An amount equal to the face value of a security. For example, a bond that sells at par is worth the same amount at which it was issued, or at which it will be redeemed at maturity.
An order that adds liquidity to the market by waiting for someone else to hit it.
Example: A limit buy order below the market price.
FINRA rule requiring traders who execute four or more day trades within five business days in a margin account to maintain a minimum $25,000 equity balance.
Applies to: U.S. stock markets only.
The date when the dividend is actually paid to eligible shareholders. It is usually a few weeks after the record date. Dividends are usually paid quarterly and are taxable in the year in which they are paid/received.
Some brokers will sell client orders to market makers. Those market makers then pay the brokers for these orders. Market makers can trade with those order by taking the other side of the trade. This is how an execution price is established.
A bundle of services offered to hedge funds and large traders by investment banks. Includes trade execution, clearing, lending, and risk management.
A low-priced, high-risk security, usually under $5 per share in the U.S.
Risks: High volatility, illiquidity, and potential for fraud.
The smallest price movement in the forex market.
Example: In EUR/USD, a movement from 1.1050 to 1.1051 = 1 pip.
Plain vanilla options, also known as vanilla options, are the most basic and standard type of options contracts. They are characterized by having no special features, meaning they are simple call or put options with a strike price and an expiration date.
Pool usually refers to a group of funds or assets combined together for trading, investment, or liquidity purposes.
A collection of financial assets like stocks, bonds, commodities, and derivatives owned by an individual or institution.
A risk management strategy that spreads investments across various assets to reduce exposure to any one asset or risk.
A trader's exposure to a particular asset.
Types:
Determining how much of a security to buy or sell in a single trade.
Key for: Managing risk and exposure.
Common methods: Fixed dollar amount, percentage of equity, volatility-based sizing
The obligation to publish trade details (price, volume, time) after execution to ensure market fairness.
Pre-market trading refers to the buying and selling of stocks before the official market hours, typically between 4:00 a.m. and 9:30 a.m. Eastern Time. This period allows investors to react to news events and economic indicators released outside regular trading hours. Pre-market activity can provide insights into market sentiment and potential price movements for the day. However, it is characterized by lower liquidity and higher volatility, which can lead to wider bid-ask spreads. Investors should exercise caution and consider these factors when making pre-market trades, as they can significantly impact investment strategies and outcomes.
Preferred stocks (or preferred shares) are a type of hybrid investment that has characteristics of both stocks and bonds. They represent ownership in a company, like common stocks, but come with features that make them more stable and income-focused, like bonds.
The process by which market prices are determined through the interaction of buyers and sellers.
Happens in: Exchanges, dark pools, auctions, OTC markets
Illegal practices intended to move a security's price to benefit the manipulator.
Examples: Pump and dump, spoofing, wash trading
Orders with better prices are executed before others.
Example: A limit buy at $50 will fill before one at $49.50.
When a broker-dealer trades from its own account rather than on behalf of a client.
Disclosure required in many jurisdictions to avoid conflicts of interest.
A put option contract gives the buyer or the holder the right but not the obligation to sell the underlying instrument at an agreed price within a specified time. The seller or writer has the obligation to buy if the holder exercises the option to sell.
An option strategy that involves buying and selling an equal number of put options on the same underlying (and same multiplier).