It's basically prunes, pushing, or an enema for giant blocks or lots of stock you want to sell.
Lot Relief Method refers to techniques used to calculate the cost basis of a lot (group) of shares, which is then used to pick out which of your lots to sell off first. The cost basis is the original cost or purchase price of the asset, and will determine what tax will be charged upon the sale.
There are multiple ways to calculate the cost basis of the lot, and depending on which is used, the tax due on the sale will vary. Two methods go in purchase order: Last In, First Out sells the last shares that were purchased first. The First In, First Out Method sells shares in the order they were purchased (the first to be bought and brought into the portfolio are the first to be sold).
The Dollar Value LIFO (Last In, First Out) groups shares by performance. Average Cost uses, well, the average of a whole group of assets or lots. Lastly, the Specific ID method lets the investor identify the shares they want.
As you may have noticed, the names are pretty clear cut, but choosing the method is less so. It's based partly on the rules applying to that asset, the method used to calculate previously, and the anticipated performance of that share in the future.
Related or Semi-related Video
Finance: What is Odd Lot Theory?37 Views
finance a la shmoop what is odd lot theory
well odd lot theory is an investment notion that presupposes that retail [Woman investor appears giving thumbs up]
investors are idiots the theory here is that when you see a lot of trades with
odd Lots you should basically do the opposite of what those trades are doing
like you know buying up a stock or selling down a stock or something like [Man throws stock away]
that well odd Lots are basically just small
order amounts like 22 shares here in 58 shares there in 77 shares here there and
everywhere and the idea is that odd Lots are almost always traded by small retail
investors who can't afford large blocks of stock and aren't wealthy so the [Stack of cash blows away]
presumption is that they're not experienced in stock market or have the
education or training to actually be making real trade schooled professional [Fire extinguisher blows out fire]
institutional investors who generally know what they're doing generally manage
large pools of money and trade in very large blocks like think big fat round [Stocks land around pool of money]
numbers in the millions of shares so when you inspect a tape running by
showing tons of tiny trades while odds are good that those are placed by you
know cardiologists and schoolteachers gardeners and plumbers all believing
that they can invest better than the market and the guys who make twenty five [People working in an office]
million dollars a year at goldman sachs yeah good luck with that and
statistically most retail investors who think they're smart enough to beat the
market are in fact idiots so the ethos of zagging in the opposite
direction of wherever retail investors are zigging well historically that's [Retail investor zig zagging]
generally been a really good idea they might be excellent cardiologists or
teachers or gardeners but when it comes to investing there well you know small
potatoes [Woman holding potato plant]
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