ARCA
ARCA, Definition
Previously known as ArcaEx, ARCA is an abbreviation of Archipelago Exchange. ARCA is an entirely online securities exchange offering stocks and options trading. Owned by NYSE Euronext, ARCA allows securities trading outside normal market hours. See also: NYSE
Abandon
Abandon, Definition
To elect not to exercise or offset a long option position.
Abandoned Baby Candlestick Pattern
Abandoned Baby Candlestick Pattern, Definition
An unusual reversal pattern on a Japanese Candlestick chart defined by a gap followed by a Doji, followed by another gap in the opposite direction. The shadows on the Doji have to completely gap above or below the shadows of the first and third day.
Abandonment Option
Abandonment Option, Definition
A contractual clause that allows the granting parties the option of withdrawing from an investment before the fulfillment or completion of all the contractual duties and the original conditions for termination. An abandonment option often appears in the contracts between financial planners and their clients, allowing one of the parties to withdraw without penalty.
Abatement
Abatement, Definition
A reduction or reprieve in the amount of taxation, debt or any other payment obligation faced by an individual or company. Abatement can include a tax decrease, a reduction in penalties, or a rebate.
Abeyance
Abeyance, Definition
The suspension of a title to real estate until legal ownership is determined.
Ability to Pay
Ability to Pay, Definition
A borrower's ability to make interest and principal payments on current and future debt obligations. In the context of municipal bonds, Ability to Pay refers to the issuer's present and future ability to create sufficient tax revenue to fulfill it's contractual obligations, accounting for municipal income and property values. In the context of taxation, Ability to Pay refers to the principle that taxes should vary according to an individual's level of wealth or income.
Abnormal returns
Abnormal returns, Definition
The return on an asset or security that surpasses the expected rate of return. Abnormal returns are above those predicted by the overall market movement.
Above Water
Above Water, Definition
Describes an asset when it's actual value when it is greater than it's book value.
Above par
Above par, Definition
Describes a bond with a current price above face value.
Above the Market
Above the Market, Definition
Describes a limit order to buy or sell a security for a given price that is above the current market price. Opposite of Below the Market
Absolute Advantage Theory
Absolute Advantage Theory, Definition
The theory that trade occurs when one country, individual, company, or region is absolutely more productive than another entity in the production of a good. A person, company or country has an absolute advantage if its output per unit of input of all goods and services produced is higher than that of another entity producing that good or service.
Absolute Breadth Index
Absolute Breadth Index, Definition
Referred to as a market momentum indicator, the absolute breadth index (ABI) is equal to the absolute value of the difference between the advancing issues and the declining issues. It shows how much activity and volatility and change is taking place on the NYSE while ignoring the direction prices are going. It shows only market activity. Developed by Norman G. Fosback. In Fosback's book, Stock Market Logic, he states that historically, high values typically lead to higher prices three to twelve months later. He found that a highly reliable variation of the ABI is to divide the weekly ABI by the total issues traded. A ten-week moving average of this value is then defined. Readings above 40% are very bullish and readings below 15% are bearish.
Absolute Price Oscillator (APO)
Absolute Price Oscillator (APO), Definiton
An indicator based on the difference between two exponential moving averages, expressed in absolute terms. Also known as the MACD indicator, the APO is calculated by subtracting the longer exponential moving average from the shorter exponential moving average. See also: Price Oscillator (PO), Percentage Price Oscillator (PPO).
Absolute Rate
Absolute Rate, Definition
The fixed part of an interest-rate swap, given as a percentage rather than a premium or discount to a reference rate. Also known as an 'absolute swap yield'.
Absolute priority rule
Absolute priority rule, Definition
The rule in bankruptcy proceedings that requires senior creditors to be fully paid before junior creditors and shareholders receive any payment resulting from liquidation or reorganization. Creditors' claims take precedence and shareholders are the last people to get paid in the event of liquidation or reorganization. Also referred to as liquidation preference.
