Ask: The lowest price any seller is willing to take for a given security or commodity at a given time.
Bid: The highest price any buyer is willing to pay for a given security or commodity at a given time.
Cover (a short sale): To eliminate a short position by buying the securities shorted.
Debt Financing: Borrowing money under an agreement to repay over a period of time at a specific interest rate in order to finance an on-going business.
Derivative security: A financial instrument whose value is based on, and determined by, another security or benchmark. This includes: options, futures, interest rate swaps, and floating-rate notes.
Equity Financing: Selling an ownership stake in a company in order to raise money to finance an on-going business.
Good Till Cancelled: A command given to a broker ensuring that the order will be filled unless it is cancelled by the investor.
Leverage: In investments, this is the control of a large amount of money by a smaller amount of money. In finance, this is the relationship of debt to equity on a company's balance sheet. The higher the debt in relation to equity, the more leverage exists.
Protective Stop: An order placed in order to limit the loss on a particular investment.
Short sale: The act of selling a borrowed security that the investor does not own in the hopes of buying it back later at a lower price.
Spread: The difference between the bid and the ask price.
Stop Order: An order placed to buy or sell a security when the security trades at a specified price on the market. A stop order to buy must be executed when a security trades at or above the stop price. A stop order to sell must be executed when a security trades at or below the stop price.
Options Terms >>
