Disposition refers to the act of getting rid of an asset or security through a direct sale or some other transfer method. Insider trades often report a disposition of a certain number of shares to board members and executives, which simply means that they have sold the assets in question.
Specifically, the act of disposition is literally getting rid of an asset through either a sale, assignment, or by transferring it to another person or organization. Assets, even an equity position in a publicly traded company, go through disposition when an investor gets rid of it. The most common form of disposition is selling stock through a brokerage firm. However, there are other ways to dispose of an asset through disposition.
"Disposition" is the technical term for selling shares of stock in a publicly traded company in all cases. When an investor sells an piece of equity, he is giving up ownership of those shares, transferring ownership to another investor or organization. Any time a person buys stock on a public exchange, an act of disposition occurs by the selling party.
"Disposition" can also be used to encompass the sale of shares or equity to collateralize a loan with a lending institution. If an investor has a margin account, for example, and a broker sells shares within that margin account, it's considered a disposition of equity.
All investors have the option of transferring ownership of shares to another person or organization. In some cases, people transfer shares to a charity to reduce capital gains tax in the current tax year. This transfer would be considered a disposition of shares. For example, if an investor purchased a block of shares for $1,000 and then transfers it to a nonprofit when the shares are worth $10,000, the investor would not pay capital gains tax on the $9,000 gain and would also be able to write off $10,000 as a charitable donation.