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T - The fifth letter of a NASDAQ stock symbol indicating
that the stock has warrants or rights involved.
T-period holding-period return - The return percentage over the T-year
period an investment duration.
Table Top - An option combination that has a bullish call spread with an
additional short call at a higher strike.
Tactical Asset Allocation - Sometimes called Active Management. A
portfolio strategy allowing departures from the normal asset mix based
upon rigorous measures of value. Tactical asset allocation involves
forecasting asset returns, correlations, and volatilities.
Tail - 1.The difference between the stop out price and the average price
in Treasury auctions. 2.The extreme ends of a probability curve.
Tail Hedging - Adjusting the number of futures contracts in a hedge
position so that the present market exposure of the hedge offsets the
underlying exposure.
Tailored Swap - Swap designed to meet the financing or currency needs of
a business with particular risk management requirements.
Take - To agree to buy another dealer’s offered price.
Take a Position - Refers to buying or selling short. To own or owe an
amount on an asset or security
Take a Powder - To temporarily cancel an order in stock, while interest
still exists.
Take a Swing - To execute a trade at a riskier price than the trader
would usually accept, in an effort to increase market share in the
institutional sector.
Take it down - The act of lowering an offer price on another bid in
order to lower the inside market.
Take or pay contract - A type of contract that dictates the purchaser
take any product offered or pay a specified amount if purchaser refuses
to take the product.
Take-up Fee - The compensation for every share of stock that an
underwriter obtains and resells upon exercising the rights or converting
the bonds.
Takeout Loan - Permanent mortgage financing that replaces loans on a
takeover project.
Takeover - Refers to an acquisition or bid that results in a change of
controlling interest or a company.
Takes a Call - An action that needs a call to an account to get the
trade accomplished.
Takes Price - In equities trading, when a price movement on must be made
on behalf of the initiating party before the trade can be completed.
Talon - The remainder of a bond after all coupons have been removed.
Tandem Options - A sequence of call or put options with non-coinciding
time periods and variable strike prices.
Tangible asset - An asset where the value depends on particular physical
properties. These properties can be items such as buildings, land, or
equipment.
Tape - As in ticker tape. A service that reports the transactions on the
major stock exchanges.
Target - Expected time to exercise an American option.
Target Cash Balance - The optimal balance of cash that a firm may hold
when considering the balance between opportunity costs and trading
costs.
Target Company - A company that looks attractive as an acquisition
target to a potential acquirer. The acquiring company may buy up to 5%
of the target company stock prior to public disclosure, but must report
all activity to the SEC when the 5% level has been reached.
Target Price - The price at which the owner of a capped instrument stops
participating in further price appreciation.
Target Return - Usually the minimum return acceptable to an investor.
Target Stock - Common or preferred shares with dividends and/or earnings
participation linked to a specific segment of the issuer's business.
Targeted Amortization Class (TAC) Bond - A collateralized mortgage
obligation that pays principal based upon a predetermined schedule.
Targeted Repurchase - An attempt to purchase back stock from a potential
acquirer in order to stall a potential takeover.
Tau - The reaction in the price of an option to changes in the
volatility variable.
Tax Anticipation Notes - Notes issued by municipalities and states to
finance operations with regard to future tax receipts.
Tax Arbitrage - The creation of instruments or transactions which can be
priced attractively to both counterparties because their cumulative
taxes are reduced.
Tax Books - The set of books that is kept for the IRS by the management
team of a firm.
Tax Deferral Option - When capital gains tax is payable only when the
asset is sold.
Tax Efficiency - A characteristic of an instrument that allows a dealer
to defer tax payments from either or both parties to the transactions
than an alternate similar position or instrument.
Tax Exempt Enhanced Municipal Security - An instrument created when a
municipal issuer enters into an interest rate swap agreement which
permits it to enjoy fixed interest costs over the life of the instrument
but to pay investors an inverse floating rate for the life of the swap.
Tax Free Acquisition - An acquisition where the individual who receives
only stock does not have to pay taxes on the gain until the shares are
sold.
Tax Haven - A country where there exists liberal tax incentives or
moderate taxes for the benefit of those wanting to invest or export from
that country.
