Glossary of Terms.

Secondary Distribution
The redistribution of a block of stock after it has been initially sold by the issuing company. Usually a large block of shares is involved (e.g., from the settlement of an estate) and these are offered to the public at a fixed price, set in relationship to the stock's market price.

Secondary Market
Secondary markets are the stock exchanges and the over-the-counter market. Securities are first issued as a primary offering to the public. When the securities are traded from that first holder to another, the issues trade in these secondary markets. Most trading is done in the secondary market. The NYSE, as well as all other stock exchanges, the bond markets, etc., are secondary markets.

Secondary Offering
A sale of securities in which one or more major stockholders in a company sell all or a large portion of their holdings; the underwriting proceeds are paid to the stockholders rather than to the corporation. Typically such an offering occurs when the founder of a business (and perhaps some of the original financial backers) determine that there is more to be gained by going public than by staying private. The offering does not increase the number of shares of stock outstanding.

Securities
Negotiable instruments such as stocks and bonds. Transferable certificates of ownership of investment products such as notes, bonds, stocks, futures contracts and options.

Securities Advisor
A person or firm registered with applicable securities commissions to generally advise the public on securities, often through publications.

Securities and Exchange Commission (SEC)
Commission created by Congress to regulate the securities markets and protect investors. It is composed of five commissioners appointed by the president of the United States and approved by the Senate. The SEC enforces, among other acts, the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940 and the Investment Advisers Act of 1940.

Securities Dealer
One who acts as the agent for another party to buy and sell securities and other investments; also an underwriter.

Securities Investor Protection Corporation (SIPC)
A non-profit membership corporation created by an act of Congress to protect clients of brokerage firms that are forced into bankruptcy. Membership is composed of all brokers and dealers registered under the Securities Exchange Act of 1934, all members of national securities exchanges and most NASD members. SIPC provides customers of these firms up to $500,000 coverage for cash and securities held by the firms.

Securitization
1. The development of markets for a variety of debt instruments that permit the ultimate borrower to bypass the banks and other deposit-taking institutions and to borrow directly from lenders.
2. In a narrow sense it also refers to the process of converting loans of various sorts into marketable securities by packaging the loans into pools and then selling shares of ownership in the pool itself.

Security
Another word for stocks, bonds, and short-term investments. Any piece of securitized paper that can be traded for value other than an insurance policy or a fixed annuity. Under the act of 1934, this includes any note, stock, bond, investment contract, debenture, certificate of interest in profit-sharing or partnership agreement, certificate of deposit, collateral trust certificate, pre-organization certificate, option on a security, or other instrument of investment commonly known as a security. Also categorized as securities are interests in oil and gas drilling programs, real estate condominiums and cooperatives, farmland or animals, commodity option contracts, whiskey warehouse receipts, multilevel distributorship arrangements, and merchandising marketing .

Sell
To convey ownership of a security or other asset for money or value. This includes giving or delivering a security with or as a bonus for a purchase of securities, a gift of assessable stock, and selling or offering a warrant or right to purchase or subscribe to another security. Not included in the definition is a pledge or loan, or a stock dividend if nothing of value is given by the stockholders for the dividend.

Selling Short
If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, s/he must buy the stock back on the open market. For instance, you borrow 1,000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug 1, you purchase 1,000 shares of XYZ at $7 per share. You've made $1,000 (less commissions and other fees) by selling short.

Series (Options)
All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price.

Series (Stocks)
Shares with common characteristics, such as rights to ownership and voting, dividends, par value, etc. In many foreign shares, one series may be owned only by citizens of the country in which the stock is registered.

Settlement
The price at which all outstanding positions in a stock or commodity are marked to market-typically, the closing price.

Settlement Change
Refers to the difference between the previous day's and current day's settlement price.

Settlement Date
The date on which payment is made to settle a trade. For stocks traded on U.S. exchanges, settlement is three days; settlement for options is one day. For mutual funds, settlement usually occurs in the U.S. the day following the trade. In some regional markets, foreign shares may require months to settle.

Settlement Price
A figure determined by the closing range that is used to calculate gains and losses in futures market accounts. Settlement prices are used to determine gains, losses, margin calls, and invoice prices for deliveries.

Shares
Certificates or book entries representing ownership in a corporation or similar entity

Share Price
For a mutual fund, the price of a share is called its net asset value (NAV). Multiplying the share price or NAV times the number of shares you have in the fund gives you the value of your investment.

