Traders Glossary

Explore, learn, and discover all trading-related terms here in our comprehensive glossary.

Principal

The purchase price of a bond

Put Calendar

A neutral to bullish strategy involving buying longer expiration puts and selling shorter expiration puts with the same strike price.

Put Diagonal

A neutral to bullish strategy involving buying longer expiration puts and selling shorter expiration puts with a higher strike price.

Put Option

The right, not the obligation to sell an underlying security at a fixed price before a predetermined date.

Put Ratio Backspread

Bearish strategy involving selling 1 or 2 higher strike puts and buying 2 or 3 lower strike puts.

Quote

The price being bid or offered by a market maker for a security.

Ratio Backspread

A strategy using all puts or all calls whereby the trader buys OTM options in a ratio of 3:2 or 2:1 to the ITM options he sells. In this way the trader is always long in more options than those he is short in.

Ratio Call Spread

A bearish strategy that involves the trader being short in more options than those he is long in, at a ratio of 3:2 or 2:1. In this way the trader will have an unlimited risk profile with only limited profit potential.

Ratio Put Spread

A bullish strategy that involves the trader being short in more options than those he is long in, at a ratio of 3:2 or 2:1. In this way the trader will have an unlimited risk profile with only limited profit potential.

Real Time

Data which is updated and received tick by tick.

Relative Strength

A technical indicator comparing a security's price action as compared to that of an index or another stock.

Relative Strength Index (RSI)

A technical indicator which is an oscillator that combines price action with volume. Best to use with trending stocks and can be used to indicate potential tops and bottoms.

Resistance

A price threshold on a price chart which is thought to be difficult for the price to burst up through because of past price movements.

Return

The income profit on an investment, often expressed as a percentage.

Reversal Stop (or Stop and Reverse) Order

A stop order which, when activated, reverses the current position from long to short (or vice versa).

Rho

The sensitivity of an option price to interest rates. Typically, call options increase in value as interest rates rise and puts decrease in value as interest rates rise.

Risk

The potential loss of a trade.

Risk Free Rate

The Interest chargeable on Treasury Bills (T-Bills) is generally known as the Risk Free Rate and it is this rate which is used as a component part of the theoretical valuation of options model.

Risk Profile

The graphic depiction of a trade, showing the potential risk, reward and breakeven points as the underlying security price deviates within a range of prices.

Seat

Membership in a stock or futures exchange.