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Meaning / Definition of

Sell Short

Categories: Strategies, Investing and Trading,

selling short is a trading strategy that's designed to take advantage of an anticipated drop in a stock's market price.To sell short, you borrow shares through your broker, sell them, and use the money you receive from the sale as collateral on the loan until the stock price drops. If it does, you then buy back the shares at a lower price using the collateral, and return the borrowed shares to your broker plus interest and commission. If you realize a profit, it's yours to keep. Suppose, for example, you sell short 100 shares of stock priced at $10 a share. When the price drops to $7.50, you buy 100 shares, return them back to your broker, and keep the $2.50-per-share profit minus commission. The risk is that if the share price rises instead of falls, you may have to buy back the shares at a higher price and suffer the loss.During the period of the short sale, the lender of the stock is no longer the registered owner because the stock was sold to the purchaser. If any dividends are paid during that period, or any other corporate actions occur, the short seller must make the lender whole by paying the amount that's due. However, that income is taxed at the lender's regular rate, not the lower rate that applies to qualifying dividend income.

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Definition / Meaning of

Roth 401(k)

Categories: Retirement and Pension,

The Roth 401(k) retirement plan, which was introduced in 2006, allows you to make after-tax contributions to your account. Earnings may be withdrawn tax free, provided that you are at least 59 1/2 and your account has been open five years or more.Both the Roth 401(k) and the traditional 401(k) have the same contribution limits and distribution requirements. You can add no more than the annual federal limit each year, and you must begin taking required minimum distributions (RMD) by April 1 of the year following the year you reach age 70 1/2. You can postpone RMDs if you are still working.You may not move assets between traditional and Roth 401(k) accounts, though you may be able to split your annual contribution between the two. If you leave your job or retire, you can roll Roth 401(k) assets into a roth ira, just as you can roll traditional 401(k) assets into a traditional ira.Most 401(k) plans, including the Roth, are self-directed, which means you must choose specific investments from among those offered through the plan.

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