Investors Glossary by Managed Account Research Incorporated Advisor Analysis and Brokerage - Financial Terms, Investment Jargon, Terms, Vocabulary, Industry Terms

Baby Bond	Bond with a face value of less than $1,000.
Back Months	Those futures delivery months with expiration or delivery dates furthest into the future; futures delivery months other than the spot or nearby delivery month.
Back Office	The departments and processes related to the settlement of financial transactions (i.e. written confirmation and settlement of trades, record keeping).
Backpricing	Fixing the price of a commodity for which the commitment to purchase has been made in advance. The buyer can fix the price relative to any monthly or periodic delivery using the futures markets.
Backwardation	Market situation in which futures prices are progressively lower in the distant delivery months. For instance, if the gold quotation for February is $160.00 per ounce and that for June is $155.00 per ounce, the backwardation for four months against January is $5.00 per ounce. (Backwardation is the opposite of contango). See Inverted Market.
Balance	Amount of money in an account.
Balance of Payments	A record of a nation’s claims of transactions with the rest of the world over a particular time period. These include merchandise, services and capital flows.
Balance Sheet	An accounting statement reflecting the firm’s financial condition in terms of assets, liabilities, and net worth (ownership). In a balance sheet, Assets = Liabilities + Net Worth
Banker's Acceptance	A draft or bill of exchange accepted by a bank where the accepting institution guarantees payment. Used extensively in foreign trade transactions.
BANs	Bond anticipation notes are issued by state and local governments prior to the issue of bonds to even out cash flow.
Base Currency	The currency in which an investor or issuer maintains its book of accounts; the currency that other currencies are quoted against. In the forex market, the US Dollar is normally considered the `base` currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair.
Basis	The difference between the spot or cash price of a commodity and the price of the nearest futures contract for the same or a related commodity. Basis is usually computed in relation to the futures contract next to expire and may reflect different time periods, product forms, qualities, or locations.
Basis Grade	The grade of a commodity used as the standard or par grade of a futures contract.
Basis Point	Measurement of a change in the yield of a security commodity or debt instrument . One basis point equals 1/100 of one percent.
Basis Points	A relationship between a bond’s price and a yield subdivided into hundredths. One hundred basis points equals 1 percent interest yield.
Basis Price	A method of pricing municipal bonds, T bills, and certain other instruments. It is an expression of yield to maturity.
Basis Quote	Offer or sale of a cash commodity in terms of the difference above or below a futures price (e.g., 10 cents over December corn).
Basis Risk	The risk associated with an unexpected widening or narrowing of basis between the time a hedge position is established and the time that it is lifted.
Bear	An investor who believes that prices/the market will decline.
Bear Market	A market distinguished by a prolonged period of declining prices accompanied with widespread pessimism.
Bear Spread	The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices but at the same time limiting the potential loss if this expectation does not materialize. In agricultural products, this is accomplished by selling a nearby delivery and buying a deferred delivery.
Bear Vertical Spread	A strategy employed when an investor expects a decline in a commodity price but at the same time seeks to limit the potential loss if this expectation is not realized. This spread requires the simultaneous purchase and sale of options of the same class and expiration date but different strike prices. For example, if call options are spread, the purchased option must have a higher exercise price than option that is sold.
Bearer Security	A security which promises to pay the holder of the security on demand.
Bearer Stocks/Shares	Securities for which no register of ownership is kept by the company. A bearer certificate has an intrinsic value. Dividends are not received automatically from the company but must be claimed by removing and returning "coupons" attached to the certificate.
Bearish	An outlook anticipating lower prices in the underlying instrument.
Bearish Spread	An option spread designed to be profitable if the underlying instrument declines in price. A bearish spread might consist of purchasing an"in-the-money" put and writing an"out-of-the-money" put.
Beneficial Owner	The owner of a security who is entitled to all the benefits associated with ownership. Customers’ securities are often registered in the name of the brokerage firm or central depository rather than in the name of the customer. Even so, the customer remains the real or beneficial owner.
