unwind

Unwind

1. The closure of an investment position.

2. The reconciliation of an error previously unseen by a brokerage house.

Notes:

1. Sometimes referred to as closing out a position. A good example would be unwinding an option position by entering into the opposite transaction.

2. When investment firms accidentally purchase the incorrect stock for a customer, they must reverse the transaction by selling the wrong stock and purchasing the correct one.

See also: Broker, Close Position

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unwind

1. To close out a relatively complicated investment position. For example, an investor who practices arbitrage by taking one position in stocks and the opposite position in option contracts would have to unwind by the date on which the options would expire.

2. To rectify a transaction in which a mistake has been made. For example, because of a misunderstanding, a brokerage firm may have bought the wrong stock for a customer. The firm must then unwind the erroneous trade by selling the stock just purchased and buying the correct stock.