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Glossary
O-P-Q Glossary of Terms Stocks/Options/Fixed Income
| odd lots |
| Stock transactions that involve less than 100 shares |
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| offer |
| The price at which a person is willing to sell a security. |
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| open interest |
| In options and futures trading, the number of outstanding option contracts at any given time which have not been exercised and have not yet reached expiration. |
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| open order |
| see Good 'til Cancelled (GTC) Order |
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| open-end investment company |
| A company or trust that uses its capital to invest in other companies. There are two principal types: the closed end and the open end, also known as mutual fund. Shares of closed-end investment companies, most of which are listed in the NYSE, are readily transferable in the open market and are bought and sold like shares of stock. Capitalization of these companies remains the same unless action is taken in change, which is rare. Open-end funds sell their own new shares to investors, stand ready to buy back their old shares, and are not listed. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them. |
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| opening purchase |
| A transaction in which the purchaser's intention is to create or increase a long position. |
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| opening sale |
| A transaction in which the seller's intention is to create or increase a Short Position in a given series of options. |
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| options |
| Options are derivative securities that give the holder the right to buy (call) or sell (Puts and Calls) a specified amount of the underlying security at a specific "strike price" and within a specified timeframe.
*The NYSE withdrew from the options trading business in 1997. |
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| out-of-the-money |
| A call option is out-of-the-money when the strike price is above the price of the underlying security. Likewise, a put option is out-of-the-money when the exercise price is below the price of the underlying security. An out-of-the-money option is one that has no intrinsic value. |
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| Over-the-Counter (OTC) |
| A market for securities made up of dealers who may or may not be members of a securities exchange. OTC firms conduct business over the telephone and act either as principals or dealers (buying and selling stock from their own inventory and charging a markup) or as a broker or agent and charging a commission. |
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| par value |
| Par value is ordinarily the amount the issuing company promises to pay, per bond, at maturity, typically $1,000. Par value is not an indication of market value. Also referred to as Face Value. |
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| partial call |
| A redemption by the issuer of a portion of the outstanding amount. Which bonds are redeemed in partial calls is usually determined by lottery. |
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| penny stocks |
| Low-priced issues, often highly speculative, selling at less than $1 a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment-caliber issues. |
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| point |
| In the case of shares of stock, a point equals $1. If ABC shares rise 3 points, each share has risen $3 in price. In the case of bonds, a point equals $10 because bonds are quoted as a percentage of $1,000. An advance from 87 to 90 would mean a rise in value of $30 from $870 to $900 |
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| preferred stock |
| A type of stock that pays a fixed dividend regardless of corporate earnings, and which has priority over common stock in the payment of dividends. However, it carries no voting rights, and should earnings rise significantly the preferred holder is stuck with the same fixed dividend while common holders collect more. The fixed income stream of preferred stock makes it similar in many ways to bonds. |
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| premium |
| For bonds and preferred stock, the premium is the amount by which the price exceeds the face, or par, value. For options markets, the premium is synonymous with the option's price. See also Discount. |
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| price improvement |
| When a buy order is executed at a price lower than the current quoted offer, or when a sell order is executed at a price higher than the current quoted bid. In addition to quoting the best prices more than 90 percent of the time, the NYSE continuous auction market typically improves upon these quoted prices, allowing investors to get a better price for their shares. |
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| price/earnings ratio (P/E) |
| A popular measure for comparing stocks selling at different prices in order to single out over- or under-valued issues. The P/E ratio is simply the price per share divided by the company's earnings per share. However, P/E is not always an accurate guide to a stock's quality. Some people tend to think that a stock is inflated and drastically overvalued if its price is many times its earnings. Yet that same stock may be quite accurately valued to reflect the company's rapid growth and potential for high future earnings. When comparing P/Es it is therefore important to choose stocks in the same industry that are likely to face the same earnings prospects. |
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| pricing |
| Bond prices may be stated in “dollar” or yield terms. In dollars, the price is expressed as a percent of par value. Thus, a price of 90 means that the value of the bond is equal to 90% of the (usually) $1,000 face amount of the bond, or $900. Yield pricing expresses the price in terms of yield to maturity. |
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| primary market |
| The process by which a corporation's stock is issued for the first time. It is then sold to the public on the secondary market. |
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| prime rate |
| The lowest interest rate charged by commercial banks to their most creditworthy and largest corporate customers; other interest rates such as personal, automobile, commercial and financing loans are often pegged to the prime. |
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| principal amount |
| The face amount of the bond payable at maturity or upon being called. |
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| prospectus |
| The issuer must provide according to SEC regulations, the official documents to potential purchasers of a new securities issue. It highlights the much longer registration statement filed with the Commission that gives information on the financial well being of the issuer and the specifics of the issue itself. Potential investors can consult this information before buying. |
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| proxy |
| A ballot by which stockholders can transmit their votes on corporate matters without needing to attend the actual shareholders meeting. A proxy could also state the stockholder's intention to transfer voting rights to someone else. A company's shareholders are commonly asked to vote on such matters as electing a board of directors, approving mergers and acquisitions, and sometimes on proposals that other stockholders have submitted to management. One share generally equals one vote. |
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| put option |
| A contract that gives the holder the right to sell the underlying stock, to the writer of the put, at a specified price (the strike price) within a fixed period of time. |
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| quote |
| The highest bid to buy and the lowest offer to sell any stock at a given time. |
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