Illiquid Market Market
which has no volume that subsequently creates a lot of slippage due to lack of trading volume.
Immediate/Cancel An
order which must be filled immediately or canceled.
Index An
index is a group of stocks which can be traded as one portfolio, such as the S&P 500. Broad-based indexes cover a wide range of industries and companies and narrow-based indexes cover stocks in one industry or economic sector.
Index
Options Call options and put options on indexes of stocks are designed to reflect and fluctuate with market conditions. Index options allow investors to trade in a specific industry group or market without having to buy all the stocks individually.
Interest
Rate The charge for the privilege of borrowing money, usually expressed as an annual percentage rate.
Interest
Rate Driven Refers to a point in the business cycle when interest rates are declining and bond prices are rising.
Inter-market
Analysis Observing the price movement of one market for the purpose of evaluating a different market.
Inter-market
Spread A spread consisting of opposing positions in instruments with two different markets.
In-the-Money If
you were to exercise an option and it would general a profit at the time, it is known to be in the money.
In-the-Money
Option A
"call" option is in-the-money if the strike price is
less than the market price of the underlying security.
A "put" option is in-the-money if the strike price
is greater than the market price of the underlying
security
Intrinsic Value The amount by which a market is in-the-money. Out-of-the-money options have no intrinsic value. Calls = underlying -strike price. Puts = strike price - underlying.
Inverse
Relationship Two or more markets which act totally opposite of one another producing negative correlations.
Investment Any
purchase of an asset to increase future income.
Iron
Butterfly The combination of a long (short) straddle and a short (long) strangle. All options must have the same underlying and have the same expiration.
L
LEAPS Long-term
stock or index options which are available with expiration dates up to three years in the future.
Leg One
side of a spread.
Limit Move The maximum daily price limit for an exchange traded contract.
Limit
Order An order to buy a stock at or below a specified price or to sell a stock at or above a specified price.
Limit
Up, Limit Down Commodity exchange restrictions on the maximum upward or downward movements permitted in the price for a commodity during any trading session day.
Liquidity The
ease with which an asset can be converted to cash in the marketplace. A large number of buyers and sellers and a high volume of trading activity provide high liquidity.
Locked
Market A market where trading has been halted because prices have reached their daily trading limit.
Long The
term used to describe the buying of a security, contract, commodity, or option.
Low
(lo) This is the lowest price paid for a stock during a certain period.
Low
IV This
is the lowest ATM IV found over a historical time period
for the stock.
The period chosen is a 6 month period.
Low Risk Investing A
trade which is hedged for purposes of limiting price loss as opposed to a directional trade where loss is unlimited.
M
Make
a Market A market maker stands ready to buy or sell a particular security for his/her own account to keep the market liquid.
Margin A
deposit contributed by a customer as a percentage of the current market value of the securities held in a margin account is thus the margin amount. This amount changes as the price of the investment changes.
Margin
Account A customer account in which a brokerage firm lends the customer part of the purchase price of a trade.
Margin
Call A call from a broker signaling the need for a trader to deposit additional money into a margin account to maintain a trade.
Margin
Requirements (Options) The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position price changes.
Mark-to-Market The
daily adjustment of margin accounts to reflect profits and losses. In this way, losses are never allowed to accumulate.
Marked
to Market At the end of each business day the open positions carried in an account held at a brokerage firm are credited or debited funds based on the settlement price of the open positions that day.
Market A
specific asset, security or commodity that is traded at an exchange.
Market-If-Touched
(M.I.T.) A price order that automatically becomes a market order if the price is reached.
Market
Maker An independent trader or trading firm that is prepared to buy and sell shares or contracts in a designated market. Market makers must make a 2-sided market (bid and ask) in order to facilitate trading.
Market
on Close An order specification that requires the broker to get the best price available on the close of trading, usually during the last five minutes of trading.
Market
Order Buying or selling securities at the price given at the time the order reached the market. A market order is to be executed immediately at the best available price, and is the only order that guarantees execution.
Market
Price The most recent price at which a security transaction took place.
Market
Value The price at which investors buy or sell a share of common stock or a bond at a given time. Market value is determined by the interaction between buyers and sellers.
Max
Loss The
maximum amount of losses possible from the option trade
in the
Optionetics option trade ranker tool.
Max Profit The
maximum amount of net profit possible from the option
trade in the
Optionetics option trade ranker tool.
Mid-cap Stocks Usually
solidly established medium growth firms with less than 100 billion in assets. They provide better growth potential than blue-chip stocks, but do not offer as wide a variety of investment attributes.
Model A
model value for the option quote is the Bjerksund and
Stensland
Approximation of the Black-Scholes "fair" value of
the option based on the
estimated IV from the stock's other options.
Model
Profit The
Optionetics option trade ranker tool software uses
an option
mathematical model ( the Bjerksund Stensland American
option model) to
fairly price the option. The Optionetics software computes
what the profit of
the option strategy would be using the mathematical
model option prices.
The profit value is called the Model Profit. If this
"model profit", when the
trade is formed, is close to the profit of 0.0 ( a
new trade should start with
no profit ) then we are confident the option data being
used for the trade is
good. Model profits that exceed $200 likely are caused
by incorrect option
data.
Momentum When a market continues in the same direction for a certain time frame, the market is said to have momentum.
Momentum
Indicator A technical indicator utilizing price and volume statistics for predicting the strength or weakness of a current market.
Momentum
Trading Investing with (or against) the momentum of the market in hopes of profiting from it.
Moving
Averages The
moving average is probably the best known, and most
versatile, technical indicator. A mathematical procedure
in which the sum of a value plus a selected number
of previous values are divided by the total number
of values. Used to smooth or eliminate t
he fluctuations in data and to assist in determining when to buy and sell.
Mutual
Fund An open end investment company that pools investors' money to invest in a variety of stocks, bonds, or other securities.
N
Naked
Option An option written (sold) without an underlying hedge position.
Naked
Position A securities position not hedged from market risk.
Narrowing
the Spread The closing spread between the bid and asked prices of a security as a result of bidding and offering.
NASDAQ National
Association of Securities Dealers Automated Quotations system -- a computerized system providing brokers and dealers with price quotations for securities traded over-the-counter as well as for many New York Stock Exchange listed securities.
Near-the-Money An
option with a strike price close to the current price of the underlying tradable.
Net
Change The daily change from time frame to time frame. For example, the change from the close of yesterday to the close of today.
Net
Profit The overall profit of a trade.
New
York Stock Exchange (NYSE) The largest stock exchange in the United States.
Note A
short-term debt security, usually maturing in five years or less.
