36 lines
2.5 KiB
Plaintext
36 lines
2.5 KiB
Plaintext
Glossary 969
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Equity Option: an option that has common stock as its underlying security. See also
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Non-Equity Option.
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Equity Requirement: a requirement that a minimum amount of equity must be
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present in a margin account. Normally, this requirement is $2,000, but some bro
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kerage firms may impose higher equity requirements for uncovered option writing.
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Equivalent Positions: positiohs that have similar profit potential, when measured
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in dollars, but are constructed with differing securities. Equivalent positions have
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the same profit graph. A covered call write is equivalent to an uncovered put write,
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for example. See also Profit Graph.
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Escrow Receipt: a receipt issued by a bank in order to verify that a customer ( who has
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written a call) in fact owns the stock and therefore the call is considered covered.
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European Exercise: a feature of an option that stipulates that the option may be
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exercised only at its expiration. Therefore, there can be no early assignment with
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this type of option.
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Exchange-Traded Fund (ETF): an index fund that is listed on a stock exchange.
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Options are listed on some ETFs. See also Index Fund.
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Ex-Dividend: the process whereby a stock's price is reduced when a dividend is
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paid. The ex-dividend date (ex-date) is the date on which the price reduction takes
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place. Investors who own stock on the ex-date will receive the dividend, and those
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who are short stock must pay out the dividend.
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Exercise: to invoke the right granted under the terms of a listed options contract.
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The holder is the one who exercises. Call holders exercise to buy the underlying
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security, while put holders exercise to sell the underlying security.
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Exercise Limit: the limit on the number of contracts a holder can exercise in a fixed
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period of time. Set by the appropriate option exchange, it is designed to prevent
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an investor or group of investors from "cornering" the market in a stock.
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Exercise Price: the price at which the option holder may buy or sell the underlying
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security, as defined in the terms of his option contract. It is the price at which the
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call holder may exercise to buy the underlying security or the put holder may exer
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cise to sell the underlying security. For listed options, the exercise price is the
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same as the striking price. See also Exercise.
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Expected Return: a rather complex mathematical analysis involving statistical dis
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tribution of stock prices, it is the return an investor might expect to make on an
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investment if he were to make exactly the same investment many times through
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out history. |