An option contract that gives the owner the right to buy
100 shares (usually) of an underlying stock at a specified
price (its strike price) for a certain, fixed period of
time (until its expiration). For the writer of a call
option, the contract represents an obligation to sell 100
shares (usually) of an underlying stock if the option is
assigned. E.g.: The owner of an AAA MAR 65 call, would
have the right to buy 100 shares of AAA at $65 (strike
price) per share between now and the third Friday in March
Agreement that allows an issuer to redeem a bond before
maturity under specified conditions.
A buy or sell order that is canceled before it has been
executed. In most cases, a Limit Order can be canceled at
any time as long as it has not been executed. [A Market
Order may be canceled if the order is placed after market
hours and is then canceled before the market opens the
following day.] A request for cancel can be made at
anytime before execution.
The buying and selling of a security or other appreciating
asset that has increased in value during the time you
Stock authorized by a company's charter and having par
value, stated value or no par value. It includes all
classes of common and preferred stock.
Carry / Carrying Charge:
The interest expense on money borrowed to finance a
margined securities position.
An account in which all transactions must be fully paid.
The amount that may either be withdrawn in cash, or used
to purchase additional securities without creating a debit
A statement of net income plus depreciation and other
non-cash charges in a company's annual report. A strong
cash flow is important for covering interest payments,
particularly for highly leveraged companies. Positive cash
flow occurs when more money comes in than goes out while
the opposite is true of negative cash flow.
Also known as Spot Market, a transaction between a buyer
and seller in which payment is given upon delivery of the
physical commodity (grain, meat, metal, etc.).
The percentage of a given mutual fund's total assets
invested in cash and equivalents.
Settlement in cash on the trade date rather than the
A company's ratio of marketable securities and cash to its
Certificate of Deposit:
Investment offered by banks, which pays stated interest at
a fixed rate. Principal is returned at maturity subject to
penalties for early withdrawal.
|Chicago Board Options Exchange (CBOE):
Opened in April 1973, it is the oldest and largest listed
Separation of ownership interest into more than one class
of common stock frequently designated as Class A and Class
B. Class A shares usually possess an advantage over Class
B shares in terms of voting power and may also possess
additional dividend and liquidation privileges.
Class of options:
A term referring to all options of the same type - either
calls or puts -- covering the same underlying stock.
A facility that compares and reconciles both sides of a
trade in addition to receiving and delivering payments and
Mutual fund with a fixed number of shares that is traded
in the secondary market. Supply and demand determine the
market price of the shares as opposed to net asset value.
The commission deducted from the proceeds before
calculating realized gain or loss. It is the fee charged
by your broker to execute your trade. It may be a
composite of several fees & charges.
The final price of a security at which a transaction was
made. See also SETTLEMENT
A reduction or an elimination of an open position by the
appropriate offsetting purchase or sale. An existing long
option position is closed by a selling transaction. An
existing short option position is closed by a purchase
transaction. This transaction will reduce the open
interest for the specific option involved.
An option strategy in which an out-of-the-money call is
sold and an in-the-money put is purchased. This is
normally used as a long stock protective strategy. The
opposite of this strategy, called a "fence,"
could be applied as a protective measure in a short stock
Collateralized Bond Obligation:
An investment grade bond backed by a pool of bonds with
differing degrees of credit quality.
Collateralized Mortgage Obligation:
A mortgage backed corporate bond. These bonds are backed
by different classes of securities, or tranches, that vary
by risk level, interest rate, mortgage prepayment risk,
and average maturity.
An option position involving a call and put (either both
long or both short) on the same stock with differing
expirations, strike prices, or both.
Short-term debt, usually maturing from 2 to 270 days,
issued by banks and corporations.
Fee charged by a broker to execute a trade. This may be a
composite of several fees and charges. Commission rates
commonly take into account the quantity of the purchase,
the unit price of the security and the type of investment.
Security representing ownership interest in a corporation.
