Glossary
SEC
The Securities and Exchange Commission. The SEC is an agency of the federal government which is in charge of monitoring and regulating the securities industry.
Secondary market
A market where securities are bought and sold after their initial purchase by public investors.
Sector index
An index that measure the performance of a narrow market segment, such as biotechnology or small capitalization stocks.
Secured put / cash-secured put
An option strategy in which a put option is written against a sufficient amount of cash (or T-bills) to pay for the stock purchase if the short option is assigned.
Series of options
Option contracts on the same class having the same strike price and expiration month. For example, all XYZ May 60 calls constitute a series.
Settlement
The process by which the underlying stock is transferred from one brokerage account to another when equity option contracts are exercised by their owners and the inherent obligations assigned to option writers.
Settlement price
The official price at the end of a trading session. This price is established by The Options Clearing Corporation and is used to determine changes in account equity, margin requirements and for other purposes. See also Mark-to-market
Short option position
A strategy that profits from a stock price decline. It is initiated by borrowing stock from a broker-dealer and selling it in the open market. This strategy is closed (covered) at a later date by buying back the stock and returning it to the lending broker-dealer.
Short stock position
Measures the difference in value between imported and exported goods and services. Nations with trade surpluses (exports greater than imports), such as Japan, tend to see their currencies appreciate, while countries with trade deficits (imports greater than exports), such as the US, tend to see their currencies weaken.
Simple Moving Average (SMA)
A simple average of a pre – defined amount of price bars. For example, a 50 period Daily chart SMA is the average closing price of the previous 50 daily closing bars. Any time interval can be applied here.
Specialist / specialist group / specialist system
One or more exchange members whose function is to maintain a fair and orderly market in a given stock or a given class of options. This is accomplished by managing the limit order book and making bids and offers for his/her/their own account in the absence of opposite market side orders. See also Market-maker and Market-maker system, (competing)
Spin-off
A stock dividend issued by one company in shares of another corporate entity, such as a subsidiary corporation of the company issuing the dividend.A stock dividend issued by one company in shares of another corporate entity, such as a subsidiary corporation of the company issuing the dividend.
Spot Market
A physical market in which foreign currencies and commodities are bought and sold for cash at the current market price, settled “on the spot” and delivered immediately.
Spot Price
The current market price. Settlement of spot transactions usually occurs within two business days.
Spot Trade
The purchase or sale of a foreign currency or commodity for immediate delivery (as opposed to a date in the future). Spot contracts are settled electronically.
Spread / spread order
A position consisting of two parts, each of which alone would profit from opposite directional price moves. As orders, these opposite parts are entered and executed simultaneously in the hope of (1) limiting risk, or (2) benefiting from a change of price relationship between the two parts.
Standard deviation
A statistical measure of price fluctuation. One use of the standard deviation is to measure how stock price movements are distributed about the mean. See also Volatility
Standardization
Interchangeability resulting from standardization. Options listed on national exchanges are fungible, while over-the-counter options generally are not. Classes of options listed and traded on more than one national exchange are referred to as multiple-listed / multiple-traded options.
Sterling
Slang term for the British Pound (GBP).
Stock dividend
A dividend paid in shares of stock rather than cash. See also Spin-off
Stock split
An increase in the number of outstanding shares by a corporation, through the issuance of a set number of shares to a shareholder for a set number of shares that the shareholder already owns. For example, a corporation might declare a '2-for-1 stock split.' This means that for every share of stock an investor owns, he/she will be given another, thus owning 2 shares instead of 1. There will be a corresponding reduction in equity value per share. In this case, the new shares (post-split) will be worth one-half their previous value but the investor will own twice as many shares. See also Stock dividend
Stop order
A type of contingency order, often erroneously known as a 'stop-loss' order, placed with a broker that becomes a market order when the stock trades, or is bid or offered, at or through a specified price. See also Stop-limit order
Stop-limit order
A type of contingency order placed with a broker that becomes a limit order when the stock trades, or is bid or offered, at or through a specific price.
Straddle
A trading position involving puts and calls on a one-to-one basis in which the puts and calls have the same strike price, expiration, and underlying stock. A long straddle is when both options are owned and a short straddle is when both options are written. Example: a long straddle might be buying 1 XYZ May 60 call, and buying 1 XYZ May 60 put.
Strike / strike price
The price at which the owner of an option can purchase (call) or sell (put) the underlying stock. Used interchangeably with striking price, strike, or exercise price.
Strike price interval
The normal price differential between option strike prices. Equity options generally have $2.50 strike price intervals (if the underlying stock price is below $25), $5.00 intervals (from $25 to $200), and $10 intervals (above $200). LEAPS generally start with one at-the-money, one in-the-money, and one out-of-the-money strike price. The latter two are usually set 20%-25% away from the former.
Suitability
A requirement that any investing strategy fall within the financial means and investment objectives of an investor or trader.
Support
A term used in technical analysis to describe a price area at which falling prices are expected to stop or meet increased buying activity. This analysis is based on previous price behavior of the stock. Opposite of resistance.
Swap
A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.
Swissy
Market slang for the Swiss Franc (CHF).
Synthetic long call
A long stock position combined with a long put of the same series as that call.
Synthetic long put
A short stock position combined with a long call of the same series as that put.
Synthetic long Stock
A long call position combined with a short put of the same series.
Synthetic position
A strategy involving two or more instruments that has the same risk-reward profile as a strategy involving only one instrument.
Synthetic short call
A short stock position combined with a short put of the same series as that call.
Synthetic short put
A long stock position combined with a short call of the same series as that put.
Synthetic short Stock
A short call position combined with a long put of the same series.