Definitions by abu yahya
NLRA
(US HISTORY) National Labor Relations Act (Wagner Act); 1935 law that permitted most US workers to form labor unions. It created the National Labor Relations Board to enforce this right. Named for Sen. Robert F. Wagner (D-NY).
The NLRB conducts secret-ballot elections to determine whether employees want union representation and also investigates unlawful labor practices by employers and unions. The act guarantees employees the right to organize, choose representatives, and bargain collectively. The NLRB regulates all employers involved in interstate commerce other than transport, agriculture, and government.
The NLRB conducts secret-ballot elections to determine whether employees want union representation and also investigates unlawful labor practices by employers and unions. The act guarantees employees the right to organize, choose representatives, and bargain collectively. The NLRB regulates all employers involved in interstate commerce other than transport, agriculture, and government.
underlying stock
(FINANCE) a stock whose price movements determine the value of a financial derivative. For example, when a hedge fund manager writes a call option for Citigroup (NYSE:C) at 4.25/share, C is the underlying stock.
"Underlying" can be used to refer to other things besides stocks; for example, commodities, currencies, or bonds.
"Underlying" can be used to refer to other things besides stocks; for example, commodities, currencies, or bonds.
underlying stock by Abu Yahya April 5, 2010
swap
(FINANCE) a type of financial derivative which two parties "swap," or exchange, the streams of income (or payments) from two different sources. The actual instrument is created by a third party, such as an investment bank.
The most familiar version of the swap is the interest rate swap, in which the holder of a fixed rate loan and the holder of an adjustable rate loan agree to exchange revenue streams.
The variety of swaps available is massively greater than with options or futures; essentially, swaps exist for every arbitrage opportunity that any combination of markets provides; the market for swaps is huge.
The most familiar version of the swap is the interest rate swap, in which the holder of a fixed rate loan and the holder of an adjustable rate loan agree to exchange revenue streams.
The variety of swaps available is massively greater than with options or futures; essentially, swaps exist for every arbitrage opportunity that any combination of markets provides; the market for swaps is huge.
BILL: Why do firms buy swaps? Why don't they just sell the loans they have to other banks, or whatever?
ANNA: One is that swaps are a method of hedging risk; you hold the bond in case the price goes up, but you buy interest rate swaps to protect against having average rates in your portfolio that are two high or two low.
ANNA: One is that swaps are a method of hedging risk; you hold the bond in case the price goes up, but you buy interest rate swaps to protect against having average rates in your portfolio that are two high or two low.
write a call
(FINANCE) create a call option that allows the future owner to buy a set number of shares of an underlying stock at a fixed strike price. May also be for traded items other than stock. The writer of a call option is both the counterparty and the originator of the derivative.
______________________________
A call option is a product that allows an investor to take a long position on a stock without actually owning it; if the underlying stock rises in value, the call option rises a lot more. The increased potential windfall is offset by the much greater likelihood that the investor will lose the entire initial investment.
The writer of the option is presumed to own the thing offered for sale; if the price of the underlying stock rises above the strike price, then the owner of the option will presumably exercise it and pocket the profit. Thus, there is a risk to the writer of the option that all of the profits from owning the stock will go to the buyer of the option. This risk is offset by the fees the writer charges for the option.
In some cases, a speculator may write an option for shares of stock that she does not own. This is particularly risky, since the price of the underlying stock could rise above the strike price, forcing the writer to buy the shares at a high price in order to sell them at a low price.
______________________________
A call option is a product that allows an investor to take a long position on a stock without actually owning it; if the underlying stock rises in value, the call option rises a lot more. The increased potential windfall is offset by the much greater likelihood that the investor will lose the entire initial investment.
The writer of the option is presumed to own the thing offered for sale; if the price of the underlying stock rises above the strike price, then the owner of the option will presumably exercise it and pocket the profit. Thus, there is a risk to the writer of the option that all of the profits from owning the stock will go to the buyer of the option. This risk is offset by the fees the writer charges for the option.
In some cases, a speculator may write an option for shares of stock that she does not own. This is particularly risky, since the price of the underlying stock could rise above the strike price, forcing the writer to buy the shares at a high price in order to sell them at a low price.
ANNA: See, here we can see management has totally screwed up. The share price is going to fall, so we should write a call.
BILL: But we don't own any shares of their stock!
ANNA: Yes, I pity the fool who buys our options!
BILL: But we don't own any shares of their stock!
ANNA: Yes, I pity the fool who buys our options!
write a call by Abu Yahya April 5, 2010
short position
(FINANCE) a situation in which an investor owns financial instruments (shares, bonds, financial derivatives, etc.) that will make the most money IF some other thing declines in value.