Tax Risk - A term or set of terms of a transaction that makes the
returns or losses unattractive after taxes.
Tax Selling - The selling of long stock positions for tax purposes,
generally in an effort to offset profit.
Tax Shield - The reduction in income taxes that results from taking an
allowable deduction from taxable income.
Tax Straddle - Technique that uses options and futures to reduce taxes
with low risk.
Tax Swap - To swap similar bonds in an effort to receive a tax benefit.
Tax-Deferred Retirement Plans - Plans sponsored by an employer that
allow earning and contributions to remain tax-free until paid out.
Tax-Exempt Sector - The sector where state and local governments issue
municipal bonds that are exempt from federal income taxes.
Tax-exempt Swap - An interest rate swap agreement with the payments
based on the yield of municipal securities.
Tax-Timing Option - To sell an asset for tax purposes or hold the asset
to defer the capital gains tax.
Taxable Acquisition - An acquisition (merger or consolidation) that is
not tax-free.
Taxable Income - Gross income less deductions.
Taxable Transaction - A transaction where all parties involved are
subject to taxes.
Technical Analysis - An analysis that seeks to interpret patterns in
past security prices.
Technical Analyst - An individual who uses technical analysis to detect
changes in the patterns of a stock in an effort to capitalize on
anticipated change.
Technical Condition of a Market - Supply and demand affecting price in a
dealer community. This condition usually affects the net position and
works for both long and short positions.
Technical Descriptors - Technical terms and variables used to describe
the market.
Technical Insolvency - A term used to describe the situation where a
company defaults on a legal obligation.
Technical Rally - Short rise in the price of securities or futures
within a declining trend.
Tender - The act of offering for delivery against futures.
Tender Bond - A municipal bond with a forward sale price linked to the
market rate on a specific Treasury bond.
Tender Offer - An offer made to a firm’s shareholders to purchase stock
well above the current market price.
Tenor - The life of a contract or instrument.
Term Bonds - A bond where the principal is payable at maturity.
Term Insurance - With term insurance, there is only a death benefit with
no accrual of cash value.
Term Loan - A bank loan with a specified amount that matures in a time
frame of one to ten years and has a specified repayment schedule.
Term Sheet - An outline of the characteristics of a financial
instrument. Usually prepared by an underwriter or by the issuing dealer.
Term to Maturity - Refers to the amount time left on a bonds life, at
which time debt will cease to exist and repayment will have been made.
Term Trust - A closed-end fund with a fixed maturity date.
Terminal Value - Refers to the value of an asset at a specified
valuation date or the value a bond reaches at maturity.
Termination - Cancellation of an contract or instrument with settlement
based on terms previously agreed to.
Termination Claim - The exercise value of an Americus Trust.
Termination Date - The effective date of termination of an agreement.
Termination Rating - An S & P credit rating given to a derivative
products company that is designed to protect counterparties by closing
out derivative contracts in the event of default or bankruptcy.
Terms of an Option Contract - The specifications of an option contract
and the exchange the option trades on. The contract specifications
include the exercise or strike price, expiration date, instrument on
which the option is written and the quantity of the underlying security
that makes up the unit of trading.
Terms of Sale - The term or conditions on which a company sets forth to
sell services or goods.
Terms of Trade - A weighted average based on a nation’s export price
compared to its import prices.
Tesobono - A Mexican Government bond denominated in pesos, with coupons
and principal indexed to U.S. dollars at the spot rate in effect at
issuance.
Texas Hedge - A transaction that increases risk rather than offsetting
risk. Ex. buying calls in addition to holding a long position in the
underlying.
The London Interbank Offered Rate - An interest rate used for loans
between major London banks, often used as a basis for variable interest
rates in the US; abbreviated as LIBOR.
Theoretical Intermarket Margin System - The process used by the Options
Clearing Corporation to establish option clearing firm margin
requirements.
Theoretical Value - The fair value of an option as determined by an
option model.
Theta - A ratio used to determine the ratio of change in an option’s
price to the decrease in expiration time.
Thin market - A condition where there is very little stock available to
buy or sell, trading volume is low, and the bid and ask quote spread are
wide.
