Stock Market Terminologies

ABANDON:

The act of not exercising or selling an option before its expiration.

ACCRUED INTEREST:

The interest due on a bond since the last interest payment was made, up to, but not including the settlement date. Anyone wishing to buy the bond pays the market price of the bond plus any accrued interest. Conversely, anyone selling a bond will have the proceeds increased by the amount of accrued interest.

ACQUISITION:

The 'A' in M&A (Mergers and Acquisitions) is when one company buys enough stock of another company to take control of that company. When a take-over attempt is "unfriendly", the buying company may offer a price for the other company's stock that is well above current market value. The management of the company that is being bought might ask for a better stock price or try to join with a third company to counter the take-over attempt.

ADJUSTED OPTION:

An option resulting after an event such as a stock split (2 for 1 stock split), stock dividend, merger, or spin-off. An adjusted option may represent some amount other than the one hundred shares that is standard in the U.S. For example, after a 2 for 1 stock split, the adjusted option will represent 200 shares. For certain adjusted options, the multiplier of the option may be something other than the $100 that is standard in the U.S.

AFFIDAVIT OF DOMICILE:

A notarized affidavit executed by the legal representative of an estate reciting the residence of the decedent at the time of death. This document would be required when transferring ownership of a security from a deceased person's name.

ALL-OR-NONE ORDER (AON):

An order that must be filled completely when the order is executed or not filled at all. In other words, partial fills are not allowed on this type of order.

AMERICAN DEPOSITORY RECEIPT (ADR):

Foreign company equities traded on a U.S. exchange. The ADR is issued by a U.S. bank in place of the foreign company's shares, which are held in trust by the bank. ADRs facilitate the trading of foreign stocks in U.S. markets. ADRs have exposure to currency fluctuations.

AMERICAN STOCK EXCHANGE (AMEX):

One of the major stock and option exchanges in the U.S. It is located in the financial district of New York City.

AMERICAN-STYLE OPTION:

An option contract that can be exercised at any time from the time the option is purchased to the expiration date of the option.

ARBITRAGE:

The simultaneous purchase and sale of identical or equivalent financial instruments in order to benefit from a discrepancy in their price relationship. More generally, it refers to an opportunity to make risk-free returns that are greater than the risk-free rate of return.

ASK or OFFER:

The price of a stock or option at which a seller is offering to sell a security, that is, the price that investor may purchase a stock or option.

ASSIGNED:

To have received notification of an assignment on short options by The Options Clearing Corporation through a broker.

ASSIGNMENT:

When the seller (writer) of an option receives an exercise notice that obligates him to sell (in the case of a call) or purchase (in the case of a put) the underlying stock at the option's strike price.

AT-THE-MONEY (ATM):

An option is at-the-money when the price of the stock is at or near the strike price.

AUTOMATED ORDER ENTRY SYSTEM:

Some exchanges have computerized systems designed to route stock and option orders directly to the trading pit. They are intended to speed the execution of orders. These systems generally have limits on the size of orders. Examples of these systems are: RAES, AUTO EX, and SUPERDOT.

AUTOMATED EXECUTION SYSTEM (AUTO EX):

The automated order routing system on the American Stock Exchange.

AUTOMATIC EXERCISE:

The Options Clearing Corporation (OCC) uses this procedure to exercise in-the-money options at expiration. Doing so protects the owner of the option from losing the intrinsic value of the option because of the owner's failure to exercise. Unless instructed not to do so by the owner of the option (through the owner's broker), The Options Clearing Corporation will exercise all expiring equity options that are held in customer accounts if they are in-the-money by .05 or more. Thinkorswim will automatically exercise an option position if it is .05 or greater in-the-money at expiration unless the owner of the option instructs otherwise.

BACK MONTHS:

A rather arbitrary term that refers to the classes of options with the expiration months that are further dated than the option class with the nearest expiration month.

BACKSPREAD:

An option position composed of either all calls or all puts, with long options and short options at two different strike prices. The options are all on the same stock and usually of the same expiration, with more options purchase than sold. A backspread is the sale of an option(s) and the purchase of a greater number of the same type of options that are out-of-the-money with respect to the one(s) purchased. For example, an 80/90 put 1-by-3 backspread is long 3*80 puts and short 1*90 put.

