times when a broker must purchase the stock that you are selling. For example, if the broker is a market ... Read Answer >>
  2. I'm new to this. Can I sell or buy stock by myself?

    In order to buy stocks, you need the assistance of a stock broker since you cannot just phone up a company and ask to buy ... Read Answer >>
  3. There are so many stockbrokers out there. How do I go about choosing the best one ...

    If you decide that you have the knowledge and experience to take on stock investing, or if you feel you would like to give ... Read Answer >>
  4. My broker just sold securities out of my account without my permission. Is this legal?

    Your broker's actions are not legal unless he or she sold the securities under certain conditions. Let's look at the two ... Read Answer >>
  5. How is it possible to trade on a stock you don't own, as is done in short selling?

    Understand how the process of short selling allows a person to sell a stock he or she doesn't technically own by borrowing ... Read Answer >>
  6. What does "in street name" mean, and why are securities held this way?

    In almost every instance when you buy or sell securities with a broker, your name is not actually on the stock or bond certificate. ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center