Thinly traded - An issue that is infrequently traded.
Third Market - Refers to the OTC market and the securities trading
there.
Third Party Pledge System - A method used by a bank to collateralize
short option positions for the benefit of the clearing corporation, the
clearing member and the customer.
Third Party Warrants - A stock, basket, or warrant issued by a party
other than the issuer of a corporation and covered by the corporate
issuer.
Threshold Level - A value on an underlying price or rate that sets or
resets the minimum payment on a ladder option or note.
Tick - The change in price of a security (up or down).
Tick Indicator - Refers to the quantity of stocks where the last trade
was an uptick or a downtick.
Tier I Capital - The permanent equity capital of a bank, consisting of
equity capital and disclosed reserves.
Tier II Capital - Secondary bank capital consisting of undisclosed
reserves, evaluation reserves, general provisions and general loan loss
reserves.
Tiered Interest Bonds - A CMO tranche that combines some of the
characteristics of a high fixed coupon note and an inverse floater. When
the interest rate index that determines the TIB rate is below a level
called the lower strike, the TIB coupon is fixed at a relatively high
level. As the index moves above the lower strike, the TIB becomes a
leveraged inverse floater with a rate that drops to zero at an upper
strike rate.
Tight - A term used to describe the nature of the inside market or last
sale in a stock. Generally used to describe how close the last sale was
(+ or – 1/16).
Tight Market - A market where the volume is large, the bid and ask
spreads are narrow, and trading is active.
Tilted Portfolio - Used in the context of a particular sector as an form
of indexing strategy that uses performance factors such as dividend
yield and P/E ratio or factors such as interest rates or inflation.
Time Box - Offsetting synthetic stock positions with different
expirations and, often, different strike prices.
Time Decay - The loss in value of an option as the expiration date
approaches.
Time Deposit - An interest-bearing deposit at an institution with a
specific maturity.
Time Discount Option - An option with premium paid at expiration that
equals the number of days the option was in the money divided by the
number of days in the life of the option, multiplied by an agreed
premium level. If the option was never in the money, there will be no
premium.
Time Diversification - The belief that above average returns tend to
offset below average returns over an extended period of time.
Time Draft - The terms for payment set forth for a specific future date.
Time Hedge - A short option hedge position that improves with time if
the underlying security is not volatile.
Time Order - An order that becomes a market order or is cancelled at a
specific point in time.
Time to Maturity - Refers to the remaining time before a contract
expires.
Time until Expiration - The amount of time left before a contract
expires.
Time Value - Describes the part of the option price that exceeds the
intrinsic value and is related to the amount of volatility in the
underlying stock.
Time Value of Money - Based on the concept that today’s dollar has more
value than a dollar in the future, due to the fact that today’s dollar
will earn interest up until the date the future dollar is collected.
Time-Weighted Return - The compounded return measured on the basis of
periodic market valuations of assets.
Times-interest-earned ratio - A formula that determines pre-interest and
pre-tax earnings, then divided by interest payments.
Timing Option - Refers to the owner’s decision of when in the delivery
month to deliver the futures contract or T- bond.
To Be Announced (TBA) Trading - Trading in the mortgage-backed
securities market in which the buyer does not know the actual pools
being delivered to back the specific securities purchase until just
prior to settlement.
Tobin's Q - A measure of a firms valuation which may help predict a
firm’s reaction to market appreciation or decline.
Tombstone - An advertisement containing the names of the underwriters in
a particular security issue.
Too Big to Fail Policy - The belief followed by U.S. bank regulators
prior to 1991 that certain banks were too large to fail.
Top - Refers to the higher price a buyer will pay for a stock.
Top Heavy - When a security reaches a price level where supply exceeds
demand.
Topping Out - When a security has enjoyed a period of rising price and
should stay at this level or potentially decline.
Toronto Index Participations - Warehouse receipt-based instruments
designed to track the Toronto-35 index.
Toronto Stock Exchange 100 index (TSE 100) - The Canadian equivalent to
the Dow Jones Industrial.
Total - Refers to buying or selling the whole amount of interest in an
issue, as opposed to having more behind it.
Total Asset Turnover - Ratio of net sales to total assets.