BANK GUARANTEE LETTER:

The document supplied by a bank certifying that a person has a specific amount of funds on deposit with the bank.

BASIS:

Generally referring to the futures markets, it is the difference between the cash price of the underlying commodity and the price of a futures contract based on that underlying commodity. Cash price minus futures price equals basis.

BASIS POINT:

A .01% tick on a 1.00% scale used to describe the yields of interest rates or interest rate products. For example, when the U.S. Fed raises the discount rate 25 basis points, the discount rate goes from 5.00% to 5.25%.

BASIS RISK:

The risk of the basis between the cash price and the future price widening or narrowing between the time a hedge position is implemented and liquidated.

BEAR:

A person who believes that the price of a particular security or the market as a whole will go lower.

BEARISH:

The outlook of a person anticipating lower prices in a particular security or the market as a whole.

BEAR MARKET:

Any market in which prices are trending lower.

BEAR SPREAD:

Generally speaking, it is any spread that theoretically profits when the market moves down. Specifically it refers to a vertical spread.

BETA:

A measure of the return (in percentage terms) on a stock relative to the return (in percentage terms) of an index. For example a stock with a beta of .80 should have a percentage net change equal to 80% of the percentage net change of the index. Therefore if the index is down 2% the stock in question should be down 1.6% (.80x2%).

BID:

The price of a stock or option at which a buyer is willing to purchase a security; the price at which a customer may sell a security.

BID/ASK (OFFER) SPREAD:

The difference between the bid and ask prices for a particular stock or option.

BINOMIAL MODEL:

A mathematical model used to price options. Generally used for American-style options, the model creates a binomial lattice to price an option, based on the stock price, strike price, days until expiration, interest rate, dividends, and the estimated volatility of the stock. One of the main differences from the Black Scholes Model is that it factors in the possibility of early exercise of the options.

BLACK SCHOLES MODEL:

A mathematical model used to price options. Generally used for European-style options, the model prices options using a probability-weighted sum of stock and a bond. Black-Scholes uses the stock price, strike price, days until expiration, interest rate, dividends, and the estimated volatility of the stock as variables in the model.

BLOCK or BLOCK TRADE:

A large position or transaction of stock, generally at least 10,000 shares or more.

BLUE SKY LAWS:

The popular name for laws enacted by various states to protect the public against securities fraud. The term is believed to have been coined by a judge who stated that some brokers were selling everything including the "blue sky" to investors.

BOND:

A debt instrument or promissory note of a corporation, municipality, or the U.S. Government. A bond represents debt on which the issuer of the debt usually promises to pay the owner of the bond a specific amount of interest for a defined amount of time and to repay the loan on the maturity date. Bonds are distinct from stock (equity), which represents ownership.

BOX SPREAD:

An option position composed of a long call and short put at one strike, and a short call and long put at a different strike. For example, a long 50/60 box spread would be long the 50 call, short the 50 put, short the 60 call and long the 60 put. Considered largely immune to changes in the price of the underlying stock, in most cases, a box spread is an interest rate trade. For all intents and purposes, the buyer of the box is lending money to the options market, and the seller of the box is borrowing money from the options market.

BREAK-EVEN POINT(S):

The stock price(s) at which an option position generates neither a profit nor a loss. An option position's break-even point(s) are generally calculated for the options' expiration date. Option pricing models can be used to calculate a position's break-even point before the options' expiration date.

BROKER:

A broker is an individual or firm that charges a fee or commission for executing, either on the floor of an exchange or electronically, buy, sell, or spread orders submitted by a customer or firm.

BROKER LOAN RATE:

This is the interest rate that banks charge brokerage firms to finance their (the brokerage firms) customers' stock and option positions.

BROKER-DEALER:

Generally, a broker-dealer is a person or firm who facilitates trades between buyers and sellers and receives a commission or fee for his services. When a broker acts in the capacity of a dealer, he may buy and sell stocks and options for his own account, which can generate profits or losses.

BULL:

A person who believes that the price of a particular security or the market as a whole will go higher.

BULLISH:

The outlook of a person anticipating higher prices in a particular security or the market as a whole.

BULL MARKET:

Any market in which prices are trending higher.

BULL SPREAD:

Generally speaking, it is any spread that theoretically profits when the market moves up. Specifically it refers to a vertical spread.