Absorbed
Absorbed, Definition
Definition
1: Describes when a cost is treated as an expense, rather than passing the cost on to customers by raising prices. Definition
2: Describes when a business is merged into an another company through it's to acquisition. Definition
3: Describes the situation in the equities market where the process of trading securities does not affecting the market price. Securities are absorbed as long as there are corresponding buy and sell orders
Abusive Tax Shelter
Abusive Tax Shelter, Definition
A limited partnership deemed by the IRS to be illegally claiming tax deductions.
Accelerated Cost Recovery System
Accelerated Cost Recovery System, Definition
A schedule of depreciation rates allowed for tax purposes introduced by the Economic Recovery Tax Act of 1981. The Modified ACRS (MACRS) replaced ACRS for property placed into service after 1986.
Accelerated Depreciation
Accelerated Depreciation, Definition
A method of depreciation used for accounting or income tax purposes that grants larger deductions in the earlier years of an asset's aquisition.
Acceleration Clause
Acceleration Clause, Definition
A contract that states that an unpaid balance becomes due if specific actions, such as a failure to make payment, occur.
Accommodation Trading
Acceleration Clause, Definition
A contract that states that an unpaid balance becomes due if specific actions, such as a failure to make payment, occur.
Accommodative Monetary Policy
Accommodative Monetary Policy, Definition
A Central Bank policy aiming to to increase the amount of money available to banks for lending, with the result of making money less expensive to borrow.
Account Executive
Account Executive, Definition
Employee of a brokerage firm who handles trades for the client.
Account Reconciliation
Account Reconciliation, Definition
The process of reviewing and adjusting the balance in a personal checkbook to match up with a bank statement.
Account Statement
Account Statement, Definition
The balance summary of all positions and transactions in a customers brokerage account.
Accredited Investor
Accredited Investor, Definition
Term used by the Securites Exchange Commission (SEC) in Regulation D of private placements to define individuals or entities that are financially sophisticated and have no need for the protection provided by certain government filings. Some restricted offerings, limited partnerships, and angel investor networks are available only to accredited investors. Accredited Investors are broadly speaking: institutional type accounts and wealthy individuals (individuals or entities with a net worth of $1 Million or more, individuals or entities with annual income of $200,000 or more, individuals or entities who purchase $150,000 or more of the offering and this does not represent more than 20% of their net worth). Companies who wish to raise capital from individuals without issuing registered securities must limit their search to Accredited Investors.
Accretion
Accretion, Definition
Accretion refers to the accumulation of capital gains in a discount bond as it approaches maturity and a value of par. While the gains are not received until the date of bond maturity, they are taxed by the IRS as annual income.
Accrual Basis
Accrual Basis, Definition
The accounting method that takes into account earnings and expenses when they have been incurred, regardless of whether they have been received or paid.
Accrued Interest
Accrued Interest, Definition
The amount of interest that has accumulated on a bond other fixed income security since the last interest payment up to but not including the settlement date. When a bond trades, the buyer pays the seller the accrued interest earned since the last coupon payment along with the contract price of a bond transaction. The buyer is reimbursed when the issuer pays next pays interest.
Accumulation
Accumulation, Definition
The act of buying more shares of a security over a period of time to avoid forcing the market higher with a single purchase.
Acid Test Ratio
Acid Test Ratio, Definition
The Acid Test Ratio is the ratio of a company's current assets subtracted from its inventories, accruals and prepaid items to current liabilities. The test is used to determine whether a firm has sufficient short-term assets to cover its immediate liabilities without selling inventory.
Active bond crowd
Active bond crowd, Definition
Refers to the most active members the bond department of the NYSE. Opposite of the cabinet crowd.
Actuals
Actuals, Definition
The physical or cash commodity, as distinguished from a futures contract. See also CashSpot Commodity.
Additional bonds test
Additional bonds test, Definition
A test to ensure that bond issuers are able to meet the debt service requirements of issuing any new additional bonds.
Advance-Decline Line
Advance-Decline Line, Definition
The advance-decline line is an indicator used to measure the breadth of a stock market advance or decline. The indicator uses the number of advancing stocks and compares that figure with the number of declining stocks. If advances outnumber declines the net total is added to the previous cumulative total, and if declines outnumber advances that net difference is subtracted from the previous cumulative total.
