A

American-Style Option - An option which can be exercised at any time between the purchase date and the expiration date.

Analyst – An employee of a bank, brokerage, advisor, or mutual fund who studies companies and makes buy and sell recommendations, often specializing in a sector or industry. Analysts use a wide variety of techniques for researching and making recommendations to the investing public.

Asked Price - The lowest price that any investor has agreed that he/she will sell a given security for.

Assignment - The receipt of an exercise notice by an option writer that requires him/her to sell the security in the case of a call option, or to buy the security in the case of a put option, at the specified strike price.

At-the-Money - An option is at-the-money if the strike price of the option is equal to the market price of the underlying security.

Average Daily Volume - The number of shares traded per day, averaged over a certain period.

B

Back-Testing - The process of optimizing a trading strategy using historical data to predict future trends of the market.

Balance Sheet - A summary of a company’s financial situation at a specific point in time, including assets, liabilities and net worth.

Bearish - A pessimistic outlook anticipating lower prices in the underlying security, sector or the overall market.

Bid Price - The highest price any investor is willing to pay for a given security.

Bid/Ask Spread - The difference in price between what the buyers are willing to pay and what the sellers are asking.

Bottom-up - An investment strategy in which companies are considered based simply on their own merit, without regard for the sectors they are part of or the current economic conditions.

Break-Even Point - The price at which an option’s cost is equal to the proceeds acquired by exercising the option. For a call option, it is the strike price plus the premium paid. For a put option, it is the strike price minus the premium paid.

Broker - An individual or firm which acts as an intermediary between a buyer and seller for a commission.

Bullish - An optimistic outlook anticipating higher prices in the underlying security, sector or the overall market.

Buy and Hold - An investment strategy in which stocks are bought and held for a long period, regardless of the market’s fluctuations.

Buy Order - An instruction made by an investor to a broker to buy a security.

C

Calendar Spread - An Options strategy involving the simultaneous purchase and sale of options of the same class and strike price but different expiration dates.

Call Option - An option contract that gives the holder the right to buy the underlying security at a stated price on or before expiration date of the contract.

Cancel Order - An instruction made by a customer to a broker to not carry out an order that he/she had placed earlier.

Candlestick Charts - A technical analysis charting method.

Capital Growth - An increase in the market price of an asset or investment.

Capital Loss - A decrease in the value of an investment or asset.

Cash Account - A brokerage account in which the customer is required to pay the full amount due by the settlement date for securities purchased.

Cash-Flow Statement - A summary of a company’s cash flow over a certain period of time.

Class of Options - A group of calls or puts on the same underlying security

Closing a Position - Closing a long position requires selling, and closing a short position requires buying.

Closing Price - The price of the last transaction of a given security at the close of a day’s trading session.

Close-to-the Money - An option contract for which the strike price is close to the current market price of the underlying security. Also called near-the-money.

Closing Bell - The end of a trading session.

Commission - Fee charged by a broker to an investor to execute a trade.

Conservative Growth - An investment strategy aimed at long-term capital appreciation with low risk.

Contract - An agreement between a buyer and a seller on for a particular security.

Contract Size - The quantity of the underlying security that the holder of an option possesses the right to buy or sell, usually the contract size is 100 shares.

Covered Call - A call option contracts written equivalent to position held in the underlying security.

Covered Combo - A strategy consisting of writing a call and a put with the same strike price and expiration against stocks that the holder owns.

Credit Spread - A spread option position in which the price of the option sold is greater than the price of the option bought.

D

Day Order - A buy or sell order which automatically expires if it is not executed during that trading session.

Debit Spread - A spread option position in which the price of the option bought is greater than the price of the option sold.

Delta - The percentage move in the underlying security that will be translated into the price movement of an option.

Deep-in-the-Money - An option which is so far in the money that it is unlikely to go out of the money prior to expiration.

Derivative Security - A financial security, such as an option or future, whose characteristics and value depend on the underlying security.

Discount Broker - A broker offering relatively low commission rates in comparison to a full-service broker.

Diversification - Spreading investment positions in a variety of securities to minimize risks and exposure.

Dividend - A taxable payment declared by a company’s board of directors and given to its shareholders out of the company’s current, usually quarterly.

Downgrade - A negative change in ratings for a security; example is an analyst’s downgrading a stock (such as from “buy” to “sell”).

Downtrend - Downward price movement of a security or the overall market.

Due Diligence - The process of research, performed by investors, such as an examination of operations and management and the verification of material facts.

