A basket trade is any trade that is performed for a set of 15 or more different shares or other securities, usually as a set proportion of those shares. Basket trades are most commonly used by institutional investors to maintain a proportionate portfolio of different shares or to purposefully alter the proportion of the shares […]
Results for: Day Trading Terminology
Contrarian Trader Definition: Day Trading Terminology
Contrarian traders base their trading strategies on the underlying principle that the market tends to overreact at both extreme highs and lows. Contrarian traders see these extremes as opportunities to profit from sharp reversals that can occur when the market corrects from a recent overreaction. However, contrarian trading strategies are more complex than simply betting […]
Wash Sale Rule Definition: Day Trading Terminology
The wash sale rule is an IRS taxation regulation governing the use of investment losses in capital gains tax. The wash sale rule prohibits the investor from claiming any sale of a security as a loss if a similar security is purchased within 30 days of the sale. The wash sale rule also applies to […]
Strangle (Options) Definition: Day Trading Terminology
A strangle is an options trading strategy that uses a put and call on the same underlying security with the same expiration date to bet on a substantial price move in either direction. Strangles are most often used in situations where the trader expects a substantial price move, but is unsure of the direction. Strangles […]
Mark To Market Definition: Day Trading Terminology
Mark to market refers to an investment measure or accounting tool used to record an asset’s value to reflect the market value of the security rather than its book value. The tool is commonly used on futures accounts and helps to ensure that all margin requirements have been completed. When it comes to mutual funds, […]
Thin Market Definition: Day Trading Terminology
A thin market refers to a market characterized by a minimal number of buyers and sellers plus high price volatility. Also referred to as a narrow market, it is also characterized by high bid-ask spreads and low trading volume. This type of market does experience lots of drastic swings thus making it difficult for traders […]
Cash Settled Options Definition: Day Trading Terminology
Cash settled options refer to options that carry the cash settlement feature. As a result, they deliver profits in form of cash and not as a physical asset. The reason why investors choose cash settled options is because they eliminate the high cost of transporting the physical asset and takes the place of indices that […]
European Option Definition: Day Trading Terminology
A European option is an options contract that can only be exercised on the expiry or expiration date. European options are contrasted with American options that can be traded at any time on or before their expiry or maturity date. European Options in Trading Despite the name, the use of European options in trading is […]
American Option Definition: Day Trading Terminology
An American option is an options contract that can be exercised on or before the expiry or maturity date. American options are contrasted with European options that can only be exercised on their expiry or maturity date. American Options in Trading Despite the name, the use of American options in trading is not a matter […]
Calendar Spread Definition: Day Trading Terminology
Calendar spread is an options strategy that allows traders and investors to enter long and short positions simultaneously for the same underlying and strike price but different expiration dates. Option traders can utilize calendar spreads as a way to get into a long position at a cheaper price by selling the other leg and bringing […]