Trading Glossary

ABNORMAL RETURNS

Describes the difference between a portfolio's performance vs. the average market performance over a set period of time.

ABSOLUTE ADVANTAGE

A country is said to have an absolute advantage if its output per unit of inputs of all goods is larger than that of another country.

ACCOUNT

A record of financial transactions for an individual at a at a bank or a brokerage company.

ACCOUNT BALANCE

The dollar amount currently remaining in an account.

ACCOUNT EXECUTIVE

An individual who usually works for a brokerage company and has the legal power to buy or sell financial instruments on behalf of a client.

ACCOUNT STATEMENT

A summary of all transactions and positions (long and short) between a broker/dealer and a client.

ACCOUNTS PAYABLE

Money owed to customers or suppliers.

ACCOUNTS RECEIVABLE

Money owed by customers.

ACCREDITED INVESTOR

Accredited investors must have a combined net worth with their spouse in excess of $1,000,000, or individual income for the past two years in excess of $200,000, or have joint income with their spouse in excess of $300,000 for the past two years or be a director or executive officer of the company.

ACTIVITY

The volume of financial instruments over a given period of time.

ADJUSTABLE RATE

An interest rate that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution.

AFFILIATE

Relationship between two companies when one company owns substantial interest of another company.

AFTER HOURS TRADING

Trading after regular trading hours on organized exchanges.

AGENT

An agent acts as intermediary between buyer and seller, taking no financial risk personally or as a firm, and charging a commission for the service.

AGGREGATE DEMAND

The total demand for goods and services produced in the economy over a period of time. It includes consumer demand of durable and non durable items, investment spending by companies on capital goods, government spending on publicly provided goods and services, and the difference between exports and imports of goods and services of the country.

AGGREGATE SUPPLY

A measure of the total supply of goods and services produced within the economy from domestic sources that are available to meet aggregate demand.

ALL OR NONE

A Futures order that instructs the broker to either fill the whole order or not at all.

ALPHA

A coefficient measuring the risk-adjusted performance of a currency or stock option. A large alpha indicates that the underlying has performed better than would be predicted given its beta (volatility).

ALTERNATIVE INVESTMENTS

Investments in hedge funds that pursue strategies uncommon in mutual funds such as long-short equity, event driven, statistical arbitrage, fixed income arbitrage, convertible arbitrage, short bias, global macro, and equity market neutral.

AMERICAN OPTION

An option that may be exercised at any time prior to expiration, as opposed to a European option that can only be exercised on a specific date (usually at expiration).

AMEX

American Stock Exchange.

AMMAN STOCK EXCHANGE

The formal securities market in Jordan.

AMORTIZATION

The repayment of a loan by installments.

ANALYST

An employee of a brokerage house who studies companies and makes buy/sell recommendations on various instruments.

ANNOUNCEMENT DATE

Date when particular news concerning a company is announced to the public.

ANNUAL REPORT

Yearly record of a company's financial condition. It includes the firm's operations, balance sheet, income statement, and cash flow statement.

ARBITRAGE

The simultaneous purchase and sale of the same (or equivalent) financial instrument on different markets to profit from price discrepancies.

ASK

The price at which the currency or instrument is offered.

ASSET

Any possession that has value.

ASSET BACKED SECURITY

A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate.

ASSET MANAGEMENT ACCOUNT

Account at a brokerage house, bank, or savings institution that integrates banking services and brokerage features.

AT BEST

Instructions given to a dealer to buy or sell the currency or instrument at the best rate that can be obtained.

AT OR BETTER

Instructions given to a dealer to buy or sell the currency or instrument at a specific rate or better.

AT PAR

A price equal to nominal or face value of a security.

AT THE MARKET

A buy or sell order that must be executed at the best price currently available in the market. These are also called market orders.

AT-THE-MONEY

An option whose strike/exercise price is equal to or near the current market price of the underlying instrument.

AUDIT

An examination of a company's accounting records and books conducted by an outside professional in order to determine whether the company is maintaining records according to generally accepted accounting principles.

AWAY FROM THE MARKET

On limit orders, a buy order away from the market would be placed lower than the current market price, and sell orders would be placed higher than the current market price. Such orders are usually held to be executed later.