The advance decline line is compared to a major index such as the S&P 500 or the Dow 30. When the advance-decline line diverges from the stock market index, this is interpreted as a possible overbought/oversold signal.
Advancing
Advancing, Definition
Describes a security in an uptrend movement with subsequently higher highs and higher lows. See also: Declining
Adverse Excursion
Adverse Excursion, Definition
Refers to the loss in a trade position caused by an adverse price movement.
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Aframax
Aframax, Definition
Aframax is a type of oil tanker. The first four letters of Aframax are an acronym for Average Freight Rate Assessment. Relatively small in size for a tanker it is well suited to short haul voyages, and has the ability to transport crude oil to most ports globally.
Against Actual
Against Actual, Definition
A transaction involving the exchange of futures for cash positions, usually undertaken by hedgers.
Agent
Agent, Definition
A securities firm is classified as an agent when it acts on behalf of its clients as buyer or seller of a security. The agent does not own the security at any time
during the transaction.Agency Bond
Agency Bond, Definition
A debt security issued by a government-sponsored enterprise such as Fannie Mae or Freddie Mac, designed to resemble a US Treasury bond.
Agency Note
Agency Note, Definition
A debt security issued by a government-sponsored enterprise such as Fannie Mae or Freddie Mac, designed to resemble a US Treasury note.
Aggregate Exercise Price
Aggregate Exercise Price, Definition
The exercise (strike) price of a a put or call option multiplied by the number of underlying securities involved in the contract (contract size). When calculating the aggregate exercise price, the premium paid or received on the option is not considered. Aggregate exercise prices are used to calculate the dollar amount needed if the option is exercised.
Aggregation
Aggregation, Definition
The principle under which all futures positions owned or controlled by one trader (or group of traders acting in concert) are combined to determine reporting status and compliance with speculative position limits.
Agricultural Commodities Index ($GKX)
Agricultural Commodities Index ($GKX), Definition
An index of agricultural commodity contracts, including Wheat, Red Wheat, Corn, Soybeans, Cotton, Sugar, Coffee, Cocoa, and Orange Juice. Compiled by Goldman Sachs.
Alberta Securities Commission (ASC)
ASC, Definition
The provincial regulatory agency responsible for overseeing the capital market in Alberta.
Agricultural Trade Option Merchant
Agricultural Trade Option Merchant, Definition
Any person that is in the business of soliciting or entering option transactions involving an enumerated agricultural commodity that are not conducted or executed on or subject to the rules of an exchange.
All or None
All or None, Definition
A type of order issued that stipulates to the broker to fill the order completely or not at all. If the order is not filled it should not be cancelled, as opposed to a fill or kill order.
Alligator spread
Alligator spread, Definition
Describes an options market spread, the commission for which is so large that the client is unlikely to make a profit even if the markets move in the client's favor.
Allowances
Allowances, Definition
The discounts (premiums) allowed for grades or locations of a commodity lower (higher) than the par (or basis) grade or location specified in the futures contract.
Alpha
Alpha, Definition
A measure of a mutual fund's risk relative to the overall market. It reflects the difference between a mutual fund's actual performance and the performance expected based on risk level taken by the fund's manager. A fund that produced the expected return for the level of risk assumed has an Alpha of zero. A positive Alpha shows that the manager produced a return greater than expected for the risk taken. A negative Alpha indicates that the manager has produced a return smaller than expected relative to the risk taken. The formula for alpha is the following:
[ (sum of y) - ((b)(sum of x)) ] / n
Where:
n = number of observations (36 mos.)
b = beta of the fund
x = rate of return for the market
y = rate of return for the fund
Alpha Coefficient
Alpha Coefficient, Definition
Alpha Coefficient measures of the ability of an asset to generate returns for a portfolio, independent of the portfolio or market conditions.
Alpha Equation
Alpha Equation, Definition
The alpha equation of a fund is as follows:
[ (sum of y) -((b)(sum of x)) ] / n
where: n =number of observations (36-60 months)
b = beta of the fund
x = rate of return for the S&P 500, or another benchmark index
y = rate of return for the fund
Alphabet Stock
Alphabet Stock, Definition
Categories of a corporation's common stock associated with a subsidiary company as a result of acquisitions and restructuring.