BUTTERFLY SPREAD:

An option position composed of either all calls or all puts (with the exception of an iron butterfly), with long options and short options at three different strikes. The options are all on the same stock and of the same expiration, with the quantity of long options and the quantity of short options netting to zero. The strikes are equidistant from each other. For example, a long 50/60/70 put butterfly is long 1*50 put, short 2*60 puts, and long 1*70 put.

BUY ON CLOSE:

To buy at the end of a trading session at a price within the closing range.

BUY ON OPENING:

To buy at the beginning of a trading session at a price within the opening range.

BUYING POWER:

The amount of money available in an account to buy stocks or options. Buying power is determined by the sum of the cash held in the brokerage account and the loan value of any marginable securities in the account without depositing additional equity.

BUY-TO-COVER:

A buy order that closes or offsets a short position in stock or options.

BUY-WRITE:

Synonymous to a covered call or covered write, this is a position of long stock and short a number of calls representing the same amount of shares as the long stock position. This position may be entered into as a spread order via Thinkorswim with both sides (buying stock and selling calls) being executed simultaneously. For example, a buy-write is buying 500 shares of stock and writing 5*50 strike calls.

CABINET OR "CAB" TRADE:

An option trade at a "cabinet price", which is equal to one dollar. Generally, cabinet trades only occur at very far out-of-the-money options. Cabinet trades are not available via thinkorswim.

CALENDAR SPREAD (TIME SPREAD):

An option position composed of either only calls or only puts, with the purchase or sale of an option with a nearby expiration offset by the purchase or sale of an option with the same strike price, but a more distant expiration. The options are on the same stock and have the same strike price. The quantity of long options and the quantity of short options net to zero. For example, long the AUG/NOV 65 call calendar spread is short 1 August 65 call and long 1 November 65 call.

CALL OPTION:

A call option gives the buyer of the call the right, but not the obligation, to buy the underlying stock at the option's strike price. The seller of the call is obligated to deliver (sell) the underlying stock at the option's strike price to the buyer of the call when the buyer exercises his right.

CALLED AWAY:

The term used when the seller of a call option is obligated to deliver the underlying stock to the buyer of the call at the strike price of the call option.

CALL WRITER:

An investor who receives a premium and takes on, for a specified time period, the obligation to sell the underlying security at a specified price at the call buyer's discretion.

CANCELED ORDER:

An order to buy or sell stock or options that is canceled before it has been executed. Generally, it is easier to cancel a limit order than a market order. A limit order can be canceled at any time as long as it has not been executed. Market orders can get executed so quickly that it is usually impossible to cancel them. Thinkorswim will not accept an order cancellation for a market order.

CAPITAL GAIN OR CAPITAL LOSS:

Profit or loss generated from transactions in stocks, options, bonds, real estate, or other property.

CARRY/CARRYING CHARGE:

Interest is charged on any money borrowed to finance a position of stocks or options. The interest cost of financing the position is known as the carry.

CASH ACCOUNT:

An account in which all positions must be paid for in full. No short positions in stocks or options are allowed in a cash account.

CASH MARKET:

Generally referred to regarding futures markets, the cash market is where transactions are made in the commodity or instrument underlying the future. For example, there are cash markets in physical commodities such as grains and livestock, metals, and crude oil, financial instruments such as U.S. Treasury Bonds and Eurodollars, as well as foreign currencies such as the Japanese yen and the Canadian dollar. As it relates to futures on stock indices, the cash market is the aggregate market value of the stocks making up the stock index.

CASH SETTLED OPTION:

An option that delivers a cash amount, as opposed to the underlying stock or futures contracts such as with options on stocks or futures, when exercised. The amount of cash delivered is determined by the difference between the option strike price and the value of the underlying index or security. In the U.S., stock index options like the OEX and SPX are cash settled options.

CHICAGO BOARD OF TRADE (CBOT):

Founded in 1848 with 82 original members, today the CBOT is the one of the largest futures and options exchanges in the world. It is known for its grain and U.S. Treasury Bond futures. Futures and futures options are traded at the CBOT.

CHICAGO BOARD OPTIONS EXCHANGE (CBOE):

The Chicago Board Options Exchange is currently (2000) the largest option exchange in the U.S. Formed in 1973, the CBOE pioneered "listed options" with standardized contracts. Equity and index options are traded at the CBOE.

