A - B - C - D - E - F- G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z

A

accumulation Institutional buying of specific stocks or the overall market. An accumulation day is identified as having volume above the previous day's volume accompanied by an increase in price.

advance/decline line A measure of market movements composed of the cumulative total of differences between advancing issues (stocks whose prices are up on the day ) and declining issues (stocks whose prices are down on the day) of securities prices.

alpha A measure of stock quality that compares the performance of an individual stock relative to the market. An alpha value of 1 means that the stock has, on average, outperformed the market by 1% per month, so if the market moves up 10% in six months, the stock should move up 16%.

arbitrage 1. Buying and selling, at temporarily different prices, two securities that are exchangeable for each other, as under a merger plan. 2. Buying a security or commodity in one market and simultaneously selling the same or a related instrument in another market in an attempt to profit from short-term price differentials.

ask The lowest currently stated acceptable price for a specific stock or commodity on the floor of an exchange. Also called the offer.

at-the-money An option in which the price of the underlying instrument is exactly the same as the strike price of the option. (See in-the-money, option, out-of-the money.)

B

bear Anyone who takes a pessimistic view of the forthcoming long-term trend in a market; that is, one who thinks that a market is or soon will be in a long-term downtrend.

bear market A long-term downtrend (a downtrend lasting months to years) in any market, especially in the stock market, characterized by lower intermediate lows (those established in a time frame of weeks to months) interrupted by lower intermediate highs.

beta A measure of a stocks volatility. A stock with a Beta of 2 should be up 20% when the market is up 10%, or down 20% if the market is down 10%.

bid An indication by an investor, trader, or dealer of the willingness to buy a security or a commodity at a certain price; also, the highest current such indication for a specific stock or commodity at any point in time.

bid and ask The current quote or quotation on the floor of any market exchange for a specific stock or commodity. The bid is the highest current price at which anyone is willing to pay at a given moment of time. The ask is the lowest current price anyone is willing to sell the security or commodity at a given moment in time. Also called the bid and offer.

block A large amount of a specific stock, generally 10,000 or more shares.

blue chip The common stock of an established industry leader, such as IBM, whose products or services are widely known and which has a solid record of performance in both good and bad economic environments.

bond yields The income available from a bond expressed as a percentage of the purchase price.

bottom The lowest price within a market movement that occurs before the trend changes and starts moving up.

book value A measure of the net worth of a share of common stock. It is calculated by subtracting the intangible assets and preferred stock from the total net worth of the company, and then dividing by the number of common shares outstanding.

break A downward price movement that goes below previous important lows and continues to carry downward. The term usually applies to dramatic downward movements after the market has been moving horizontally in a "line" for a sustained period.

breakout An upward price movement that goes above previous important highs and continues to carry upward. The term usually refers to dramatic upward movements occurring after the market has been moving horizontally in a "line" over a sustained period.

brokerage The same commission the fee charged by a registered securities or commodities broker for executing a customer's order.

bull Anyone who takes an optimistic view of the forthcoming long-term trend in a market; that is, one who thinks that a market is or soon will be in a long-term uptrend.

bull market A long-term (months to years) price movement in any market characterized by a series of higher intermediate highs (those established within weeks to months) interrupted by higher consecutive intermediate lows.

C

call An option contract giving the owner the right to buy a specified amount of a stock bond, commodity, etc. at a stated price within a specified period.

capital Accumulated money or goods used to produce income.

car Market slang for one contract in the commodities markets.

CBOE Chicago Board Options Exchange.

commission The fee charged to a client by a registered broker for the execution of an order to buy or sell a stock, bond commodity, option, etc.

consolidation A period of trading in a security or commodity market characterized by a narrow price range over a sustained period. In technical terms, consolidation periods usually indicate periods of extended large-scale acquisition or liquidation of a financial instrument, and therefore often precede strong price movements.

contract One unit of trading within the commodities markets; it caries in size from market to market.

correction An intermediate market price movement (one that lasts from weeks to months) that moves contrary to the long-term trend, pr primary movement (the movement that lasts from months to years). Usually, corrections retrace between one-third to two-thirds of the primary movement before reversing.

D

day trade Any trade that is made within the same market within the same day.

delivery The change in ownership or control of the actual commodity in exchange for cash in the settlement of a futures contract.

demand The desire and willingness to pay or trade for a good or service within the market.

distribution Institutional selling of specific stocks or the overall market. A distribution day is identified as having volume above the previous day's volume accompanied by a decrease in price.

dividend A distribution of the earnings of a corporation, usually in the form of cash, stock, or property. The board of directors declares all dividends.

discount rate The interest rate charged to member banks that borrow directly from the nine Federal Reserve Banks.

