Glossary

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Bar Chart

In the bar chart, the highs and lows on the stock exchange within the set period (day, week, month) are clearly visible. The length of the price bar reflects the fluctuation of the value in the considered period. Additionally the left bar shows the opening price and the right bar the closing price within the considered period.

Basic Price

The price at which the basic security can be bought or sold when exercising the option.

Basic Risk

The danger that the ratio between the spot and forward price essentially changes in the time period between opening and offsetting the position.

Basic Security

Underlying tool of an option or a future agreement.

Basis

The difference between a financial tool’s spot price and forward price.

Basket of Deliverable Bonds

The total bonds, which meet certain conditions on the day of delivery and consequently are considered to satisfy a futures interest rate. The list of deliverable bonds is created by the stock exchange.

Bear Call Spread

Bear spread, which consists of the sale of a call with a lower exercise price and the simultaneous purchase of a call with the same expiry date but a higher exercise price.

Bear Put Spread

Bear spread, which consists of the sale of a put with a lower exercise price and the simultaneous purchase of a put with the same expiry date but a higher exercise price.

Bear Spread

A strategy consisting of the simultaneous sale and purchase of calls or puts, which returns a profit if the price of the underlying security falls.

Below Par

Qualification of a security whose market value is below the nominal value.

Best Order

An order, which must be concluded at the best possible price as soon as it comes onto the market.

Best/Cheapest Order

An order, which must be concluded at the best possible price as soon as it comes onto the market.

Black-Scholes Option Pricing Model

An analytical model for the calculation of theoretical option pricings, which takes into account both the daily rate of the basic values, the interest rate, the maturity, the volatility and potential dividend payments within the maturity period. The original model version was developed for the option pricing calculation of European options.

Bond Future

Futures contract on a long-term federal bond [Federal Government Bond]. Since the Federal Government Bonds are a continuous issue of the Federal Republic of Germany, there are a variety of Federal Government Bonds with different maturities. Subject to the bond future is a virtual obligation with a maturity between eight and ten years and an interest rate of six percent as well as a contract value of €100,000. The EUREX futures market is the trading centre.

Bonus Shares

If companies want to raise money on the capital market, in addition to issuing shares, they also have the option of issuing bonus shares. These special securities certify a property right where the investor legally stands between the creditor and co-owner. Therefore they have both with shares and with loans some common features. Bonuses [Genüsse], as they are called for short on the stock exchange, are in Germany issued particularly by banks and Sparkassen. Barely three percent of about 600 listed bonus shares come from companies in the industry, insurance and service provider sectors. With the purchase of a bonus share, the investor acquires a claim to a share in the business success of the issuing company. At first glance therefore, he is not different to a shareholder. Holders of bonus shares however must renounce the usual rights of a co-owner. They have, for example, no rights to participate or to vote in the Annual General Meeting. What combines bonus shares with a loan and marks it off from a share is the fact that the investor can retrieve his paid equity or cancel the certificate at any time. And he has the right to receive regular payments, the amount of which can be constant but can also be partly variable, depending on the type of certificate. Unlike with shares and loans, for this type of investment, there are no standards set by the legislator or the stock exchanges. The issuers can adjust every detail to their personal financial needs. General statements on bonus shares are therefore not possible. (Source: “Handbuch Wertpapiere“, Stiftung Warentest (Hrsg.), Berlin 2002)

Break-Even Price

The value of an option defined according to a mathematical option pricing model, where both the buyer and the option writer achieve the break-even price after considering the risk factor.

Bull Call Spread

A bull market strategy, which consists of the purchase of a call with a lower exercise price and the simultaneous sale of a call with a higher exercise price and the same expiry date.

Bull Put Spread

A bull market strategy, which consists of the purchase of a put with a lower exercise price and the simultaneous sale of a put with a higher exercise price and the same expiry date.

Bull Spread

A strategy consisting of the simultaneous purchase and sale of calls or puts, which returns a profit if the price of the underlying security increases. For example: sale of an option with a higher exercise price and the simultaneous purchase of an option of the same type with a lower exercise price.

Bull/Bear-Ratio

The bull/bear ratio describes a percentage ratio of the weighted recommendations submitted to us on the number of the entire recommendations (purchases, retentions, sales). With this tool you can analytically estimate the current situation of a share, an index or the entire market from an analyst point of view. If this value is positive and also still very high, then many shares are undervalued and can normally be closed at constant rates. With a positive low value, the share/index/market is estimated fairly and can normally be closed at constant rates. A negative value on the contrary means that the share is expensive and the rate will probably fall. Our bull/bear ratio fluctuates between -100% (very very bad) up to +100% (very very good). Analysts advertise, as is known, many purchasing recommendations and few sales recommendations and instead issue a retention for a sale. Here it was found that every fourth retention is, in our calculation, treated as a sale.

Butterfly Spread

An option position consisting of a total of 4 contracts with the same expiry date, resulting from the purchase of an option with a low basic price, the sale of options with moderate basic prices and the purchase of an option with a high basic price. The strategy is based on the acceptance of a stable market situation or at least a declining volatility.

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