CHICAGO MERCANTILE EXCHANGE (CME):

Originally formed in 1874 as the Chicago Produce Exchange, where products such as butter, eggs, and poultry were traded, the CME is now one of the biggest futures and options exchanges in the world. The CME trades futures on stock indices, foreign currencies, livestock, and Eurodollars. Futures and futures options are traded at the CME.

CLASS OF OPTIONS (OPTIONS CLASS):

Options of the same type either all calls or all puts on the same underlying security.

CLEAR/CLEARING:

The process by which orders are accounted for and matched, and funds transferred.

CLEARING BROKER-DEALER:

A broker-dealer that clears its own trades as well as those of introducing brokers.

CLEARING HOUSE:

An agency connected with an exchange through which all stock and option transactions are reconciled, settled, guaranteed, and later either offset or fulfilled through delivery of the stock and through which payments are made. It may be a separate corporation, rather than a division of the exchange itself.

CLEARING MEMBER:

Clearing members of U.S. exchanges accept responsibility for all trades cleared through them, and share secondary responsibility for the liquidity of the exchanges' clearing operation. Clearing members earn commissions for clearing their customers' trades. Clearing members must meet minimum capital requirements.

CLOSE (C), THE:

The time at which trading on a stock or option ends for the day. In reference to the O,H,L,C "C" represents the closing price of the session.

CLOSING PRICE:

The price of a stock or option at the last transaction of the day.

CLOSING PURCHASE:

A transaction in which a person who had initially sold short a stock or option exits or closes his short position by buying back the stock or option.

CLOSING RANGE:

The range of high and low prices, or bid and ask prices, recorded during the close (the final closing minutes of the trading day).

CLOSING TRANSACTION:

A transaction in which a person who had initially bought or sold stock, futures or options exits or closes (liquidates) his position by selling his long stock, futures or options or buying back his short stock, futures or options.

COMBO:

Often another term for synthetic stock, a combo is an option position composed of calls and puts on the same stock, same expiration, and typically the same strike price. The quantity of long options and the quantity of short options nets to zero. Buying a combo is buying synthetic stock; selling a combo is selling synthetic stock. For example, a long 60 combo is long 1*60 call and short 1*60 put. Sometimes, combo is used to describe options at two different strikes, in which case it would not be synthetic stock.

COMMINGLING:

The combining by a brokerage firm of customer securities with firm securities and pledging them as joint collateral for a bank loan; this practice is prohibited unless authorized by customers.(FINRA)

COMMISSION:

The one time fee charged by a broker to a customer when the customer executes a stock or option trade through the brokerage firm.

CONDOR SPREAD:

An option position composed of either all calls or all puts (with the exception of an iron condor), with long options and short options at four different strikes. The options are all on the same stock and of the same expiration, with the quantity of long options and the quantity of short options netting to zero. Generally, the strikes are equidistant from each other, but if the strikes are not equidistant, the spread is called a pterodactyl. For example, a long 50/55/60/65 call condor is long 1*50 call, short 1*55 call, short 1*60 call, and long 1*65 call. In a long (short) condor the highest and lowest stikes are both long (short) while the two middle strikes are both short (long).

CONFIRMATION STATEMENT:

After a stock or options transaction has taken place, the brokerage firm must issue a statement to the customer. The statement contains the name of the underlying stock, the number of shares or options bought or sold and the prices at which the transactions occurred.

CONSOLIDATED TAPE:

The ticker reporting transactions of NYSE listed stocks that take place on the NYSE or any of the other regional stock exchanges. Similarly, transactions of AMEX listed securities, and certain other securities listed on regional stock exchanges, are reported on a separate tape.

CONTINGENCY ORDER:

When you place a stock or options order you can choose to place contingencies on that order, meaning that the order will be filled only when a specific event has occurred. For example, a contingency order might be, "Buy 10 XYZ 80 calls at the market if XYZ stock trades above 75".

CONTRACT:

The basic unit of trading for options. An option, whether it's a put or a call, is an agreement between two parties (the buyer and the seller) to abide by the terms of the option contract as defined by an exchange.

CONTRACT MONTH:

Generally used to describe the month in which an option contract expires.