Beta (Beta Coefficient)	A statistic generated through regression analysis of stock returns that compares the price sensitivity of a single stock or small group of stocks in relation to a larger group or index of stocks. If, for example, the stock of AT&T has a beta of 0.85 in relation to the MMI, it would be expected to fluctuate at the rate of 85 percent of the fluctuation for the index.
Bid	An expression of a desire to buy a specific quantity of a commodity at a stated price.
Bid Price	The highest price any potential buyer is willing to pay for a particular option
Bid/Ask Quote	The latest available bid and offer (ask) price for a particular option series.
Bid/Ask Spread	The difference in price between the latest available bid and offering quotations for a particular option series. See spread
Big Figure	Dealer phrase referring to the first few digits of an exchange rate. These digits rarely change in normal market fluctuations, and therefore are omitted in dealer quotes, especially in times of high market activity. For example, a USD/Yen rate might be 107.30/107.35, but would be quoted verbally without the first three digits i.e. "30/35".
Blackboard Trading	The practice of selling commodities from a blackboard on a wall of a commodity exchange.
Black-Scholes Model	An option pricing formula initially developed by F. Black and M. Scholes for securities options and later refined by Black for options on futures.
Blue Chip	A term used to describe the common stocks of corporations with the strongest of reputations. (In poker, the blue chip is usually assigned the highest money value.)
Blue-Chip Stock	Refers to the common stock of a nationally known company with a long record of profit growth and divided payment and with a reputation for its management, product, and services. Good examples of Blue-Chip stocks are the stocks of the companies listed in the Dow Jones Industrial Average or the Major Market Index.
Board Broker System	A system of trading in which an individual member of an exchange (or a nominee of the member) is designated as a Board Broker for a particular commodity with the responsibility of executing orders left with him by other members on the floor, providing price quotations, and maintaining orderliness in the trading crowd. A Board Broker may not trade for his own account or the account of an affiliated organization. Also See Free Crowd Systems and Specialist System.
Board of Trade	Any exchange or association, whether incorporated or unincorporated, of persons who are engaged in the business of buying or selling any commodity or receiving the same for sale on consignment. See Contract Market.
Board Order	See Market-if-Touched Order.
Boiler Room	An enterprise which often is operated out of inexpensive, low-rent quarters (hence the term "boiler room") that uses high pressure sales tactics (generally over the telephone) and possibly false or misleading information to solicit generally unsophisticated investors.
Bond	A debt instrument; a security that represents the debt of a corporation, a municipality of the federal government, or any other entity. A bond is usually long-term in nature (10 to 30 years).
Bond Fund	Type of mutual fund that invests in bond and preferred stocks with the idea of providing a stable income with a minimum of risk.
Bond Indenture	A legal statement enumerating duties of the issuer and rights of the holder.
Bonds	Bonds are tradable instruments (debt securities) which are issued by a borrower to raise capital. They pay either fixed or floating interest, known as the coupon. As interest rates fall, bond prices rise and vice versa.
Book	In a professional trading environment, a book is the summary of a traders or a desks total positions.
Book Entry	A security transaction that is completed by a credit and debit to the seller's and buyer's books, correspondingly, for the security and is reversed for money transfer. The actual security may exist as a piece of paper in a centralized clearing house, or its existence may be limited to an entry on the computer of the Treasury.
Book Transfer	A series of accounting or bookkeeping entries used to settle a series of cash market transactions.
Book Value	A value computed by subtracting the total liabilities from the value of all assets on the balance sheet, then dividing by the number of common shares. This is an accounting term that has no relation to the securities market value.
Booking the Basis	A forward pricing sales arrangement in which the cash price is determined either by the buyer or seller within a specified time. At that time, the previously-agreed basis is applied to the then-current futures quotation.
Box Transaction	An option position in which the holder establishes a long call and a short put at one strike price and a short call and a long put at another strike price, all of which are in the same contract month in the same commodity.
Breadth of the Market	A measurement of the number of issues that advance or decline on a particular trading day.
Break	A rapid and sharp price decline.
Break-Even Point	The futures price at which a given option strategy is neither profitable nor unprofitable. For call options it is the strike price plus the premium. For put options it is the strike price minus the premium.