E

Early Exercise - An exercise or assignment of an option prior to expiration.

Earnings - The net income of a company over a certain period.

Earnings per Share - Total earnings divided by the number of shares outstanding. Also EPS.

Earnings Surprise - An earnings report that differs from the consensus forecast, i.e. causing a substantial movement in the security’s price.

Equilibrium - A balance, when demand equals supply.

European-style Option - An option which can only be exercised for a specified period of time just prior to its expiration, usually on the day of expiration.

Exchange Traded Fund - ETFs are index-based investment products that allow investors to buy or sell shares of entire portfolios of stock in a single security, and is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index.

Exercise - To implement the right of the option holder to buy or sell the underlying security at the strike price.

Exercise Price - The price at which the option holder can buy or sell the underlying security. Also called Strike Price.

Exit - The way in which an investor closes out a specific position.

Expiration Cycle - A sequence of dates on which the options of a particular security expire. All options (other than LEAPS) are placed in one of 3 cycles: the January cycle, the February cycle, or the March cycle.

Expiration Date - The day on which an option may be exercised.

Extrinsic Value - The difference in price between an option premium and its intrinsic value - represented by time and Volatility

F

Financial Institution - Institution which collects funds from the public and places them in financial assets, such as deposits, loans, and bonds.

Float - The number of shares of a security that are outstanding and available for trading by the investing public.

Forecast - Estimate future trends by examining and analyzing available information.

Free Market - Business governed by the laws of supply and demand, not restrained by government interference, regulation or subsidy.

Full Service Broker - A broker providing an all-inclusive services, including research information and advice.

Fundamental Analysis - An analysis conducted to evaluate the financial condition of a company in terms of past performance, future expectation and earnings.

Fund Manager - The individual responsible for making decisions related to any portfolio of investments (often a mutual fund, pension fund, or insurance fund).

H

Horizontal Spread - An Options strategy involving the purchase and sell of put options and call options having the same strike price but different expiration dates. Also called Time Spread.

I

Implied Volatility - A theoretical value designed to represent the volatility of the security underlying an option as determined by the price of the option.

Income Statement - An accounting of sales, expenses, and net profit for a given period.

Insider Buying - Buying of a company’s stocks by individual directors, executives or other employees, believing that the company’s stock is undervalued.

Insider Selling - Selling of a company’s stock by individual directors, executives or other employees. While selling of small amounts of stock is quite common, selling of large amounts of stock is sometimes interpreted by investors as a sign that the insiders know something negative about the company’s future.

Institutional Fund - A mutual fund that targets pension funds, endowments, and other high net worth entities and individuals. Often their main objective is to reduce risk, so they invest in hundreds of different securities, which makes them among the most diversified funds available.

In-the-Money - An option is in-the-money if the strike price of the call option is below or the put option is above the market price of the underlying security.

Intrinsic Value - The difference in price between the market price of the underlying security and the strike price.

L

Large-Cap Stock - A stock with more than US$5 billion market value.

Last Trading Day - The final day during which trading may take place in a particular option contract, which it must be settled by delivery of the underlying security.

Leverage - An option position is leveraged because it controls a large amount of securities with less money than comparable investments.

Limit Order - A buy order to purchase at or below or a sell order to sell at or above a specified (limit) price.

Liquidity - The ease with which a transaction can be made without changing the particular security price.

Listed Option - An option authorized by an exchange for trading.

Long Position - The state of actually owning a security or contract.

M

MACD - Moving Average Convergence/Divergence. a technical analysis term for the crossing of two moving averages.

Market Analysis - An analysis used to predict the market movement.

Market Capitalisation - Market capitalisation represents the aggregate value of a company or stock. It is obtained by multiplying the number of shares outstanding by their current price per share.

Market Maker - A brokerage or bank that maintains a firm bid and ask price in a given security by standing ready, and able to buy or sell at publicly quoted prices. These firms display bid and offer prices for specific numbers of specific securities, and if these prices are met, they will immediately buy for or sell from their own accounts. Market makers are very important for maintaining liquidity and efficiency for the particular securities that they make markets in.

Market Order - An order to be executed immediately at the best possible price.

Market Value - The price of a security traded at the current time.

Mean - One type of average, calculated by dividing the sum of a set of values by the number of values.

Mid-Cap Stock - A stock with over US$1 billion but below US$5 billion market value.

Micro-Cap Stock - A stock with under US$250 million market value.