Total Coverage Period - The life, from start date to final settlement of
a financial instrument.
Total Debt to Equity Ratio - A ratio that compares long-term debt and
current liabilities to shareholder equity.
Total Dollar Return - A formula for determining the dollar return on an
investment, including the sum of capital gains, interest income, and
currency gains or losses on the total investment.
Total Return - Used to determine the actual rate of return accumulated
over an evaluation period.
Total Return Options - Options which pay off on a change in price as
well as any dividend or interest income attributed to the underlying
during the life of the option.
Total Return Swap - Any swap in which the non-floating rate side is
based on the total return of an equity or fixed income instrument with a
life longer than the swap.
Total Revenue - The sum of total sales and revenue for a given period.
Touch Option - Any of several variations of barrier options which become
triggered when the instrike, outstrike, or early exercise price is
touched once, twice, or some other number of times or when the
underlying trades at or through the barrier.
Touch-Up or Touch-Down Option - A binary option with a fixed payout at
expiration if the underlying price touches an instrike above or an
instrike below the spot price prior to expiration.
Toxic Waste - Securities with unusual risks and limited liquidity that
few investors and market makers want to touch.
Tracking Error - Used with indexing strategies, the tracking error
applies to the standard deviation based on the difference between
benchmark performance and the replicating portfolio.
Trade - Refers to the transaction when one party purchases a security
from another party.
Trade Acceptance - A written demand, accepted by a company, and agreed
upon to pay a given sum at some future date.
Trade Away - A trade or execution by another broker or broker dealer.
Trade Credit - A trade credit issued by one firm to another for the
future purchase of goods or services.
Trade Date - The date on which all the terms and methods of a financial
instrument are agreed upon.
Trade Draft - A draft sent to a company.
Trade Flat - To trade in an out of a security without making a profit or
taking a loss.
Trade House - Slang for a firm that deals in commodities.
Trade on the Wire - To give an offer on an equity without previously
checking conditions such as customer interest or floor conditions.
Trade Rule - A rule adopted by options exchanges to be able to trade
exchange options throughout the exchanges without customer orders
appearing to trade through better bids or offers that are not real
quotes where a trade can be done.
Trade Through - A transaction executed at a less favorable price than
the best bid or offer posted at the time of the trade.
Traders - An individual that takes positions in and trades securities in
order to make a profit.
Trades by Appointment - A stock that is difficult to trade based on
illiquidity.
Trading - To buy or sell securities.
Trading Book - A principal’s portfolio of instruments purchased or sold
in trading with customers and in profits from spreads between buying and
selling prices.
Trading Costs - Refers to the costs associated with buying and selling
securities such as commissions and the bid and ask spread.
Trading Derivative - A free-standing derivative that is held by an
accounting entity for trading or inventory purposes.
Trading Halt - An exchange enforced halt of trading on stocks, bonds,
options or futures contracts while news is distributed about the
security.
Trading Limit - The maximum number of futures contracts a trader may buy
or sell in one session.
Trading on the Equity - Using borrowed money to gain leverage in
acquiring an enlarged investment position.
Trading Posts - The area of a stock exchange where securities are
traded.
Trading Range - The difference in price between the highs and lows of
stocks traded for a specific period of time.
Trading Range Warrant - An instrument which presents a elevated return
if the underlying sells within a specified trading range at expiration
and a smaller return if the underlying trades outside the trading range.
Tranche - Refers to simultaneous offering of several related securities.
Transaction Cost - The cost of buying or selling a financial instrument,
commission charged by the brokerage firm executing the trade and part of
the spread between the bid and the asked prices.
Transaction Exposure - The risk a company takes on in regard to future
cash flow in a foreign currency know that the exchange rate may change.
Transaction Loan - A bank loan with a specific purpose as opposed to a
loan that can be used for various purposes.
Transaction Risk - Currency exchange rate risk for the period between
the start date and the payment date of a contract.
Transaction Tax - The tax imposed by foreign countries on certain
transaction.
Transactions Costs - Refers to the costs involved with physically moving
an asset from buyer to seller.
Transactions Motive - Holding cash in order to conduct business with
cash.
