A covered put is a short put option position where the writer does own the underlying shares or has deposited a cash or cash equivalent represented by the value of the options contract. If the stock is declining and the option expires the writer can keep the premium however if the stock is increasing and the holder exercises their option, than the writer must deliver the underlying shares or cash/cash equivalent.
This strategy has limited risk unlike an uncovered put or \"naked put\".
A rating of a company's credit (ability to payback debt), typically done by a third party credit agency.
A loan that has proven uncollectible and is written off.
The perceived financial risk that an debt will not be paid.
The conditions under which credit is extended by a lender to a borrower.
The person/business that is owed money.
Critical Growth Period
The times in which a company's growth is essential.
The point on a chart where an indicator crosses a price line or another indicator.
A Commodity Trading Advisor. A CTA is regulated by the federal Commodity Futures Trading Commission, and those who manage customer accounts must be members of National Futures Association (NFA). Registration & membership with the NFA is not an endorsement, only a statement that the CTA has met the requirements established by the Commodity Futures Trading Commission. A CTA is engaged in the business of advising others as to the advisability of trading in futures or options on futures through publication, wire communications, or through direct recommendations. CTA's must provide to clients a risk disclosure document that outlines a trading program, background information, risks inherent, method(s) of compensation, along with records of the CTA's actual past trading performance records.
Similar to an interest rate swap, except the currencies in the two legs are different, the principal amount on which the interest is paid is always exchanged at maturity. Optionally, there may also be an exchange of principal at the start of the deal.
Cash, accounts receivable, inventory and other assets.
Debts or obligations that are coming due within a year.
A ratio which uses the current assets of a company divided by its current liabilities. Balance-sheet strength indication.
Repetitive patterns, or a period between patterns (ie: bull to bear to bull is a cycle, fall to winter to spring to summer is a cycle).
An order placed to be executed only on one day. If the order cannot be filled on the specified day it is automatically canceled.
Refers to the practice of entering and exiting a market within the same day.
An intersection of two consecutive moving averages that move in opposite directions. The signifies a false signal and is typically disregarded.
A written acknowledgment of debt, typically secured by a lien on assets.
An assessment of the ability and willingness to repay a loan.
The raising of loan capital through the creation of debt.
The total debt divided by total assets.
General term for any security representing money loaned that must be repaid to the lender at a future date. Bonds, notes, bills, and money market instruments are all debt securities.
Total liabilities divided by total assets. The debt/asset ratio shows the proportion of a company's assets which are financed through debt. If the ratio is less than one, most of the company's assets are financed through equity. If the ratio is greater than one, most of the company's assets are financed through debt. Companies with high debt/asset ratios are said to be "highly leveraged," and could be in danger if creditors start to demand repayment of debt.
Measure of a company s leverage, calculated by dividing long-term debt by common shareholders equity, usually using the data from the previous fiscal year. Sometimes, long-term debt plus preferred shareholder s equity is divided by common shareholders equity, since preferred stock can be viewed as a form of debt. A company with a higher debt/equity ratio can offer greater returns to shareholders but be riskier.
Debt/Income Ratio - DTI
The debt-to-income ratio (DTI) is a measurement of and individual or corporations ability to sustain their debt load. This is also the leading indicator for the lending institutions to see if the borrower is capable of absorbing more debt.
To calculate the debt-to-income ratio (DTI): Total monthly debt payments / Total monthly income
The higher the ratio, the less likely the individual or corporation can pay the debt back.
The lower the ratio, the more likely the individual or corporation can pay the debt back
The failure of a debtor to make payment.
Tender and receipt of an actual commodity/financial instrument in settlement of a futures contract.
A clearing member's notice of intention to settle a futures contract by making physical delivery.
The rate of change of fair value of an option with respect to the change in price of the underlying.
A strategy where the total positive deltas of a position (long futures, long Calls, short Puts) equals the total negative deltas of that position (short futures, short Calls, long Puts).
