TRADING DICTIONARY
+ASSET
AN ASSET OR ASSET CLASS IS A CLASSIFICATION OR GROUPING OF INVESTMENTS THAT EXHIBIT SIMILAR CHARACTERISTICS AND ARE SUBJECT TO THE SAME LAWS. EQUITIES ARE ITS OWN ASSET CLASS, OPTIONS ARE ITS OWN ASSET CLASS, FUTURES ARE ITS OWN ASSET CLASS. THERE ARE MANY OTHER ASSET CLASSES BUT THESE ARE JUST SOME EXAMPLES.
+TICKER
A TICKER SYMBOL IS AN ARRANGEMENT OF CHARACTERS—USUALLY, LETTERS—REPRESENTING PARTICULAR SECURITIES LISTED OR TRADED PUBLICLY. EXAMPLES: APPLE = AAPL, MICROSOFT = MSFT.
+STOCKS
A STOCK (ALSO KNOWN AS EQUITY, EQUITIES, SECURITY, SECURITIES) IS A SECURITY THAT REPRESENTS THE OWNERSHIP OF A FRACTION OF A CORPORATION. THIS ENTITLES THE OWNER OF THE STOCK TO A PROPORTION OF THE CORPORATION’S ASSETS AND PROFITS EQUAL TO HOW MUCH STOCK THEY OWN. UNITS OF STOCK ARE CALLED “SHARES”.
+OPTIONS
OPTIONS ARE FINANCIAL INSTRUMENTS THAT ARE DERIVATIVES BASED ON THE VALUE OF UNDERLYING SECURITIES SUCH AS STOCKS.
+FUTURES
FUTURES ARE FINANCIAL CONTRACTS OBLIGATING THE BUYER TO PURCHASE AN ASSET OR THE SELLER TO SELL AN ASSET AND HAVE A PREDETERMINED FUTURE DATE AND PRICE. A FUTURES CONTRACT ALLOWS AN INVESTOR TO SPECULATE ON THE DIRECTION OF A SECURITY, COMMODITY, OR A FINANCIAL INSTRUMENT.
+POSITION
A POSITION IS THE AMOUNT OF A SECURITY, COMMODITY OR CURRENCY WHICH IS OWNED BY AN INDIVIDUAL, DEALER, INSTITUTION, OR OTHER FISCAL ENTITY.
+LONG
A LONG POSITION—ALSO KNOWN AS SIMPLY LONG—IS THE BUYING OF A STOCK, COMMODITY, OR CURRENCY WITH THE EXPECTATION THAT IT WILL RISE IN VALUE.
+SHORT
A SHORT, OR A SHORT POSITION, IS CREATED WHEN A TRADER SELLS A SECURITY FIRST WITH THE INTENTION OF REPURCHASING IT OR COVERING IT LATER AT A LOWER PRICE. A TRADER MAY DECIDE TO SHORT A SECURITY WHEN SHE BELIEVES THAT THE PRICE OF THAT SECURITY IS LIKELY TO DECREASE IN THE NEAR FUTURE.
+CALL
A CALL IS AN OPTION CONTRACT GIVING THE OWNER THE RIGHT, BUT NOT THE OBLIGATION, TO BUY A SPECIFIED AMOUNT OF AN UNDERLYING SECURITY AT A SPECIFIED PRICE WITHIN A SPECIFIED TIME. THE STOCK, BOND, OR COMMODITY IS CALLED THE UNDERLYING ASSET. A CALL BUYER PROFITS WHEN THE UNDERLYING ASSET INCREASES IN PRICE.
+PUT
A PUT IS AN OPTIONS CONTRACT THAT GIVES THE OWNER THE RIGHT, BUT NOT THE OBLIGATION, TO SELL A CERTAIN AMOUNT OF THE UNDERLYING ASSET, AT A SET PRICE WITHIN A SPECIFIC TIME. THE BUYER OF A PUT OPTION BELIEVES THAT THE UNDERLYING STOCK WILL DROP BELOW THE EXERCISE PRICE BEFORE THE EXPIRATION DATE.
+STRIKE
A STRIKE PRICE IS THE SET PRICE AT WHICH AN OPTIONS CONTRACT CAN BE BOUGHT OR SOLD WHEN IT IS EXERCISED. FOR CALL OPTIONS, THE STRIKE PRICE IS WHERE THE SECURITY CAN BE BOUGHT BY THE OPTION HOLDER; FOR PUT OPTIONS, THE STRIKE PRICE IS THE PRICE AT WHICH THE SECURITY CAN BE SOLD.
+EXPIRATION
AN EXPIRATION DATE IN DERIVATIVES IS THE LAST DAY THAT DERIVATIVE CONTRACTS, SUCH AS OPTIONS OR FUTURES, ARE VALID. BEFORE AN OPTION EXPIRES, ITS OWNERS CAN CHOOSE TO EXERCISE THE OPTION, CLOSE THE POSITION TO REALIZE THEIR PROFIT OR LOSS, OR LET THE CONTRACT EXPIRE WORTHLESS.
+PREMIUM
PREMIUM IS THE TOTAL COST TO BUY AN OPTION.
+DELTA
DELTA IS THE RATIO THAT COMPARES THE CHANGE IN THE PRICE OF AN ASSET, USUALLY MARKETABLE SECURITIES, TO THE CORRESPONDING CHANGE IN THE PRICE OF ITS DERIVATIVE.
+THETA
THETA IS A MEASURE OF THE RATE OF DECLINE IN THE VALUE OF AN OPTION DUE TO THE PASSAGE OF TIME. IT CAN ALSO BE REFERRED TO AS AN OPTION’S TIME DECAY. IF EVERYTHING IS HELD CONSTANT, THE OPTION LOSES VALUE AS TIME MOVES CLOSER TO THE MATURITY OF THE OPTION.
+INTRINSIC VALUE
THE INTRINSIC VALUE IS THE DIFFERENCE BETWEEN THE PRICE OF THE UNDERLYING ASSET (FOR EXAMPLE, THE STOCK OR COMMODITY OR WHATEVER THE OPTION IS BEING TAKEN OUT ON) AND THE STRIKE PRICE OF THE OPTION.
+EXTRINSIC VALUE
TIME VALUE IS ALSO KNOWN AS EXTRINSIC VALUE. THE AMOUNT OF A PREMIUM THAT IS IN EXCESS OF THE OPTION’S INTRINSIC VALUE IS REFERRED TO AS ITS TIME VALUE. EXTRINSIC VALUE MEASURES THE DIFFERENCE BETWEEN THE MARKET PRICE OF AN OPTION, CALLED THE PREMIUM, AND ITS INTRINSIC VALUE.