Trading

DEFINITION OF 'HELD-FOR-TRADING SECURITY'

Debt and equity investments that are purchased with the intent of selling them within a short period of time (usually less than one year). Accounting standards necessitate that companies classify any investments in debt or equity securities when they are purchased. The investments can be classified as: held to maturity, held for trading or available for sale. Held-for-trading securities (or simply trading securities) are considered short-term assets, and their accounting is handled as such. Gains and losses resulting from changes in the investment's value are recorded as gains and losses on an income statement.

INVESTOPEDIA EXPLAINS 'HELD-FOR-TRADING SECURITY'

Held for trading securities include debt and equity instruments that are held for short periods of time, purchased with the intention of profiting from short-term price changes. They are purchased with the intention of selling them in the near term. These debt and equity investments are reported at fair value, and unrealized gains and/or losses are included in earnings.

DEFINITION OF 'HELD TO MATURITY SECURITY'

Accounting standards necessitate that companies classify any investments in debt or equity securities when they are purchased. The investments can be classified as held to maturity, held for trading or available for sale. A held to maturity security is a debt or equity security that is purchased with the intention of holding the investment to maturity. This type of security is reported at amortized cost on a company's financial statements and is usually in the form of a debt security with a specific maturity date.

INVESTOPEDIA EXPLAINS 'HELD TO MATURITY SECURITY'

Unlike held for trading securities, temporary price changes are not shown in accounting statements for held to maturity securities. Since stocks do not have a maturity date, they cannot be classified as held to maturity securities. The interest income received from a held to maturity...