Dow Jones Industrial Average The most widely used indicator of market activity, composed of an average of 30 large issues within the industrial sector of the economy.

Dow Jones Transportation Average The most widely reported indicator of stock activity in the transportation sector of the economy, composed of an average of 20 large issues.

E

earnings The net income available for common stock divided by the number of shares outstanding, reported quarterly by most companies (also earnings-per-share).

efficient markets theory A view of the markets that states that a market may reflect all relevant information known about the market. Consequently, adjustment to new information is virtually instantaneous.

exchange Organized exchanges where commodities, futures, and securities transactions are carried out by member traders and brokers.

exercise To execute the rights granted in an options or warrant contract. For example, an owner of a call contract on common stock exercises a call by executing the right to buy 100 shares of the stock at the strike price stated in the contract.

expiration date The date specified in an option contract on which the option becomes worthless and the owner no longer has the rights specified in the contract.

F

Federal Reserve Board A seven-member group, appointed by the President, responsible for setting the monetary policy of the United States and for overseeing the operation of the Federal Reserve System.

Federal Reserve System (The Fed) The central bank system of the United States, composed chiefly of the Federal Reserve Board, the Federal Open Market Committee, the nine Reserve District Banks, and member banks. Its chief responsibility is to regulate the flow of money and credit.

Federal Funds Cash reserves of banks and certain other institutions above and beyond those needed as reserve requirements. These funds are available to other banks as loans to meet reserve requirements.

Federal Funds Rate (fed funds rate) The interest charged by one institution lending federal funds to another. This rate is largely controlled by short-term open market operations by the Fed.

firm quote The actual price at which a financial instrument (100 shares of stock, 5 bonds, and so on) may be bought or sold.

floor trader A member of an exchange who enters transactions for his or her own account from the floor of the exchange; synonymous with local.

follow through day Developed by William J. O'Neil, an indication of a potential change of trend in place. After the market has made a new low and a rally has been attempted, a follow through day will be identified when a major index closes up 1.7% or more for the day with an increase in volume from the day before. A follow through day can only occur between four and seven days from a potential bottom.

FOMC (The Federal Open Market Committee) A committee with the Federal Reserve System comprised of the seven members of the Federal Reserve Board, the President of the Federal Reserve Bank of New York, and four of the eight other district bank presidents, who serve on a rotating basis. The main purpose of the committee is to make decisions regarding open market operations.

free reserves A measure of reserves held within the entire Federal Reserve System above and beyond required reserves. It is used as an indicator of the potential credit availability within the Federal Reserve System.

fundamental analysis A method securities analysis that employs study of the overall economy, industry conditions, and the financial condition and management of a particular company in an effort to evaluate the intrinsic value of a specific stock.

futures Contracts standardized by an exchange for the purchase or sale of a commodity at a future date.

futures contract A standardized, exchange-traded contract to make or take delivery of a particular type and grade of commodity at an agreed, upon place and point in the future. Futures contracts are transferable between parties.

G

glamour stock A favored, highly traded stock, usually of an established company that has performed well and paid dividends in good times and bad.

growth stock A relatively speculative stock, usually one of a relatively new company that is expected to grow at a fast rate. Consequently, the stocks usually sell at high price/earnings ratios while paying low dividends.

H

hedge Investing to reduce the risk of a position in a security or commodity, normally by taking the reverse position in a related security. For example, owning 10,000 shares of XYZ at 100 may be hedged by owning 100 puts of XYZ with a strike price at 98.

high The highest price a security or commodity reaches within a specified time period.

I

inflation An increase in the supply of money. When the increase in the supply of money outstrips the increase in the supply of goods and services, the result is a general rise in the levels of prices.

insider Anyone who has information not available to the public that may affect the future price of a stock.

in-the-money An option that has intrinsic value. For a call, the option is in-the-money if the current market price of the underlying instrument is above the strike price stated in the call contract. For a put, the option is in-the-money if the current market price is below the strike price stated in the put contract.

index futures Futures contracts traded in the basis of the underlying cash index or average. Unlike commodities futures, there is no tangible asset traded for delivery other than the cash value of the futures contract at the time of expiration.

intermediate trend The price in any market lasting from weeks to months.

investor One who buys and holds securities for a long-term period (months to years), usually for the purpose of obtaining income or value appreciation.

J

junk bonds A general term for bonds issued by corporations during a leveraged buyout (LBO) for the purpose of raising capital to buy a controlling position of the company's shares. The difference between junk bonds and other corporate bonds are the size of the bond issue and the purpose for which the bonds are issued. They earned the nebulous title "junk" because so many of the bond issues depreciated dramatically in market value after the issue because the market value of the underlying assets securing them depreciated. There was no other collateral.