Therefore, one always has to take a short position on something in particular. A short position on gold means the investor expects gold to decline in value in the near future, and has bought various things to make money if it does.
Some ways to take a short position on X include:
(1) buying a put option on X
(2) writing a call option on X
(3) borrowing X and selling it (shorting a stock)
#3 is the classical way to take a short position. It was dangerous because a skillful trader could squeeze the shorts using a corner.
Therefore, one always has to take a short position on something in particular. A short position on gold means the investor expects gold to decline in value in the near future, and has bought various things to make money if it does.
Some ways to take a short position on X include:
(1) buying a put option on X
(2) writing a call option on X
(3) borrowing X and selling it (shorting a stock)
#3 is the classical way to take a short position. It was dangerous because a skillful trader could squeeze the shorts using a corner.
BILL: I guess you took a bath when the stock market tanked, huh?
ANA: Nope. I took a short position on all of the nine largest banks. Did rather well, thank you very much.
BIL: Sweet!
ANA: Nope. I took a short position on all of the nine largest banks. Did rather well, thank you very much.
BIL: Sweet!
short position by Abu Yahya April 5, 2010
squeeze the shorts
(FINANCE) hilarious term used for over a century in the trading of stocks, commodities, etc. A way in which someone who controls much of the outstanding shares of stock can make a lot of money while ruining those who are betting against the stock.
A "short" is traditionally someone with expertise in shorting a stock, i.e., managing to borrow shares and sell them in anticipation of a decline in value. Obviously, if there are many people shorting a particular stock at any given time, and if they are wrong about the future, then a steep rise in value if the share price will not only cause them to lose money, it will force panic purchases of stock as the traders attempt to cover their shorts. If the instigator of the squeeze is successful, he will have a corner, and drive the price of the stock up to absurd levels.
An unsuccessful squeeze of shorts in a copper trust triggered the Crisis of 1907. That, in turn, triggered the Aldrich–Vreeland Act (May 1908).
A "short" is traditionally someone with expertise in shorting a stock, i.e., managing to borrow shares and sell them in anticipation of a decline in value. Obviously, if there are many people shorting a particular stock at any given time, and if they are wrong about the future, then a steep rise in value if the share price will not only cause them to lose money, it will force panic purchases of stock as the traders attempt to cover their shorts. If the instigator of the squeeze is successful, he will have a corner, and drive the price of the stock up to absurd levels.
An unsuccessful squeeze of shorts in a copper trust triggered the Crisis of 1907. That, in turn, triggered the Aldrich–Vreeland Act (May 1908).
The brokers, after awhile, commenced to borrow large amounts of the stock. This convinced the insiders that there was a big short interest somewhere, and they got together in order to squeeze the shorts... They never awakened to the fact that the {president of the company} had sold out on them... {and were totally ruined}
Henry Clews, Victor Niederhoffer, *Fifty Years in Wall Street*, p.149
Henry Clews, Victor Niederhoffer, *Fifty Years in Wall Street*, p.149
squeeze the shorts by Abu Yahya April 5, 2010
Corner
(FINANCE) Used either as a noun: a situation in which a trader controls the supply of a traded item, such as shares of stock, supplies of a commodity, etc.
Or else, used as a verb: to obtain control over the supply of a thing, so that one can drive the price up to extremely high levels.
Cornering the market for anything (or getting a corner) is extremely difficult and requires not only immense amounts of money (usually borrowed for the purpose), but also timing and the ability to bluff opponents.
A corner is ultimately a long position in the sense that it is a direct attack on investors taking a short position.
Or else, used as a verb: to obtain control over the supply of a thing, so that one can drive the price up to extremely high levels.
Cornering the market for anything (or getting a corner) is extremely difficult and requires not only immense amounts of money (usually borrowed for the purpose), but also timing and the ability to bluff opponents.
A corner is ultimately a long position in the sense that it is a direct attack on investors taking a short position.
The corner must be timed very precisely, because it cannot last for more than a very short time. Even when the the price of the thing (like, say, silver) goes up to very, very high levels, more supplies cannot come onto the market or the corner will be lost.
At the same time, there has to be a target of the corner--some group of people who have to buy the cornered item no matter how high the price goes (otherwise, the quantity demanded will just go to zero). For this reason, corners are nearly always part of an attempt to squeeze the shorts.
At the same time, there has to be a target of the corner--some group of people who have to buy the cornered item no matter how high the price goes (otherwise, the quantity demanded will just go to zero). For this reason, corners are nearly always part of an attempt to squeeze the shorts.