36 lines
2.5 KiB
Plaintext
36 lines
2.5 KiB
Plaintext
966 Glossary
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Commodities: see Futures Contract.
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Contingent Order: an order whose execution or price is dependent on the align
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ment or price of the underlying security and/or its options. Most commonly it is an
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order to buy stock and sell a covered call option that is given as one order to the
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trading desk of a brokerage firm. Also called a "net order." This is a "not held"
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order. See also Market Not Held Order.
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Conversion Arbitrage: a riskless transaction in which the arbitrageur buys the
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underlying security, buys a put, and sells a call. The options have the same terms.
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See also Reversal Arbitrage.
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Conversion Ratio: see Convertible Security.
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Converted Put: see Synthetic Put.
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Convertible Security: a security that is convertible into another security. Generally,
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a convertible bond or convertible preferred stock is convertible into the underly
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ing stock of the same corporation. The rate at which the shares of the bond or pre
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ferred stock are convertible into the common is called the conversion ratio.
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Cover: to buy back as a closing transaction an option that was initially written, or
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stock that was initially sold short.
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Covered: a written option is considered to be covered if the writer also has an oppos
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ing market position on a share-for-share basis in the underlying security. That is, a
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short call is covered if the underlying stock is owned, and a short put is covered
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(for margin purposes) if the underlying stock is also short in the account. In addi
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tion, a short call is covered if the account is also long another call on the same secu
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rity, with a striking price equal to or less than the striking price of the short call. A
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short put is covered if there is also a long put in the account with a striking price
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equal to or greater than the striking price of the short put.
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Covered Call Write: a strategy in which one writes call options while simultane
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ously owning an equal number of shares of the underlying stock.
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Covered Put Write: a strategy in which one sells put options and simultaneously is
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short an equal number of shares of the underlying security.
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Covered Straddle Write: the term used to describe the strategy in which an
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investor owns the underlying security and also writes a straddle on that security.
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This is not really a covered position.
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Credit: money received in an account. A credit transaction is one in which the net
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sale proceeds are larger than the net buy proceeds ( cost), thereby bringing money
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into the account. See also Debit. |