American Depository Receipt (ADR)
American Depository Receipt (ADR), Definition
Securities issued by a U.S. bank that represent shares of a foreign company and are traded on a U.S. exchange. ADRs trade like normal stocks and are listed on either the NYSE, AMEX or Nasdaq. They normally trade in line with the stock of the parent company on its domestic exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas.
Related Links: adr.com
American Option
American Option, Definition
An option that can be exercised at any time prior to or on the expiration date.
See also: European Option
American-Style Options
American-Style Options, Definition
Options that can be exercised any time during their lifetime. These are also known as open options.
American Stock Exchange (AMEX)
American Stock Exchange (AMEX), Definition
The American Stock Exchange (AMEX) is the third largest stock exchange in the United States and handles approximately 10% of all domestic securities trading. Located in New York, the exchange traces its origins to when brokers began meeting on the curb outside the NYSE in order to trade stocks that failed to meet the Big Board’s stringent listing requirements. Though AMEX now has its own trading floor it is sometimes referred to as the Curb Exchange. Most trading on AMEX is in small-cap stocks and derivatives. In 1998 the parent company of the Nasdaq purchased the AMEX and combined their markets, however the two exchanges continue to operate separately. See Also: Nasdaq, NYSE
Related Links: Amex.com
Amex Index Options
Amex Index Options, Definition
The American Stock Exchange was one of the pioneers in index options and today trades put and call options on broad market, industry sector and international indices. Index options make it possible for investors to leverage an entire market to speculate or hedge against price movements in a stock market as a whole or in broad segments of a particular market.
Amortization
Amortization, Definition
The paying off of debt in regular installments over a specified period of time.
Analyst
Analyst, Definition
A financial professional employed by a bank, brokerage, advisor, or mutual fund with expertise in evaluating financial instruments, who performs investment research and makes buy and sell recommendations to institutional and retail investors. Usually analysts specialize in a single industry or business sector. Also referred to as a financial analyst or securities analyst.
Annual Report
Annual Report, Definition
Refers to the annual report made by a company to its stockholders, containing a balance sheet, an income statement, a list of changes in retained earnings, and how revenues were used.
( 1 ) A publication, including financial statements and a report on operations, issued by a company to its shareholders at the company's fiscal year-end.
Annuity
Annuity, Definition
An annuity is a contract between you and an insurance company, under which you make a lump-sum payment or series of payments. In return, the insurer agrees to make periodic payments to you beginning immediately or at some future date.
There are two types of annuities: fixed and variable. In a fixed annuity, the insurance company guarantees that you will earn a minimum rate of interest during the time that your account is growing. The insurance company also guarantees that the periodic payments will be a guaranteed amount per dollar in your account. These periodic payments may last for a definite period, such as 20 years, or an indefinite period, such as your lifetime or the lifetime of you and your spouse.
In a variable annuity, by contrast, you can choose to invest your purchase payments from among a range of different investment options, typically mutual funds. The rate of return on your purchase payments, and the amount of the periodic payments you will eventually receive, will vary depending on the performance of the investment options you have selected.
Annuities also offer tax-deferred growth of earnings and a death benefit that will pay your beneficiary a guaranteed minimum amount, such as your total purchase payments.
Anonymous Trading
Permits Participating Organizations to voluntarily withhold their true broker identities when entering orders and trades on TSX trading systems.
Anthracite
Anthracite, Definition
Anthracite is the most valuable form of coal. It contains high levels of carbon and releases the greatest amount of energy on a per unit basis.
See also: Energy Trading
Approved Delivery Facility
Approved Delivery Facility, Definition
Any bank, stockyard, mill, storehouse, plant, elevator, or other depository that is authorized by an exchange for the delivery of commodities tendered on futures contracts.
Arbitrage
Arbitrage, Definition
Arbitrage describes the simultaneous purchase of a security in one market and the sale of it or a derivative product in another market to profit from price differentials between the two markets.
