Should You Take Advantage of Gypsy Swaps?

by Andrew McGuinness     Aug 16, 2019

If you are a new trader keen on investing, odds are there is much more left for you to know about the market than you have discovered on your own. The field of investments is a vast one, to say the least, and there is a large amount of information seemingly hidden from traders new to the market.

There is an incredibly expansive vocabulary associated with the market; and part of Trading 101 is to uncover as much of this vocabulary as possible through studying the market and pursuing research as an investor. Gypsy swaps, for example, is likely a term many are unfamiliar with. The following is an overview of what exactly gypsy swaps are and how to use them profitably.

1. Defining gypsy swaps

Luckily, the term gypsy swaps itself clues us quite a bit into what type of actions are involved with this investment. Basically, an investor is faced with the need to swap a freely traded share with a restricted share that holds limitations in terms of time and price. This leads the investor to swap with the company issuing the shares.

Now, the issuing company uses these shares to earn capital by selling them to another investor for more or less than what it is being sold for on the market. By doing so, this new investor has equity in the issuing company as well as the issuing company contributing to its own capital. Gypsy swaps are often the choice you make when all else is lost. They are last-ditch efforts to save a share.

2. How safe are gypsy swaps?

There are gypsy swaps that are considered a violation of section 5 of the Securities Act. Gypsy swap shares are also commonly improperly registered. For this reason, you should keep an eye out for red flags when it comes to performing gypsy swaps just in case you do happen to get stooped.

Not only can you get stooped and lose the funds you were putting into this investment, but you may have to deal with civil penalties and sanctions if a violation occurs within your transaction. Make absolutely sure that gypsy swaps are officially registered and valid before going about any trades, exchanges, or investments.

3. Who might take advantage of gypsy swaps?

If you are a trader who would like to exchange one type of asset for another within the same company, gypsy swaps may be invaluable to you. It is a much more convenient way of going about the investment of a new asset without going through the motions of selling one security and then buying the other.

This exchange is not only more convenient but also more cost-efficient – oftentimes, you only have to pay the tax fees. The issuing companies of these securities are obviously the big winners here, gaining capital for the selling of assets to new buyers. These new buyers also gain equity within the company that sold their securities.


There are a lot of terms you might not be aware of as a new trader, and this may be because the terms refer to moves only experienced traders are advised to take, or simply because these moves are not worthwhile. The latter is true of most gypsy swaps. They are used as somewhat of a last resort. So unless you are desperate, gypsy swaps are not the way to invest.

Get unlimited access to our Learning Center,
Broker Insights and Exclusive Promotions for Free!