Glossary S

A quick entry and exit on a position.

Someone who enters and exits stock or options positions quickly, with small profits or losses, holding a position only for a short time during a trading session.

A name for a membership on an exchange.

Markets in which securities are bought and sold subsequent to their being sold to the public for the first time.

A government agency established by Congress to help protect investors. The SEC regulates the stock, stock options, and bond markets.

 
This is a nonprofit corporation created by an act of congress to protect clients of a brokerage firms that are forced into bankruptcy.
 
TD Ameritrade, Inc. is a member of the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash). Explanatory brochure available on request at www.sipc.org.
TD Ameritrade also provides $149.5 million worth of protection for each client through supplemental coverage provided by London insurers. The $149.5 million of coverage includes a sub-limit of $900,000 on cash. Each client is limited to a combined return of $150 million from SIPC or London insurers. The TD Ameritrade supplemental insurance policy has an aggregate limit of $500 million for claims from all TD Ameritrade clients. This supplemental insurance provides coverage following brokerage insolvency and does not protect against loss in market value of the securities.
 

A generic term for investment or trading vehicles. Securities can be stock, bonds, or derivative securities such as options or futures.

The holding of client-owned securities separate from securities owned by other clients and separate from securities owned by the brokerage firm.

Organizations accountable to the SEC for the enforcement of federal securities laws and the supervision of securities practices within their assigned fields of jurisdiction. Examples of these organizations are: FINRA, NYSE and the CBOE.

All option contracts of the same class that also have the same exercise price and expiration date.

The conclusion of a stock or options trade through the transfer of the security (from the seller) or cash (from the buyer).

Date on which a transaction must be settled. Buyers pay for securities with cash and sellers deliver securities.

The closing price of a stock or option used for account statements and to calculate gains and losses in an account.

A unit of ownership in a company or other financial asset.

As a noun, it refers to people who have sold stock or options without owning them first. As an adjective, it refers to a position of short stock or options. Compare to long.

Buying back stock or options to close out a short position.

The selling of options as protection against a decrease in value of a long securities position.

The number of shares of stock that have been sold short is known as a stock's short interest.

Someone who sells stock or options without owning them first. The short seller looks to profit from buying the stock or options back later at a price lower than where he sold it.

When traders who have sold a stock short start to lose profits or incur losses as the stock begins to rise, sometimes dramatically. The short sellers are forced to buy back their short stock positions in order to limit their losses.

An account type in which only one individual has control over the investments and may transact business.

The Sizzle index is a measure of the current option volume vs. the past 5 trading days' volume. It is a ratio of the current volume of all the options for a stock and the average daily volume for all the options over the past 5 days. It indicates whether a stock's options are more or less active than they have been. If the Sizzle index is greater than 1.00, the current option volume is greater than the average of the past 5 days. If the Sizzle index is less than 1.00, the current option volume is less than the average of the past 5 days. The call sizzle and put sizzle are calculated the same way by comparing the call or put volume and the past 5 day average call or put volume.

The difference between the price someone might expect to get filled at on an order, and the actual, executed price of the order.

Members of the NYSE, PHLX, and AMEX whose function is to maintain a fair and orderly market by managing the limit order book and making bids and offers in a particular stock or class of options.

A line of credit in a client's margin account, it's a limit on the amount of money a client can borrow against collateral in the account.

Someone who buys or sells stocks or options hoping to profit from favorable short term moves in their price or volatility.

When a corporation divides its assets into two companies, one the original company and the other a new, independent company. Shares of stock in the new company are issued to stockholders of the original corporation.

An action taken by a corporation in which the number of outstanding shares is increased and the price per share decreases. For example, if a trader were long 100 shares of stock of a company with a price of $120, and that company instituted a 3-for-1 split, the trader would see his position become long 300 shares of stock with a price of $40. The value of the trader's position does not change (unless the price of the stock subsequently changes) and his proportionate ownership in the company remains the same. Compare to reverse split.

1) a position or order involving two or more different options or stock and options (see leg), or 2) the difference between the bid and offer prices of a stock or option.

A type of order specifying two different option contracts on the same underlying security.