Also see: Spread
Arbitrageur
Arbitrageur, Definition
An individual who attempts to profit from the differences in price when the same, or a similar, security, currency, or commodity is traded on two or more markets. The arbitrageur attempts to profit by simultaneously purchasing and selling to take advantage of pricing differentials or spreads.
Arbitration
Arbitration, Definition
A process for settling disputes between parties that is less structured than court proceedings. NFA ’s arbitration program provides a forum for resolving futures-related disputes between NFA members or between NFA members and customers. Other forums for customer complaints include the American Arbitration Association.
Archipelago
Archipelago, Definition
Archipelago is an ECN - an Electronic Communications Network, used for creating a market for Nasdaq and listed (NYSE) stocks. The trading system automatically matches buy and sell orders at specified prices.
See also: Archipelago.com
Area Pattern
Area Pattern, Definition
A price movement pattern that follows an interupted upward or downward move in a stock or commodity. These patterns, including Head and Shoulders, Triangles, Pennants, Flags, Wedges, and Broadening Formations, have predictive value.
Arithmetic (Linear) Scaling
Arithmetic (Linear) Scaling, Definition
Describes the spacing on an Arithmetic or Linear scale chart, where the distance between each point on the vertical scale is the same.
Artificial Intelligence
Artificial Intelligence, Definition
The creation of programs to perform tasks which humans perform using their intelligence, thus mimicing our thought processes.
See also: Neural Networks
Artificial Price
Artificial Price, Definition
A futures price that has been affected by a manipulation and is thus higher or lower than it would have been if it reflected the forces of supply and demand.
Ascending Trend Channel
Ascending Trend Channel, Definition
A channel formed using two parallel, upward trendlines as the borders. The upper trendline connects chart highs, the lower trendline connects the chart lows.
Ascending Triangle
Ascending Triangle, Definition
The ascending triangle is a bullish chart pattern. The triangle is formed by two converging trendlines, where the lower line is rising and the upper line is flat. The price breaking through the horizontal resistance level depicted by the flat trendline is considered a buy signal.
Asian Option
Asian Option, Definition
An exotic option whose payoff depends on the average price of the underlying asset during some portion of the life of the option.
See also: American Option
Ask
Ask, Definition
The lowest price a seller is willing to accept for a given security or commodity, also known as the asking price or offer price.
Assay
Assay, Definition
Metal purity test to ensure that a metal meets exchange set quality standards for trading.
Asset Class
Asset Class, Definition
An asset class is a group of similar investments such as blue chip stocks. In order to build a diversified portfolio it is necessary to diversify among various asset classes, for example blue chip stocks, bonds and real estate.
Associated Person (AP)
Associated Person (AP), Definition
An individual who solicits or accepts (other than in a clerical capacity) orders, discretionary accounts, or participation in a commodity pool, or supervises any individual so engaged, on behalf of a Futures Commission Merchant, an Introducing Broker, a Commodity Trading Advisor, a Commodity Pool Operator, or an Agricultural Trade Option Merchant.
At-the-Market
At-the-Market, Definition
An order to buy or sell a contract of a security at whatever price is obtainable when the order reaches the trading facility.
See also: Market Order
At-the-Money
At-the-Money, Definition
When an option's strike price is the same as the current trading price of the underlying commodity or security, the option is at-the-money.
Auction Rate Security
Auction Rate Security, Definition
A debt security, typically issued by a municipality, in which the yield is reset on each payment date via a Dutch auction.
Audit Trail
Audit Trail, Definition
The record of trading information identifying, for example, the brokers participating in each transaction, the firms clearing the trade, the terms and time or sequence of the trade, the order receipt and execution time and, ultimately, and when applicable, the customers involved.
Automated Pit Trading (APT)
Automated Pit Trading (APT), Definition
APT is a screen based after-hours trading system for major futures contracts on the London International Financial Futures Exchange (LIFFE).
Automatic Excercise
Automatic Excercise, Definition
Automatic Excercise refers to the action taken by the options clearing firm at expiration when an in-the-money option has not been exercised or canceled.