Demand Index (DI)
One of the early volume indicators, developed in the 1970s by James Sibbet. DI is charted on an open scale and fluctuates above and below a zero line. When buying pressure is greater than selling pressure, the DI is above the zero line and vice versa. See report.
Type of loan which must be repaid in full on demand.
Method to account for assets which lower in value over time.
Options on stocks and stock indices that reflect the underlying value of common stocks and are traded by speculators.
Directional Movement Indicator (DMI)
The average of the Average Directional Movement (ADX) today and the ADX 14 days ago.
The process of determining the present value of a series of future cash flows.
Note: Discounting is the reverse of compounding.
Discounting of Accounts Receivable
A method for short-term financing in which accounts receivable are used as collateral to secure a loan. Also known as pledging of accounts receivable.
An account for which buying and selling orders can be placed at the discretion of a broker or other designated person without the consent of the account owner.
Occurs where two indicators disagree. For instance, when the price doesn't agree with an indicator such as an oscillator (trending in opposite directions), this is a forewarning of a reversal. Whenever a divergence occurs, price typically follows the indicator.
A diversified fund or to diversify a fund is the act of balancing a portfolio by dividing funds among various different financial avenues that are considered to be different (ie: sector, buisiness, stock/bond/etc.). Diversification (the intransitive of diversify) is to be engaged in the act of diversifying.
A diversified fund is a mutual fund that maintains a diversified portfolio. By have a diversified portfolio, is it assumed that this will hedge the risk by investing into a variety of different financial instruments (sector, business, stocks, bonds, real estate, etc..). The act of diversification is supported by the idea that not all financial instrument move in the same direction at the same time thereby reducing the impact of a downturn in any one particular market.
A dividend rate is a fixed or variable rate paid on common or preferred shares.
Gives an indication of the income generated by a share of stock. Dividend yield is calculated by taking the amount of dividends paid per share over the year and dividing by the stock's price.
Regular payments made by companies to their stock holders, which can vary over time. These payments compensate the investors for not receiving interest which they might have received with other investments. Investors can also make a profit if the stock price increases over time. Future dividends can have an impact on the worth of an option as the equity or underlying price normally drops when a dividend payment is made.
A bullish reversal pattern. This pattern consists of two lows of approximately equal hieght, a resistance line is then drawn which connects the two lows. The break of this resistance line generates a move equal in size with the price difference between the average height of the bottoms and the resistance line.
A bearish reversal pattern. This pattern consists of two highs of approximately equal hieght, a support line is then drawn which connects the two tops. The break of this support line generates a move equal in size with the price difference between the average height of the tops and the support line.
Dow Jones Averages
Charles H. Dow (1851-1902), an American economist and publisher along with Edward D. Jones (1856-1920) established Dow Jones & Co. (1882), a publisher of financial news. In 1889 he founded the Wall Street Journal. Dow wanting a system to keep track of the conditions of the stock market and devised a formula to calculate the stock averages. Charles Dow stepped in with his first Dow Average. In 1884, he began with 11 stocks representing the largest and most influential companies of the time. At the time, railroads were the prime candidate for his averages. Generally, industrial companies were considered more speculative.
The Dow Jones Industrial Average (DJIA) has been considered one of the most important indicators of the overall condition of the stock market since it\'s creation in the late 19th century. The DJIA is a price-weighted average of 30 companies. These companies are perceived to be the largest and most influential companies (blue chip stocks and primarily industrial) on the US markets. The 30 companies are chosen by the editors of the Wall Street Journal (published by Dow Jones & Company), which has been publishing the Dow Jones Averages since October 7, 1896. The DJIA is calculated by adding the prices of the 30 stocks and dividing by an adjusted denominator.
Based on the philosophy that the market prices reflect every significant factor that affects supply and demand - volume of trade, fluctuations in exchange rates, commodity prices, bank rates, and so on. In other words, the daily closing price reflects the psychology of all players involved in a particular marketplace - or the combined judgment of all market participants. (see report)
An downtick is when a market transaction occurs at a lower price than the last (price went down). This is the opposite of an uptick
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