Breakpoint	A purchase of shares in an open-end investment company mutual fund that is large enough to entitle the buyer to a lower sales charge. A series of breakpoints is established by the fund, at each of which the charge is reduced.
Bretton Woods Accord of 1944	An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and set the price of gold at US $35 per ounce. The agreement lasted until 1971. See More on Bretton Woods.
Broad Tape	Term commonly applied to news wires carrying price and background information on securities and commodities markets, in contrast to the exchange's own price transmission wires, which use a narrow "ticker tape."
Broker	(1) A person paid a fee or commission for acting as an agent in making contracts, sales or purchases; (2) when used as floor broker, it refers to the person who actually executes someone else's trading orders on the trading floor of an exchange; (3) when used as account executive, it refers to the person who deals with customers and their orders in commission-house offices. See also Registered Commodity Representative.
Broker Association	Two or more exchange members who (1) share responsibility for executing customer orders; (2) have access to each other's unfilled customer orders as a result of common employment or other types of relationships; or (3) share profits or losses associated with their brokerage or trading activity.
Brokerage	A fee charged by a broker for execution of a transaction; an amount per transaction or a percentage of the total value of the transaction; usually referred to as a commission fee.
Brokerage Firm	A partnership or corporation that is in business to provide security services for a general marketplace.
Bucket Shop	A brokerage enterprise which "books" (i.e., takes the opposite side of) a customer's order without actually having it executed on an exchange.
Bucket, Bucketing	Illegal practice of accepting orders to buy or sell without executing such orders, and the illegal use of the customer's principal-margin deposit-without disclosing the fact of such use.
Bulge	A rapid advance in prices.
Bull	One who expects a rise in prices. The opposite of "bear." A news item is considered bullish if it portends higher prices.
Bull Market	A market distinguished by a prolonged period of rising prices. (Opposite of bear market)
Bull Spread	The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a rise in prices but at the same time limiting the potential loss if this expectation is wrong. In agricultural commodities, this is accomplished by buying the nearby delivery and selling the deferred.
Bull Vertical Spread	A strategy used when an investor expects that the price of a commodity will go up but at the same time seeks to limit the potential loss should this judgment be in error. This strategy involves the simultaneous purchase and sale of options of the same class and expiration date but different strike prices. For example, if call options are spread, the purchased option must have a lower exercise or strike price than the sold option.
Bullion	Bars or ingots of precious metals, usually cast in standardized sizes.
Bullish	An outlook anticipating higher prices in the underlying instrument.
Bullish Spread	An option spread designed to be profitable if the underlying instrument rises in price. A bullish spread might consist of purchasing an "in-the-money" call and writing an "out-of-the money" call.
Bundesbank	The central bank of Germany
Buoyant	A market in which prices have a tendency to rise easily with a considerable show of strength.
Business Day	A day on which the exchanges are open for business.
Butterfly Spread	A three-legged spread in futures or options. In the option spread, the options have the same expiration date but differ in strike prices. For example, a butterfly spread in soybean call options might consist of two short calls at a $6.00 strike price, one long call at a $6.50 strike price, and one long call at a $5.50 strike price.
Buy (or Sell) On Close	To buy (or sell) at the end of the trading session within the closing price range.
Buy (or Sell) On Opening	To buy (or sell) at the beginning of a trading session within the open price range.
Buy/Write	An advanced option order that combines the purchase of an equity and the sale of a call option on the same underlying security.
Buyer	A market participant who takes a long futures position or buys an option. An option buyer is also called a taker, holder, or owner.
Buyer’s Option (Contract)	A settlement that calls for delivery and payment according to the number of days specified by the buyer.
Buyer's Call	See Call.
Buyer's Market	A condition of the market in which there is an abundance of goods available and hence buyers can afford to be selective and may be able to buy at less than the price that previously prevailed. See Seller's Market.
Buy-In	(1) A purchase to cover a previous sale, often called short covering. See also Cover. (2) A method of compensation for failure to deliver in the cash bond market.
Buying Hedge (or Long Hedge)	Buying futures contracts to prevent against possible increased cost of commodities that will be needed in the future. See also Hedging.
Buying Power	In a margin account, the maximum dollar amount of securities that the client can purchase or sell short without having to deposit additional funds.