A strategy involving four options and four strike prices
that has both limited risk and limited profit potential. A
long call condor spread is established by buying one call
at the lowest strike, writing one call at the second
strike, writing another call at the third strike, and
buying one call at the fourth (highest) strike. This
spread is also referred to as a "flat-top
A written notification from a broker to a client
specifying the details of securities' transaction
Consumer Price Index (CPI):
A measure of price changes in consumer goods and services
used to gauge periods of inflation or deflation.
Instructions to execute a transaction in one security that
depends on the execution price of another security. E.g.:
Sell the XYZ May 60 call at 2, contingent upon XYZ stock
being at or below $59 1/2.
The number of underlying shares covered by one option
contract. This is 100 shares for one equity option unless
adjusted for a special event, such as a stock split or a
An investment strategy in which a long put and a short
call with the same strike price and expiration are
combined with long stock to lock in a nearly risk-less
profit. E.g.: Buying 100 shares of XYZ stock, writing 1
XYZ Jan 50 call, and buying 1 XYZ Jan 50 put at desirable
prices. The process of executing these three-sided trades
is also called "conversion arbitrage." See also REVERSE
The price at which convertible securities, such as bonds
and preferred stock, can be converted into common stock at
a set conversion ratio.
A debt security that is exchangeable for a set number of
shares of another type of security, usually common stock,
at a predetermined price. See also BOND.
A debt security investment in obligations of U.S.
corporations. Corporate bonds are taxable and have a
specific maturity date. They are often traded on major
exchanges. See also BOND.
The original price paid for an asset, including any
commissions or fees, used to determine capital gains or
losses at the time of sale. If an asset is inherited the
asset value is appraised at the donor's time of death.
To close out an open position. This term is used most
frequently to describe the purchase of an option or stock
to close out an existing short position.
|Covered Call / Covered Call Writing:
An option strategy in which a call option or options are
sold against equivalent amounts of long stock or long
calls. E.g.: Writing (selling) 2 XYZ Jan 50 calls while
owning 200 shares of XYZ stock, or 2 XYZ Jan 40 calls.
A strategy in which one call and one put with the same
expiration, but different strike prices, are written
against each 100 shares of the underlying stock. E.g.:
Writing 1 XYZ Jan 50 call and 1 XYZ Jan 55 put, and buying
100 shares of XYZ stock. In actuality, this is not a fully
"covered" strategy because assignment on the
short put would require purchase of additional stock.
An open short option position that is offset by a
corresponding stock or option position. That is, long
stock or a long call could offset a covered call, while a
long put or a short stock position could offset a covered
put. This insures that if the owner of the option
exercises, the writer of the option will not have a
problem fulfilling the delivery requirements. See also UNCOVERED
An option strategy in which one call and one put with the
same strike price and expiration are written against each
100 shares of the underlying stock. E.g.: Writing 1 XYZ
Jan 50 call and 1 XYZ Jan 50 put, and buying 100 shares of
XYZ stock. In actuality, this is not a fully
"covered" strategy because assignment on the
short put would require purchase of additional stock.
Money received in an account either from a deposit or a
transaction that results in increasing the account cash
In a cash account, the credit balance is the amount of
money in a customer's account after all debts have been
paid and all proceeds from sales received. In a margin
account, a credit balance would include the proceeds held
from a short sale which would be held in escrow for the
borrowed securities for these sales.
Difference in the value of two options, where the value of
the one sold exceeds the value of the one purchased. A
bull spread with puts and a bear spread with calls are
examples of credit spreads.
|Current Market Value (CMV):
CMV refers to the closing market price of a position on
the most recent business day. J.B. Oxford & Company
will use a reasonable estimate if no closing price is
A company's current assets divided by its current
liabilities. It is a measure of a company's liquidity.
Current Year High & Low Price:
The highest and lowest price for a given asset during the
current calendar year.
For stock, the annual dividend divided by the current
price per share. For bonds, the annual interest payment
divided by the current price divided by 100 times
quantity. A measure in percentage terms of how much income
you can derive from the security. Of great importance to
fixed income investors and of minimal importance to growth
investors. See YIELD
Committee on Uniform Securities Identification Procedures.
An industry code, which uniquely identifies all traded
stocks and bonds.