36 lines
2.6 KiB
Plaintext
36 lines
2.6 KiB
Plaintext
Glossary 975
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Options Clearing Corporation (OCC): the issuer of all listed option contracts that
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are trading on the national option exchanges.
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Original Issue Discount (O1D): the initial price of a zero-coupon bond. The owner
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owes taxes on the theoretical interest, or phantom income, generated by the annu
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al appreciation of the bond toward maturity. In reality, no interest is paid by the
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zero-coupon bond, but the government is taxing the appreciation of the bond as if
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it were interest.
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Out-of-the-Money: describing an option that has no intrinsic value. A call option is
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out-of-the-money if the stock is below the striking price of the call, while a put
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option is out-of-the-money if the stock is higher than the striking price of the put.
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See also In-the-Money, Intrinsic Value.
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Over-the-Counter Option (OTC): an option traded over-the-counter, as opposed
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to a listed stock option. The OTC option has a direct link between buyer and sell
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er, has no secondary market, and has no standardization of striking prices and expi
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ration dates. See a'lso Listed Option, Secondary Market.
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Overvalued: describing a security trading at a higher price than it logically should.
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Normally associated with the results of option price predictions by mathematical
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models. If an option is trading in the market for a higher price than the model indi
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cates, the option is said to be overvalued. See a'/so Fair Value, Undervalued.
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Pairs Trading: a hedging technique in which one buys a particular stock and sells
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short another stock. The two stocks are theoretically linked in their price history,
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and the hedge is established when the historical relationship is out of line, in hopes
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that it will return to its former correlation.
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Parity: describing an in-the-money option trading for its intrinsic value: that is, an
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option trading at parity with the underlying stock. Also used as a point of refer
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ence-an option is sometimes said to be trading at a half-point over parity or at a
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quarter-point under parity, for example. An option trading under parity is a dis
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count option. See a'/so Discount, Intrinsic Value.
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PERCS: Preferred Equity Redemption Cumulative Stock. Issued by a corporation,
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this preferred stock pays a higher dividend than the common and has a price at
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which it can be called in for redemption by the issuing corporation. As such, it is
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really a covered call write, with the call premium being given to the holder in the
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form of increased dividends. See Call Price, Covered Call Write, Redemption Price.
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Physical Option: an option whose underlying security is a physical commodity that
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is not stock or futures. The physical commodity itself, typically a currency or |