L

leverage The use of borrowed capital to increase the potential net return in trading or investment.

leveraged buyout The acquisition of a controlling interest in the stock of a company by borrowing the money from public or from private sources in which capital is raised by the issue and sale of bonds (junk bonds) secured by the assets of the company.

liabilities Debts or legal obligations to pay owned by a person or legal entity.

line A technical term used to describe price movements within a market that stay within a narrow range (usually within 5%) over a given time period.

long Owning securities or commodities in anticipation of an increase in value or price.

long-term trend Price movements tending to be generally up or generally down lasting over a period of months to years.

low The lowest price of a security or commodity reached during a specific time period.

M

manipulation An undefined securities violation sometimes enforced by the SEC. Manipulation is the act of influencing prices in a market by artful skillful (and sometimes insidious) means.

margin The amount of equity (cash) as a percentage of market value of the underlying market interest held in a margin account.

O

OEX Index Options for the S&P 100 Index.

offer An indication by a trader or investor of the willingness to sell a security or commodity; or, in a quote, the current lowest price anyone is willing to sell a security or commodity.

open market operations The buying and selling of government and government agency securities by the Federal Open Market Committee for the purpose of increasing or decreasing the level of bank reserves to effect control of the money supply.

option The right to buy (a call) or sell (a put) a specified amount of a security (stocks, bonds, futures, and so on) at a specified price within a specified time period.

out-of-the-money An option that has no intrinsic value. A call is out-of-the-money if the value of the underlying instrument is below the strike price stated in the call contract. A put is out-of-the-money if the market price of the underlying instrument is above that stated in the options contract.

overbought A technical term used to describe the opinion that more and stronger buying has occurred in a market than is warranted by fundamental considerations.

overhead resistance A term used in technical analysis to describe the condition of likely sellers at price targets above current price. When buyers are sitting on losses they will often wait for an opprtunity to sell when the price comes back to the level where they bought it. Overhead resistance makes it difficult for price to rise.

oversold A technical term used to describe the opinion that more and stringer selling has occurred in a market than is warranted by fundamental considerations.

over the counter (OTC) market A market of stocks traded that are not listed on the major exchanges.

P

premium The market price of an option - the price one pays for an option, which varies with market volatility, time, and the price of the underlying instrument.

price/earnings ratio (PE) The ratio of the current price of a stock divided by the annual earnings per share.

primary Of first importance, most important, or essential.

program trading Any of a variety of trading strategies carried out through electronic means that are executed in a preplanned sequence, usually by a computer.

put An option that gives the owner the right to sell a specific amount of a security at a specified price within a specified time period.

Q

quote The current bid and offer for a security on the floor of the exchange on which it is traded.

R

range The price bounds between which a market or specific or commodity trades within a particular trading period (namely, close of the day's trading, day, month, year, and so on).

reaction A price movement against the prevailing trend. A reaction differs from a secondary correction in that it may occur within the short-term trend, intermediate term trend, or the long-term trend, whereas a secondary correction is an intermediate reaction occurring within the long-term trend.

resistance Any price level that is deemed as a significant high in trading by the market. When prices approach these levels on the way up, price movements often tend to slow down or "bounce off" them, and when they break through these levels, they often break out sharply.

S

secondary correction In the stock market, an important intermediate price movement that moves in a contrary direction to the primary trend, usually consisting of at least a 5% change in prices over a minimum period of 14 calendar days.

short The state of having sold a security or futures contract prior to ownership. A person with a short position is liable for delivery of the item(s) sold until he or she buys back the positron.

short-term-trend A price trend lasting from days to weeks.

speculator A market participant who buys and sells market instruments in an attempt to profit from intermediate-term (weeks to months) price changes.

stop order An order given to a broker that becomes a market order when the market price of the underlying instrument reaches or exceeds the specific price stated in the stop order.

stock option An options contract in stocks, a put or a call, standardized to 100 shares per contract.

straddle A pair of options held by the same person consisting of one call an one put on the same underlying instrument having the same strike price and expiration date.

strike price The specified price in an options contract at which the underlying instrument will be bought or sold if the option is exercised.

support Any price level deemed as a significant low in trading by the market. When prices approach these levels on the way down, price movements often tend to slow down or "bounce" off them, and when they break above these levels, they often break sharply.

T

takeover stock Any stock that is involved in takeover negotiations, or a stock that is thought to be so involved.

technical analysis A method of market forecasting that relies exclusively on the study of past price and volume behavior to predict future price movements.

tick The smallest price movement allowed by the rules of an exchange.

top The high price in any market over a specified period (namely, intraday top, weekly top, long-term top, and so on).

V

volume The number of shares (for stocks) or contracts (for commodities) that change ownership in a given time period.