A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Options Trading Terms: M
MAINTENANCE MARGIN:
An amount of cash or margin-eligible securities that must be maintained on deposit in a customer's account to maintain a particular position. If a customer's equity in his account drops to, or under, the maintenance margin level, the account may be frozen or liquidated until the customer deposits more money or margin-eligible securities in the account to bring the equity above the maintenance margin level.
MARGIN:
The amount of equity contributed by a customer (in the form of cash or margin-eligible securities) as a percentage of the current market value of the stocks or option positions held in the customer's margin account.
MARGIN ACCOUNT:
An account that allows a customer to borrow money from a brokerage firm against cash and margin-eligible securities held in the customer's margin account at that brokerage firm.
MARGIN BALANCE:
The amount a customer has borrowed, using cash or margin-eligible securities as collateral, in his margin account.
MARGIN CALL:
A brokerage firm's demand of a customer for additional equity in order to bring margin deposits up to a required minimum level. If the customer fails to deliver more equity in the account, the customer's positions may be liquidated.
MARGIN-ELIGIBLE SECURITIES:
Securities, such as stocks or bonds, that can be used as collateral in a margin account. Options are not margin-eligible securities.
MARGIN REQUIREMENT:
The minimum equity required in an account to initiate or maintain a position in stock or options.
MARKET:
1) A quote, that is a bid and ask price for a stock or option, ex. the market on the XYZ Dec 75 calls is 2 ½ - 3, or 2) a term for all stocks as a whole, ex. the market is going up means stocks in general are rising, or 3) a place to trade.
MARKET ARBITRAGE:
The simultaneous purchase and sale of the same security in different markets to take advantage of price disparity between the two markets. For example, purchasing a call or put on the CBOE subsequently selling the contract at the PHLX at a higher price.
MARKET IF TOUCHED (MIT):
A type of stock order that becomes a market order when a particular price on a stock is reached. A buy MIT order is placed below the market; a sell MIT order is placed above the market.
MARKET MAKER:
A term for a trader at the CBOE or PCX who trades for his own account. They compete with each other to provide the best bid and ask prices for options to the public.
MARKET ON CLOSE (MOC):
An order to buy or sell stock or options at the end of the trading session at a price within the closing range of prices. MOC orders must be placed 45 minutes before the close of trading.
MARKET (PRICE) ORDER:
An order to buy or sell stock or options that is to be executed as soon as possible at the best possible price. Compare to a limit order or stop order, which specifies requirements for price or time of execution.
MARK-TO-MARKET:
The daily updating of the value of stocks and options to reflect profits and losses in a margin account.
MARRIED PUT:
The purchase of a put option and the underlying stock on the same day. Special tax rules may apply to this position.
MERGER:
The act of combining two or more corporations into one corporate entity. Options on stocks involved in mergers can be difficult to evaluate.
MINIMUM PRICE FLUCTUATION:
The smallest possible increment of price movement for a stock or option. It is often referred to as a "tick".
MODEL:
Any one of the various option pricing models used to value options and calculate the "Greeks". Models typically use six factors in their calculations: the underlying stock price, the strike price, the time until expiration, dividends, interest rates, and the volatility of the stock. Thinkorswim uses the Black-Scholes model for European-style options, and the Binomial model for American-style options.
MONEY MARKET FUND:
A special type of mutual fund that invests only in short-term, low-risk fixed-income securities, such as bankers' acceptances, commercial paper, repurchase agreements and Treasury bills. The money market fund manager tries to maintain a share price of $1.00. Money market funds are not federally insured, even though the money market fund's portfolio may consist of guaranteed securities.
MULTIPLE LISTED:
When the same stock or option is listed on two or more different exchanges. For example, IBM options are traded on the CBOE, PHLX and AMEX.
MULTIPLIER:
Refers to the number, typically $100, used to calculate aggregate strike prices and premiums for options. The multiplier affects profit/loss calculations on options positions.
Sam Collins
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At present, the short-term trend is up but both the intermediate- and long-term trends are down.
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