Trading and options glossary
704 terms and 34 options strategies, from stocks and bonds to the Greeks, volatility, desk language, risk and valuation. Each is defined in plain words; the terms come with a worked example.
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A
B
- Backwardation
- Balance sheet
- Base currency
- Base-rate neglect
- Basic vs diluted EPS
- Basis
- Basis point (bp)
- Basis risk (tracking risk)
- Basket option
- Bat and ball
- Beat / miss
- Benchmark
- Best execution
- Beta
- Beta hedge
- Beta-adjusted exposure
- Bid / offer
- Bid-ask spread
- Bid-wanted
- Big figure / handle
- Bills, notes, bonds
- Binomial risk-neutral probability
- Birthday problem
- Black–Scholes
- Block trade
- Blotter
- Blow-up
- Blue chip
- Body
- Bond
- Bond convexity
- Bond credit spread
- Bond floor
- Borrow fee
- Bottom line
- Breakeven
- Breakeven inflation
- Breakeven move
- Breakeven win rate
- Breakout
- Breeden–Litzenberger
- Bridge and torch
- Broken-wing butterfly
- Broker vs dealer
- Bull / bear market
- Burning ropes
- Butterfly (vol quote)
- Butterfly arbitrage
- Buy side
- Buy the dip
- Buy to close (BTC)
- Buy to open (BTO)
- Buy Write
- Buy-in
- Buyback
- Buying power
- Buying-power reduction (BPR)
C
- Cable
- CAC 40
- CAGR
- Calendar Spread - Credit
- Calendar Spread - Debit
- Call
- Call-spread overhedge
- Called away
- Calmar ratio
- Candlestick (OHLC)
- Cap-weighted index
- Capex
- Capital-guaranteed note
- Capitulation
- CAPM
- Carry trade
- Cash account
- Cash settlement
- Cash-and-carry
- Cash-flow statement
- Cash-secured put
- Catch a falling knife
- Central bank
- CFI vs CFF
- CFO
- Chain of causes
- Charm
- Choice
- Chop / range-bound
- CL
- Clearinghouse
- Clock-hand overlaps
- Closing auction
- COGS
- Collar
- Combo order
- Commodity
- Complement rule
- Compounding
- Concentration risk
- Confirmation bias
- Consensus
- Contango
- Contract adjustment
- Contract multiplier
- Convenience yield
- Conversion
- Conversion premium
- Convertible arbitrage
- Convertible bond
- Core CPI
- Corporate bond
- Correction
- Correlation
- Cost of carry
- Cost of debt
- Cost of equity
- Cost of protection
- Counterparty risk
- Coupon
- Coupon collector
- Covariance
- Covered Basket Call
- Covered Call
- Covered interest parity
- Covered Put
- Credit default swap
- Credit rating
- Credit spread
- Credit-to-width ratio
- Currency pair
- Current ratio
- Current vs quick ratio
- Current yield
- Cut
- Cxl / out
- Cyclical vs defensive
D
- Dark pool
- Days to cover
- Days to liquidate
- DCF
- Dead-cat bounce
- Debit spread
- Debt/equity
- Deductible
- Default
- Defined risk
- Deflation
- Deliverable
- Delta
- Delta as a probability
- Delta band
- Delta hedging
- Delta-neutral
- Depreciation & amortization (D&A)
- Derivative
- Diagonal Spread - Long leg expires first
- Diagonal Spread - Short leg expires first
- Dice re-roll game
- Difference of squares
- Digital option
- Dilution
- Discount certificate
- Discount factor
- Discount rate
- Disposition effect
- Diversification
- Dividend
- Dividend futures
- Dividend risk
- Dividend yield
- Dollar delta
- Dot plot
- Dovish
- Dow Jones Industrial Average
- Down-and-in put
- Drawdown
- DTE
- DuPont
- DV01
- DXY
E
- Early assignment
- Early exercise
- Earnings season
- EBIT
- EBITDA
- ECB
- Edge
- Eighths
- Enterprise value
- EPS
- Equity risk premium
- ES
- ETF
- EUR/USD
- European-style
- EV/EBITDA
- Event premium
- Event trade
- Ex-dividend date
- Exercise
- Exercise by exception
- Exotic option
- Expectancy
- Expected move
- Expected shortfall
- Expiration
- Expiration risk
- Expiry (contract month)
- Extrinsic (time) value
F
- Fat tails
- FCF yield
- Fed funds rate
- Fermi estimate
- Fiber
- FINRA
- Firm (quote)
- Fixed-fractional risk
- Flat
- Float
- Floor
- FOK
- FOMC
- FOMO
- Forced liquidation
- Forward points
- Forward price
- Forward rate
- Forward-start option
- FRA (forward rate agreement)
- Free cash flow
- Front month
- Front-running
- Futures contract
- Futures convexity adjustment
- Futures maintenance margin
- Futures roll
G
H
I
- “I don't know, but…”
- Iceberg order
- Implementation shortfall
- Implied dividend
- Implied financing rate
- Implied move
- Implied volatility (IV)
- In the money (ITM)
- In touch with
- In-out parity
- Income statement
- Inflation
- Information ratio
- Initial jobless claims
- Initial margin
- Initiation
- Insider trading
- Institutional investor
- Interest coverage
- Interest rate
- Interest-rate cap / floor
- Intrinsic value
- Inverted strangle
- Inverted yield curve
- Investment bank
- Investment grade
- IOC
- IOI
- IPO
- Iron butterfly