Momentum Indicator - Technical analysis indicator which seeks to predict future market trends based on recent price and volume data. It compares the current price of a security to the price a selected number of periods ago.

Money Management - A set of trading rules and guidelines to keep risks at bay.

Moving Average - Technical analysis term meaning the average price of a security over a specified time period, used in order to spot pricing trends by flattening out large fluctuations. Moving average data is used to create charts that show whether a stock’s price is trending up or down.

O

Online Trading - The increasingly popular activity of buying and selling securities over the internet, through a broker’s proprietary software.

Opening Bell - Beginning of a trading session on an exchange.

Open Interest - The total number of option contracts that have not yet been exercised, expired, or fulfilled by delivery.

Open Market - A market which is widely accessible to all investors or consumers.

Open Position - A position that is not yet closed.

Option - A financial instrument that entitles the holder to buy or sell a number of shares (usually 100) of a particular security at predetermined price (strike price) on or before the expiration date of the contract.

Option Chain -A listing of the complete set of options available for a particular security. The data for each option includes option type, strike price and expiration date.

Option Holder - The purchaser of an option

Option Price - Also called the Premium

Oscillator - A technical analysis term for an indicator that moves up and down, within a price range.

Out-of-the-Money - An option is out-of-the-money if the strike price of the call option is above or the put option is below the market price of the underlying security.

Overbought - Technical analysis term indicating a stock has risen too much and/or is too expensive.

Oversold - Technical analysis term indicating a stock has fallen too far and/or is underpriced.

Overvalued - Perceived to be too expensive.

P

Paper Trading - Making simulated transactions with no real money, to practice or test theories.

Peak - The highest price, value or rate reached.

Position - The amount of a security either owned (a long position) or owed (a short position) by an investor.

Premium - The price of an option paid to open a call or put.

Preservation of Capital - A conservative investment strategy characterised by a desire to avoid risk of loss.

Price/Earnings Ratio - The P/E ratio is equal to a stock’s market capitalisation divided by its after-tax earnings over a 12-month period. The value is the same whether the calculation is done for the whole company or on a per share basis.

Price Gap - A significant price movement of a security between two trading sessions, such that there is no overlap in the trading ranges for the two days, such that the second day’s opening price is outside the first day’s trading range.

Price Range - The lowest and highest prices that a given security reaches over a specified period.

Put Option - An option contract that gives the holder the right to sell the underlying security at a stated price on or before expiration date of the contract.

Q

Qualitative Analysis - Determining the value of an investment, especially a stock, by examining its non-numeric characteristics, such as management, customer loyalty, and brand value.

Quarterly Report - Quarterly reports contain financial statements, a discussion from the management, and a list of “material events” that have occurred with the company (such as a stock split or acquisition).

Quote - The highest bid or lowest ask price available on a security at any given time.

R

Rally - A substantial rise in the price of a security or overall market, following a decline.

Ratio - One value divided by another. The result is representative of the value of one quantity in terms of the other.

Realised Profit - A capital gain or loss that is realised, for example a capital gain or loss on a completed transaction.

Real-Time - A particular security quotes that states the most current offer to buy or sell.

Rebound - A rally following a decrease in the price or a security.

Recommendation - An opinion given by an analyst to his/her clients about whether a given stock is worth buying or not, the most common ratings are strong buy, buy, hold, sell and strong sell. These analysts typically look at the company’s fundamentals and then build financial models in order to project future trends, most notably future earnings.

Resistance - In technical analysis, the inability of a stock to rise above a certain price (resistance level).

Retail Investor - An individual who purchases small amounts of securities for him/herself, as opposed to an institutional investor.

Retracement - A price movement in the opposite direction of the previous trend.

Retreat - Drop in price level following a rise.

Return on Investment - ROI. A measure of a corporation’s profitability, equal to a fiscal year’s income divided by common stock and preferred stock equity plus long-term debt. ROI measures how effectively the firm uses its capital to generate profit; the higher the ROI, the better.

Revenue - For a company, this is the total amount of money received by the company for goods sold or services provided during a certain time period. It also includes all net sales, exchange of assets; interest and any other increase in owner’s equity and is calculated before any expenses are subtracted.

Reversal - Change in the general direction of a market or security.

Risk - The quantifiable likelihood of loss or less-than-expected returns.

Risk Tolerance - An investor’s ability to handle declines in the value of his/her portfolio.

S

Seasonality - Cyclicality in a business or the economy from one season to the next.

