Unwind (redirected from unwound)

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.

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Unwind

1. See: Close a position.

2. To correct a mistake. For example, if an investor instructs his/her broker to sell a security and the broker instead buys it, the broker must re-sell the security, and pay the client what he/she may have lost in the mistake. This process is known as unwinding.