Share Profit
Calculated by dividing the profit after dividend rights of preferred shares by the average number of common shares outstanding. This figure may be calculated either before or after taking extraordinary items into account. If the company had a loss, this calculation would result in a share loss figure, either before or after extraordinary items.

Shareholder of Record
A shareholder whose name is registered in the records of a company whose shares he or she holds. Dividend payments and rights issues are announced as being payable to shareholders of record.

Shareholder or Stockholder
Someone who owns preferred or common shares of a company.

Shareholders' Equity
Ownership interest of common and preferred stockholders in a company. It is also the difference between the assets and liabilities of a company, which is sometimes called net worth, or just "equity."

Short
The term used to describe the selling of a security, contract or commodity not owned by the seller. For example, an investor who borrows shares of stock from a broker-dealer and sells them on the open market is said to have a short position in the stock.

Short Position (Options)
A position wherein a person's interest in a particular series of options is as a net writer (i.e., the number of contracts sold exceeds the number of contracts bought).

Short Position (Stocks)
Occurs when a person sells stocks s/he does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought to close out the transaction. This method is used when a trader believes the stock price is going down.

Short Sale
Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.

Slippage
The difference between estimated transaction costs and actual transaction costs. The difference is usually composed of revisions to price difference or spread and commission costs.

Split
The division of the outstanding shares of a corporation into larger number of shares. A "3 for 1 split" by a company with one million shares outstanding results in three million shares outstanding. Each holder of 100 shares before the split would hold 300 shares after the split, although the proportionate equity in the company would remain the same.

Spot Month
In trading, the current contract month. Also known as the front month.

Spot Prices
Same as cash price, the price at which a commodity is selling at a particular time and place.

Spread
1. In a quotation, the difference between the bid and the ask prices of a security.
2. An options position established by purchasing one option and selling another option of the same class but of a different series. A trade in which two related contracts/stocks/bonds/options are traded to exploit the relative differences in price change between the two.

Stochastic Indicator
The Stochastic Indicator is based on the observation that as prices increase, closing prices tend to accumulate ever closer to the highs for the period. Conversely, as prices decrease, closing prices tend to accumulate ever closer to the lows for the period. Trading decisions are made with respect to divergence between % of "D" (one of the two lines generated by the study) and the item's price. For example, when a commodity or stock makes a high, reacts, and subsequently moves to a higher high while corresponding peaks on the % of "D" line make a high and then a lower high, a bearish divergence is indicated. When a commodity or stock has established a new low, reacts, and moves to a lower low while the corresponding low points on the % of "D" line make a low and then a higher low, a bullish divergence is indicated. Traders act upon this divergence when the other line generated by the study (K) crosses on the right-hand side of the peak of the % of "D" line in the case of a top, or on the right-hand side of the low point of the % of "D" line in the case of a bottom. Two variations of the Stochastic Indicator are in use: Regular and Slow. When the Regular plot of the Stochastic too choppy, the "Slow" version can often clarify the Stochastics.

Stock
When you own a company's stock, you own part of the company. How much you own depends on how many shares of stock you have. Holders of common stock are the last to be paid any profits from the company but are likely to profit most from any growth it has. Owners of preferred stock are paid a fixed dividend before owners of common stock, but the amount of the dividend doesn't usually grow if the company grows.

Stock Broker
One who acts as an agent in the buying and selling of securities and charges a commission for his services.

Stock Quote
A list of representative prices bid and asked for a stock during a particular trading day. Stocks are quoted in points, where one point equals $1, and 1/8ths of a point, where 1/8th equals 12.5 cents. Stock quotes are listed in the financial press and most daily newspapers.

Stock Split
An increase in the number of a corporation's outstanding shares that decreases the par value of its stock. The market value of the total number of shares remains the same. The proportional reductions in orders held on the books for a split stock are calculated by dividing the market price of the stock by the fraction that represents the split.

Stock Symbol
An unique three or four letter symbol assigned to a security trading on a stock exchange.

Stops
Buy stops are orders that are placed at a predetermined price over the current price of the market. The order becomes a "buy at the market" order if the market is at or above to the price of the stop order. Sell stops are orders that are placed with a predetermined price below the current price. Sell-stop orders become "Sell at the market" orders if the market trades at or below the price of the stop.

