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What is accommodation trading?

Accommodation Trading is when two traders enter into a non-competitive trade agreement which disregards the current market price for the securities being traded.

The primary reason to engage in accommodation trading is for an investor to avoid taxes by harvesting more losses than actually occurred.

One investor will buy shares from another investor for a price significantly below the market value so that the selling investor can report more losses. The partners will typically agree to allow the selling party to buy the shares back later at the same price.

There are also legal accommodation trades, such as Cabinet Trades, which are used to close out the position in options that have become worthless for a small fee (such as a dollar) to allow the investor to get the position off of his books.

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