CONTRACT SIZE:

The number of shares of the underlying stock that an options contract would deliver if exercised. Contract sizes for equity options in the U.S. are generally 100 shares, unless the contract size has been adjusted for a split, merger, or spin-off. For example, if you are long 1 XYZ 50 call with a contract size of 100 and you exercise that call, you will get 100 shares of XYZ for a price of $50 per share. If you are long 1 ABC 90 call with a contract size of 250 and you exercise that call, you will get 250 shares of ABC for a price of $90 per share. Thinkorswim incorporates the contract size in the calculation of your delta and gamma.

CONVERSION:

A position of long stock, short a call, and long a put (with the call and put having the same strike price, expiration date, and underlying stock). The short call and long put acts very much like short stock, thus acting as a hedge to the long stock. So, a conversion has a very small delta. A conversion is a way to exploit mispricings in carrying costs.

CORRECTION:

A temporary reversal of direction of the overall trend of a particular stock or the market in general.

COST BASIS:

The original price paid for a stock or option, plus any commissions or fees. It is used to determine capital gains or losses when the stock or option is sold.

COVER:

Frequently used to describe the purchase of an option or stock to exit or close an existing short position.

COVERED WRITE OR COVERED CALL OR PUT/COVERD CALL OR PUT WRITING (SELLING):

An option strategy composed of a short call option and long stock, or a short put option and short stock. For example, selling (writing) 2 XYZ 50 calls while owning 200 shares of XYZ stock is a covered call position.

COVERED WRITER (SELLER):

Someone who sells or "writes" an option is considered to have a "covered" position when the seller of the option holds a position in the underlying stock that offsets the risk of the short option. For example, a short put option is covered by a short position in the underlying stock, and a short call option is covered by a long position in the underlying stock.

CREDIT:

An increase in the cash balance of an account resulting from either a deposit or a transaction. As it relates to option orders, a credit is how much the premium collected from selling options exceeds the premium paid for buying options.

CREDIT BALANCE (CR):

This is the money the broker owes the customer after all commitments have been paid for in full. The money could come after a sale of securities, or simply be cash in the customer's account.

CREDIT SPREAD:

Any option spread where you collect a credit when you execute the spread.

CROSSED MARKET:

A situation that occurs on multiple-listed stock and options, where the highest bid price for a stock or option on one exchange is higher than the lowest ask price for that same stock or option on another exchange.

CROSSING ORDERS:

The practice of using one customer's orders to fill a second customer's order for the same security on the opposite side of the market. For this to occur each order must be first offered on the exchange floor; if there are no takers, the broker may cross the orders usually at a price somewhere in between the existing bid and ask prices.

CURRENT MARKET VALUE (CMV):

The current worth of the securities in an account. The market value of listed securities is based on the closing prices on the previous business day. Syn. long market value (LMV). (FINRA)

CUSTOMER:

Any person or entity that opens a trading account with a broker-dealer. The customer may be classified in terms of account ownership, payment methods, trading authorization or types of securities traded.

CUSTOMER AGREEMENT:

The document a customer signs when opening a margin account with a broker- dealer; this document allows the firm to liquidate a portion or all of the customer's account if the customer fails to meet margin requirements set by the firm or Exchange.

CUSTOMER STATEMENT:

This document displays a customer's trading activity, positions and account balance. The SEC requires the statement be sent quarterly, however, Thinkorswim's customer statements will be sent daily via email or may be accessed on line at anytime day or night.

DATE OF RECORD (RECORD DATE):

Date on which you must own shares of a stock to be entitled to the dividend payment on that stock. The day after the record date and until the day the dividend is actually paid, the stock trades ex-dividend.

DAY ORDER:

A day order is an order that is "good for the day" and is automatically cancelled if it cannot be executed the day it was placed. Compare to good-til-cancelled (GTC) orders.

DAY TRADE:

A stock or option position that is purchased and sold on the same day.

DAY TRADING:

Buying and selling the same stock or option position in one day's trading session, thus ending the day with no position.

DEALER:

A firm or individual engaged in the business of buying or selling securities for its own account. Thinkorswim is not a dealer.

DEBIT BALANCE (DR):

In a customer's margin account, that portion of the value of stocks that is covered by credit extended by the broker to the margin customer. In other words, the amount of money a customer owes the brokerage firm. (FINRA)

DEBIT SPREAD:

Any option spread where you pay money for the spread. The debit occurs when the amount of premium paid for the option purchased exceeds the premium received for the option sold.