- Iron condor (desk usage)
- IV crush (vol crush)
- IV percentile
- IV rank
J
K
L
- Large cap / mid cap / small cap
- Last price
- Last trading day
- LEAPS
- Legging in
- Legging risk
- Level 2
- Leverage
- Liabilities
- LIBOR
- Lift the offer
- Light-switch puzzle
- Limit order
- Linearity of expectation
- Liquidity
- Liquidity risk
- ln 2
- Locate
- Locked position
- Lognormal assumption
- Long Box Spread
- Long Butterfly
- Long Call
- Long Call Spread
- Long gamma
- Long Iron Condor
- Long position
- Long premium
- Long Put
- Long Put Spread
- Long Straddle
- Long Strangle
- Long vega
- Long vol
- Lookback option
- Loonie
- Loss aversion
- Lot
- Lotto ticket
- LULD
M
- Macaulay duration
- Maintenance margin
- Maker-taker
- Managing winners
- Margin account
- Margin call
- Margin expansion / compression
- Margin-requirement expansion
- Mark
- Mark-to-market
- Market cap
- Market impact
- Market maker
- Market order
- Market-wide circuit breaker
- Marketable limit
- Max drawdown
- Mean reversion
- Melt-up
- Memory coupon
- MES
- Mid
- Minority interest
- Moat
- Modified duration
- Momentum
- Moneyness
- Monte Carlo VaR
- Month codes
- Monthlies
- Monty Hall
- MOO / MOC
- Morning check
- Moving average
- Multiple expansion / compression
- Mutual fund
N
O
P
- P/B
- P/E ratio
- P/S ratio
- P/S vs EV/Sales
- P&L
- Paid / given
- Par swap rate
- Par value
- Parity (conversion value)
- Parity arbitrage
- Partial fill
- Participation rate
- Payer swap
- Payment date
- Payoff diagram
- Payoff ratio
- Payout ratio
- PCE
- PEG ratio
- Penny stock
- PFOF
- Physical delivery
- Physical settlement
- Picking up nickels in front of a steamroller
- Pin risk
- Pinning
- Pip
- Pirate puzzle
- PMI
- Poor man's covered call
- Portfolio
- Portfolio margin
- Position delta
- Position Greeks
- Position sizing
- Powers of 2
- Pre-market
- Premium
- Premium vs discount bond
- Present value
- Price target
- Price-weighted index
- Priced in
- Primary market
- Probability of profit
- Prop trading
- Protection barrier
- Protective Call
- Protective Put
- Put
- Put skew
- Put-call parity
- Put-call parity with dividends
Q
R
- R-multiple
- Rally
- Real yield
- Realized volatility
- Realized vs unrealized P&L
- Rebalancing
- Recency bias
- Record date
- Recovering from a miss
- Recovery rate
- Reg T
- Replicating portfolio
- Repo
- Resistance turned support
- Retail investor
- Retail sales
- Revenge trading
- Revenue
- Reversal
- Reverse barrier
- Reverse convertible
- Reverse split
- Rho
- Risk limit
- Risk of ruin
- Risk reversal (25-delta)
- Risk-neutral pricing
- Risk-on / risk-off
- Risk:reward ratio
- ROA
- ROE
- ROIC
- Roll for a credit
- Rolling
- Round lot / odd lot
- Rule of 16
- Rule of 72
- Russell 2000
S
- S&P 500
- Safe haven
- Scale in / out
- Scenario analysis
- SEC
- Secondary market
- Sector (GICS)
- Sell side
- Sell the news
- Sell to close (STC)
- Sell to open (STO)
- Sell-off
- Sevenths
- Shareholder
- Shareholders’ equity (book value)
- Shares outstanding
- Sharpe ratio
- Short Butterfly
- Short Call Spread
- Short Collar
- Short gamma
- Short interest
- Short Iron Condor
- Short leg
- Short Naked Call
- Short premium
- Short Put
- Short Put Spread
- Short selling
- Short squeeze
- Short Straddle
- Short Strangle
- Short strike
- Short Synthetic
- Short vega
- Short vol
- Sixths & twelfths
- Skewing a quote
- Slippage
- SOFR
- Sortino ratio
- Sovereign bond
- Speculation
- Spoofing
- Spot
- Square
- Square-root-of-time rule
- Squares near 50
- St Petersburg paradox
- Stagflation
- Standard lot
- State your assumptions
- Steepening / flattening
- Stock (share)
- Stock exchange
- Stock index
- Stock split
- Stop order
- Stop-limit
- Stop-loss
- Stopped out
- €STR
- Straddle approximation
- Strategy-based margin
- Stress test
- Strike price
- Strike width
- Structured product
- Structuring margin
- Subject (indicative)
- Sunk-cost fallacy
- Support / resistance
- Swap spread
- Swaption
- Sweep
- Swissie
- Synthetic
- Synthetic equivalent
T
- T-bill
- T+1
- Tail hedge
- Tail risk
- Tape bomb
- Technical recession
- Teenie
- Term structure
- Terminal value
- Tested side
- The 100/105 call spread
- The book
- The figure
- The Greeks
- The wheel
- Theta gang
- Think out loud
- Tick size
- Tick value
- Ticker
- Tied to
- Time decay (theta)
- Time in force (DAY / GTC)
- Time value of money
- TIPS
- Top line
- Total return
- Total return swap
- Tracking error
- Trade pitch
- Trading halt
- Trading heavy
- Trading journal
- Trading volume
- Trailing stop
- Trailing vs forward P/E
- Trailing zeros of 100!
- Treasury
- Trend
- TWAP
- Twelve-coin weighing
- Two-egg drop
- Two-way price