Business, Legal & Accounting Glossary
Selling currently owned stock shares short. This strategy creates a neutral position in which the gains from the short sale and the loss from the decline in value of shares owned offset in the case that share prices decline, and is similar to purchasing a put option. The shares owned are considered a long position, and the term “box” refers to the older practice of placing shares held long-term in a safety deposit box. An example of this strategy would be if you expected your shares in XYZ to fall in value because a competitor just released a new and better product. Instead of selling your long position you could sell the stock short, with gains offsetting losses. While you wouldn’t pay taxes on the sale of stock because you did not actually sell shares, you might have to pay taxes on the short sale if you entered into another hedging strategy within 60 days after you closed your previous shor position.
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This glossary post was last updated: 16th November, 2021 | 0 Views.