DECK:

The stack of stock or option orders that are to be filled by a broker on the floor of an exchange.

DECLARATION DATE:

The date a company announces the payment date, record date and amount of an upcoming dividend.

DEFERRED:

Refers to "back month" options or futures.

DELAYED OPENING:

Exchange officials can postpone the start of trading on a stock beyond the normal opening of a day's trading session. Reasons for the delay might be an influx of large buy or sell orders, an imbalance of buyers and sellers, or pending important corporate news that requires time to be disseminated.

DELAYED QUOTES:

Stock or option price quotes that are delayed by the exchanges 15 or 20 minutes from real-time.

DELIVERY:

When referring to stock options, delivery is the process of delivering stock after an option is exercised. If a trader is long a call, and he exercises that call, the person who is short that call must deliver the underlying stock to the trader who is long the call. If a trader is long a put, and he exercises that put, the trader will deliver the underlying stock to the person who is short that put. Actually, the delivery of the stock takes place through clearing firms under very specific terms and procedures established by the exchange where the option is traded. See assignment and exercise.

DELTA:

An approximation of the change in the price of an option relative to a change in the price of the underlying stock when all other factors are held constant. For example, if a call has a price of $1.5 and a delta of .33, if the underlying stock moves up $1, the option price would be $1.83 ($1.5 + (.33 x $1.00)). Generated by a mathematical model, delta depends on the stock price, strike price, volatility, interest rates, dividends, and time to expiration. Delta also changes as the underlying stock fluctuates. See gamma.

DERIVATIVE SECURITY:

A security whose value is derived from the value and characteristics of another security, called the underlying security. Calls and puts are derivative securities on underlying stocks.

DESIGNATED ORDER TURNAROUND (DOT):

NYSE's automated order entry system.

DISCOUNT RATE:

The rate that the Federal Reserve Bank charges on short term loans it makes to other banks and financial institutions.

DISCRETIONARY ACCOUNT:

An account in which the customer has given the registered representative authority to enter transactions at the rep's discretion. thinkorswim does not offer this type of account.

DIVIDEND:

A payment made by a company to its existing shareholders. Dividends are usually cash payments made on a quarterly basis. Dividends can also be in the form of additional shares of stock or property.

DIVIDEND FREQUENCY:

Indicates how many times per year (quarterly, semi-annually) a particular stock pays a dividend.

DIVIDEND YIELD:

The annual percentage of return that received from dividend payments on stock. The yield is based on the amount of the dividend divided by the price of the stock and of course fluctuates with the stock price.

DON'T KNOW (DK) NOTICE:

A term used when brokers or traders compare confirmations on a transaction. If one party receives a confirmation on a trade that it does not recognize, that party would send the other party a D.K. notice.

DOWN-TICK:

A term used to describe a trade made at a price lower than the preceding trade. A short sale may not be executed on a down or minus tick.(FINRA)

DOWNTREND:

Successive downward price movements in a security over time.

DUAL/MULTIPLE LISTED:

When the same stock or option is listed on two or more different exchanges. For example, IBM options are traded on the CBOE, PHLX and AMEX.

DUPLICATE CONFIRMATION:

SRO regulations require a duplicate confirmation (of a customer's confirmations) be sent to an employing broker-dealer, if the customer is an employee of another broker dealer. Also, this duplicate confirmation may be sent to a customer's attorney if the request is put in writing. (FINRA)

EARLY EXERCISE:

A feature of American-style options that allows the buyer to exercise a call or put at any time prior to its expiration date.

EQUITY:

Equity can have several meanings, including 1) stock, as it represents ownership in a corporation, or 2) in a margin account, equity represents a customer's ownership in his account; it is the amount the trader would keep after all his positions have been closed and all margin loans paid off.

EQUITY OPTIONS:

See Stock options.

EUROPEAN-STYLE OPTIONS:

An option contract that can only be exercised upon its expiration date. Compare to American-style options.

EXCESS EQUITY:

The value of cash or securities held in a margin account that exceeds the federal requirement. (FINRA)

EXCHANGE:

An association of persons (members) who participate in buying and selling securities. It also refers to the physical location where the buying and selling takes place.

EXCHANGE-LISTED SECURITY:

Securities that have met certain requirements and have been admitted for full trading privileges on an exchange such as the NYSE or AMEX. These securities will have a three letter designation (IBM) rather than a four letter designation (MSFT) for over-the-counter securities.