SEC - Securities and Exchange Commission. The primary federal regulatory agency for the securities industry, whose responsibility is to promote full disclosure and to protect investors against fraudulent and manipulative practices in the securities markets.

Sector - A distinct subset of a market, society, industry, or economy, whose components share similar characteristics. Stocks are often grouped into different sectors depending upon the company’s business.

Security - An investment instrument, issued by a corporation, government, or other organization which offers evidence of debt or equity.

Security Deposit - Money paid in advance of a transaction to protect a seller or renter against damage or non-payment.

Sell Order - An instruction made by an investor to a broker to buy a security.

Sentiment - A measurement of the mood of the overall investing public, either bullish or bearish.

Series - Options of the same class, strike price, and expiration date.

Session - Period of trading activity from the time a market opens until it closes.

Shareholder - One who owns shares of stock in a corporation.

Shareholder Value - The value that a shareholder is able to obtain from his/her investment in a company. This is made up of capital gains, dividend payments, proceeds from buyback programs and any other payouts that a firm might make to a shareholder.

Shares Outstanding - The shares of a corporation’s stock that have been issued and are in the hands of the public.

Short Position - The state of selling a security or contract short.

Sideways - A price which is neither rising or falling; also called flat.

Signal - Technical analysis term for any indication of when it is time to buy or sell a particular investment, or when a market trend is shifting, based on charts, data, and formulas.

Slippage - The difference between estimated and actual transaction costs.

Small-Cap Stock - A stock with between US$250 million and US$1 billion market value.

Smart Money - Experienced investors and traders, who are able to spot trends and find investment opportunities before everyone else.

Soft Market - A market which has more sellers than buyers. Low prices result from this excess of supply over demand.

Spread - The difference between the current bid and the current ask of a given security; also called bid/ask spread.

Stochastic Oscillator - A technical indicator which compares a stock’s closing price to its price range over a given period of time. The belief is that in rising market stocks will close near their highs, while in a falling market they will close near their lows.

Stock Market - General term for the organized trading of stocks through exchanges.

Stock Symbol - Ticker symbol for a stock.

Stop-Loss Order - A stop order for which the specified price is below the current market price and the order is to sell.

Stopped Out - When a position is offset by the execution of a stop order.

Strike Price - The specific price at which the buyer of a call option may purchase the underlying security and the buyer of a put option may sell the underlying security.

Support - In technical analysis, a price level which a security has had difficulty falling below.

T

Target Price - Price at which a holder of a stock is hoping to sell the stock.

Technical Analysis - A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict future market trends. Technical analysts believe that they can accurately predict the future price of a stock by looking at its historical prices and other trading variables.

Theoretical Value - In options pricing, the hypothetical value of an option as calculated by the Black-Scholes Option Pricing Model.

Thinly Traded - Traded infrequently and/or in low volumes.

Time Decay - The ratio of the change in an option’s price to the decrease in its time leading to the expiration date.

Time Value - The amount by which an option’s premium exceeds its intrinsic value. Also called time premium.

Top-down - An investment strategy which first finds the best sectors or industries to invest in, and then searches for the best companies within those sectors or industries. This investing strategy begins with a look at the overall economic picture and then narrows it down to sectors, industries and companies that are expected to perform well.

Trend - The current general direction of movement for security prices.

Trendline - Technical analysis formation created by drawing a line connecting a series of descending tops, descending bottoms, ascending tops or ascending bottoms.

U

Underlying Security - A security which is subject to delivery upon exercise of an option contract.

Undervalued - Price is below its perceived value.

Unrealised Profits - Profit or loss which has been made but not yet realised through a transaction, such as a stock which has risen in value but is still being held.

Upgrade - A positive change in ratings for a security; example is an analyst’s upgrading a stock (such as from “sell” to “buy”)

Uptrend - Upward price movement of a security or the overall market.

V

Vertical Spread - An option strategy involving the simultaneous purchase and sale of options of the same class and expiration date but different strike prices.

Volatility - The relative rate at which the price of a security moves up and down. If the price of a stock moves up and down rapidly over short time periods, it has high volatility. If the price almost never changes, it has low volatility.

Volume - The number of shares or contracts traded during a given period, for a security or an entire exchange.

W

Wasting Asset - An asset which has a limited life and therefore decreases in value over time, such as an option which is out of the money.

Weak Market - A market in which sellers outnumber buyers.

Writer - The seller of an option contract.

.

.