Stop Loss and Stop Buy Orders
Orders for certain securities when the price of a stock rises or falls to a specified price. A stop loss order is an order to sell when the price of the stock declines to, or below, a stated price. The purpose of this is to reduce the amount of loss that might occur. A stop buy order is an order to buy a stock when the price rises to a certain level. This is given by a person who has sold a security short in an attempt to reduce loss or protect a profit should the price rise unexpectedly.

Stop Order
An order to buy or sell at the market when and if a specified price is reached.

Stop Price
The specific price at which a stop order, limit order, or stop-limit order to a securities broker is to be executed.

Stop-limit Order
An order to a securities broker to buy or sell at a specified price or better but only after a given stop price has been reached or passed. A stop-limit order is a combination stop order and limit order. A stop-limit order avoids the risk of a stop order, which becomes a market order when the price is reached. But as with all limit orders, a stop-limit order may miss the market entirely if the specified limit price never occurs.

Straddle
A position consisting of a long (short) call and a long (short) put, where both options have the same strike price and expiration date.

Strangle
A position that consists of a long OTM (short) call and a long OTM (short) put where both options have the same underlying, the same expiration date, but different strike prices.

Synthetic Long Call
A long put and a long stock or future.

Synthetic Long Put
A long call and a short stock or future.

Synthetic Long Stock
A short put and a long call.

Synthetic Securities
Security created by buying and writing a combination of options that imitate the risk and profit profile of a security.

Synthetic Short Call
A short put and a short stock or future.

Synthetic Short Put
A short call and a long stock or future.

Synthetic Short Stock
A short call and a long put.

Synthetic Straddle
Futures and options combined to create a delta neutral trade.

Takeover Bid
An offer made to security holders of a company to purchase their voting securities which, together with the offering individual's already owned securities, will total over 20 % of the outstanding voting securities of the company. For federally incorporated companies, the equivalent requirement is more than 10 % of the outstanding voting shares of the target company.

Technical Analysis
A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value.

Technical Indicator
A bullish or bearish numerical indicator used to help predict future price movement.

Tender Offer
A general offer to all shareholders of a corporation to purchase some or all outstanding shares at a stated price.

Time Premium
Another name for extrinsic value. The additional value of an option due to the volatility of the market and the time remaining until expiration. Premium minus intrinsic value.

Time Series
A collection of observations made sequentially in time and indexed by time.

Time Spread
A spread consisting of one long and one short option of the same type with the same exercise price but which expire in different months (i.e., sell the nearby month, buy the far away month). Margin may be required.

Trade
A verbal (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later. Optionetics instructors use the word "trade" to mean the purchase or sale of a single stock and one or more derivatives at the same time, as part of a single strategy, and entered on the same day. A completed trade includes both an entry and an exit.

Trade Date
The date on which a trade occurs. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks, settlement is generally 5 business days after the trade.

Trading Account
An account opened with a brokerage firm from which to place trades. Opening an account takes several steps including signing a risk disclosure statement (a document which indicates that the signer understands the risks involved in trading), performance bond agreement (binds the trader to pay for any losses incurred in the course of trading), and a futures account agreement (outlines how the account is to be handled by the broker).

Trading Halt
A pause in the trading of a particular security on one or more exchanges, usually in anticipation of a news announcement or to correct an order imbalance. During a trading halt, open orders may be canceled and options may be exercised.

Trading Range
The difference between the high and low prices traded during a period of time; with commodities, the high/low price limit established by the exchange for a specific commodity for any one day's trading.

Trailing Stop
A stop-loss order that follows the prevailing price trend.

Transaction Date
The date on which the purchase or sale of a security takes place.

Type
The classification of an option contract as either a put or a call.

Uncovered Call
A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price.

Uncovered Put
A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called naked puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.

Uncovered Writer
A seller or writer who has sold stock or a stock option contract for stock that he or she does not own. Also referred to as a naked writer.

Underlying Instrument
A trading instrument subject to purchase upon exercise.

Underlying Securities
1. Options: The security subject to being purchased or sold upon exercise of an option contract. For example, IBM stock is the underlying security to IBM options.
2. Depository receipts: The class, series and number of the foreign shares represented by the depository receipt.

Underwriting
The procedure by which investment bankers channel investment capital from investors to corporations and municipalities that are issuing securities.