Transfer Agent - An appointed official given the responsibility to
handle the transfer of securities.
Transfer Pricing - The assessment of purchases and sales of goods and
services between the divisions of an enterprise, usually across
international boundaries.
Transfer Tax - A tax levied on the seller or buyer of a security on an
exchange or OTC.
Transition Phase - The time frame in which a company and it’s earnings
start to mature and begins to stabilize.
Translation Risk - Risk that the valuation of balance sheet assets and
liabilities can be affected by currency rate change.
Transparent Market - A trading system with accurate and up-to-date price
and volume information.
Treadway Commission - Another name for the National Commission on
Fraudulent Financial Reporting. Named after former SEC Commissioner
James C. Treadway.
Treasurer - A corporate officer with the responsibility of overseeing a
company’s financing and investment activities.
Treasurer's check - A bank issued check used to make payments.
Treasury (US) - The government agency that issues all Treasury bonds and
bills.
Treasury Bill - A US Treasury debt obligation that will have a maturity
of one year or less. T-bills generally mature at 91 days,182 days or 52
weeks.
Treasury Bond - A US Treasury debt obligation that has a maturity of 10
years or more.
Treasury Note - A US Treasury debt obligation that has a maturity rate
of between 2 and 10 years.
Treasury Rate Index Principal Swap - Swap based on the three month
treasury bill auction rate.
Treasury Receipts (TRs) - Stripped coupons and principal repayments from
Treasury bonds and notes.
Treasury Security - A security that is issued by the US Treasury.
Treasury Stock - A common stock that has been repurchased by and is now
being held by the company.
Treasury/EuroDollar (TED) Spread - The yield differential between
Treasury bill and Eurodollar futures contracts with the same expiration.
Treasury/EuroDollar Spread Swap - A swap with the respective floating
rate cash flows referenced to the London Interbank Offered Rate and a
similar term Treasury Bill rate.
Trend - Refers to the general direction the market is taking.
Trend Option - An average rate option in which pre-expiration price
behavior is time-weighted according to a formula prior to initiation of
the trade.
Triangular Arbitrage - To strike deals simultaneously in three markets
to gain an arbitrage profit.
Trigger Note - A note which matures if the trigger rate rises above or
falls below a predetermined level.
Triggering Event - A specified event that requires a specific action in
the duratinon or ownership of an instrument, such as a deposit of
collateral, cancellation of a swap, repayment of principal, or exercise
of an option.
Triple Witching Hour - Refers to the four times a year that S&P Futures
contract expires simultaneously with S&P 100 index option contract and
other options contracts on individual stocks. It falls on the last
trading hour on the third Friday of March, June, September and December.
Trough - A term used to describe a transitional time between recession
and recovery.
True lease - Any contract or agreement that qualifies as a valid lease
agreement with Internal Revenue code standards.
Trust Deed - An agreement used to define the terms of a bond between
trustee and borrower.
Trust receipt - A receipt for items to be held in trust for the lender.
TT&L Account - A bank account for Treasury tax and loan.
Tunnel - A series of range forwards or collars focused on forward rates
in interest rate or currency markets.
Tunnel Option - A set of collars with constant strike prices or rates
covering non-coinciding periods.
Turbo Option - Typically a combination of two call options on the same
side of the market with different strike prices.
Turnaround - A situation where securities are bought and sold on the
same day for settlement purposes.
Turnover - In regards to mutual funds, turnover is defined as a the
previous year’s trading activity as a percentage of the total assets in
a fund. If a fund has a 50% turnover, it states that the value of trades
were half of the assets of the fund.
Two-Dollar Broker - An independent floor broker on the floor of a stock
exchange who executes orders for other exchange members for a fee.
Two-Factor Model - Used to describe the zero beta version (Black’s) of
the capital asset pricing model.
Two-Sided Market - A market where both the bid and ask prices are quoted
or where customers are positioned on both sides of the market.
Two-Tier Bid - Refers to the takeover bid where an offer is made by the
acquirer to pay a premium for necessary shares in order to gain control
of the remaining shares.
Two-Tier Tax System - A taxation system where shareholder income is
taxed twice.
Type - A classification system for options contracts classifying them as
either puts or calls. |