EX-DIVIDEND:

Describes a stock whose buyer does not receive the most recently declared dividend. Dividends are payable only to shareholders recorded on the books of the company as of a specific date of record (the "record date"). If you buy the stock any time after the record date for a particular dividend, you won't receive that dividend.

EX-DIVIDEND DATE:

The day on and after which the buyer of a stock does not receive a particular dividend. This date is sometimes referred to simply as the "ex-date," and can apply to other situations beyond cash dividends, such as stock splits and stock dividends. On the ex-dividend date, the opening price for the stock will have been reduced by the amount of the dividend, but may open at any price due to market forces.

EXECUTION:

The actual completion of an order to buy or sell stock or options.

EXERCISE:

If the buyer of a stock option wants to buy (in the case of a call) or sell (in the case of a put) the underlying stock at the strike price or, in the case of a cash-settled option, to receive the index price and the strike price settlement amount, the option must be exercised. To exercise an option, a person who is long an option must give his broker instructions to exercise a particular option (or if the option is .05 in-the-money at expiration it will be automatically exercised for a customer) Someone with short option positions must be aware of the possibility of being assigned if his short options in-the-money, and he must make sure he has adequate buying power available in his account to cover any such potential assignment.

EXERCISE PRICE (STRIKE PRICE):

The cost per share at which the holder of an option may buy or sell the underlying security. (FINRA/Options)

EXPIRATION CYCLE:

The expiration cycle has to do with the dates on which options on a particular underlying security expire. A stock option, other than LEAPS, will be in one of three cycles, the January cycle (with options listed in January, April, July or October), the February cycle (with options listed in the February, May, August or November) or the March cycle (with options listed in March, June, September or December). At any given time, an option will have contracts with four expiration dates outstanding.

EXPIRATION (EXPIRATION DATE):

On the expiration date, an option and the right to exercise it cease to exist. Every option contract becomes null and void after its expiration date. For stock options, this date is the Saturday following the third Friday of the expiration month.

EXTRINSIC VALUE (TIME VALUE):

The difference between the entire price of an option and its intrinsic value. For example, if a call option with a strike price of $50 has a price of $2.75, with the stock price at $52, the extrinsic value is $.75. The price of an out-of-the-money (OTM) option is made up entirely of extrinsic value.

FAST MARKET:

The exchange declares trading in stocks or options to be in a "fast market" when transactions in the pit occur in such volume and with such rapidity that price reporters are behind in entering quotes. During this time, executing brokers are not held to any fills if a price is traded through on a limit order.

FED FUNDS (FEDERAL FUNDS):

The money a bank borrows from another to meet its overnight reserve requirements.

FED FUNDS RATE:

Set by the Federal Reserve Board, the Fed Funds Rate is the rate banks charge each other on overnight loans held at the Federal Reserve Bank.

FEDERAL OPEN MARKET COMMITTEE (FOMC):

A committee of the Federal Reserve Board which operates by buying and selling government securities in the open market. This buying and selling is how the Federal Reserve Board controls the U.S. money supply. The FOMC decides whether to change the discount rate or not.

FEDERAL RESERVE BOARD (FRB):

A seven-member board of governors of the Federal Reserve System, appointed by the U.S. President and confirmed by the Senate, that is responsible for monetary policy within the United States. It controls the supply of money and credit to try to control inflation and create a stable, growing economy.

FENCE:

An option and stock position consisting of long stock, long an out-of-the-money put and short an out-of-the-money call, which emulates a bull spread. Alternatively, a reverse fence can be long stock, long in-the-money put and short in-the-money call which emulates a bear spread. All the options have the same expiration date.

FILL:

The result of executing an order.

FILL OR KILL (FOK):

A type of order that is canceled unless it is executed completely within a designated time period, generally as soon as it is announced by the floor broker to the traders in the pit. Compare to all-or-none (AON).

FINANCIAL INDUSTRY REGULARY AUTHORITY (FINRA):

Regulatory authority responsible for overseeing brokers and dealers in the securities business (changed its name from "NASD" in July 2007.)

FLAT:

Used to describe an account that has no open positions in stocks or options. Flat can also be regarding a position with little or no delta or gamma.

FLOAT:

Number of shares of stock of a corporation that available for public trading.