SPX is the symbol for the Standard & Poor's 500 cash index. It is a capitalization-weighted index of 500 stocks from a broad range of industries. The options are cash settled, European style expiration, and only trade at the CBOE.

A summary of a brokerage account's activity and balances.

Another name for equity, it is a security that represents ownership in a corporation.

Calls or puts with the right to buy or sell individual stocks.

A type of order that turns into a market order to buy or sell stock or options when and if a specified "stop" price is reached. Stop orders to buy stock or options specify prices that are above their current market prices. Stop orders to sell stock or options specify prices that are below their current market prices. A stop order will not guarantee an execution at or near the activation price. Once activated, they compete with other incoming market orders.

A type of order that turns into a limit order to buy or sell stock or options when and if a specified price is reached. Stop limit orders to buy stock or options specify prices that are above their current market prices. Stop limit orders to sell stock or options specify prices that are below their current market prices. With a stop limit order, as with all limit orders, you risk missing the market altogether. In a fast-moving market, it might be impossible to execute an order at the stop-limit price or a more favorable one.

An option position composed of calls and puts, with both calls and puts at the same strike. The options are on the same stock and of the same expiration, and either both long or both short with the quantity of calls equal to the quantity of puts. For example, a long 50 straddle is long 1*50 call and long 1*50 put. A long straddle requires a large move in the stock price, an increase in implied volatility or both for profitability, while a short straddle performs well when the stock is in during a tight trading range, decreased implied volatility or both. Please note that multiple-leg option strategies such as this can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

An option position composed of calls and puts, with both out-of-the-money calls and out-of-the-money puts at two different strikes. The options are on the same stock and of the same expiration, and either both long or both short with the quantity of calls equal to the quantity of puts. For example, a short 50/70 strangle is short 1*50 put and short 1*70 call. A long strangle requires a large move, an increase in implied volatility or both for profitability, while a short strangle performs well during a tight trading range, decreased implied volatility or both. Please note that multiple-leg option strategies such as this can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

Securities held in the name of a brokerage firm on behalf of a client. This is required for margin accounts, and facilitates delivery for stock transactions.

The pre-determined price at which underlying stock is purchased (in the case of a call) or sold (in the case of a put) when an option is exercised.

Every corporation whose stock is traded on an exchange, and every option traded on an exchange is given a unique identification symbol of up to five letters. Generally, these symbols abbreviate the corporation's complete name and, in the case of options, their strike price, expiration date, and whether they are calls or puts.

Creating a position that emulates another by combining at least two of calls, puts or stock that acts very much like a position of outright stock, calls or puts.

An option position composed of long puts and long stock. The quantity of long puts equals the number of round lots of stock. For example, long 5 synthetic 70 calls at can be created by being long 5*70 puts and long 500 shares of stock.

An option position composed of long calls and short stock. The quantity of long calls equals the number of round lots of stock. For example, long 8 synthetic 80 puts at can be created by being long 8*80 calls and short 800 shares of stock.

An option position composed of long calls and short puts on the same stock, strike price and expiration. The quantity of long options and the quantity of short options nets to zero. For example, long 500 shares of synthetic stock can be created by being long 5*70 calls and short 5*70 puts. See combo. Please note that multiple-leg option strategies such as this can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

An option position composed of short puts and short stock. The quantity of short puts equals the number of round lots of stock. For example, short 3 synthetic 60 calls, can be created by being short 3*60 puts and short 300 shares of stock.

An option position composed of short calls and long stock. The quantity of short puts equals the number of round lots of stock. For example, short 4 synthetic 70 puts, can be created by being short 4*70 calls and long 400 shares of stock.

An option position composed of short calls and long puts on the same stock, strike price and expiration. The quantity of long puts and the quantity of short calls nets to zero. For example, short 400 shares of synthetic stock can be created by being short 4*70 calls and long 4*70 puts. See combo. Please note that multiple-leg option strategies such as this can entail substantial transaction costs, including multiple commissions, which may impact any potential return.

The broad macroeconomic factors that affect all companies in a stock market. It is also known as market risk. Theoretically, it's the risk in a portfolio that cannot be reduced through diversification. Compare to unsystematic risk.