Glossary

All 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

S

Scalper

Speculators who use the smallest price fluctuations to make profits and who offset their open positions within the shortest time, mostly within the same exchange session.

Scalping

A trading method where positions are entered for a very short time during which the trader tries to profit from very small price differences.

Security

A security, which must be provided to hold a short position in options or a futures position in order to cover a loss resulting from adverse price fluctuations.

Selective Hedging

A hedging strategy, which is based on the market expectations of the market participant who, in certain cases, only hedges some of his position

short

The selling position, which has not yet been offset through the purchase of an opposed position.

Short Sale

The sale of financial tools or goods, which the seller does not own.

Short Selling

If a stock price dramatically branches out on the stock exchange without basic reasoning, then this is often referred to as “short selling”. This type of investment is very speculative. With such a transaction, shares are offered under the current price at a precisely set time. The problem here is that the sellers do not even own the shares. Therefore they must buy them at some point in order to be able to return them to the lender. Consequently they speculate that the share price will fall even more. Then they buy the shares themselves and still pocket a profit. If the stock price develops in the other direction, the short seller faces a high loss. So-called hedge funds regularly use this type of transaction. The effect of such transactions if they are implemented on a large scale is that in a downstream float of the stock exchange, the pressure to sell through short selling is increased. Vice versa, it can be that, with an upstream float, this trend is reinforced, because the short sellers are caught off-guard and must buy ahead. According to information from the German Shares Institute (DAI), some banks, in the last period of uncertainty, stopped lending stocks of security in general as well as shares to the hedge funds in particular. Therefore shares were then also not able to be sold short and consequently the slump is reinforced. For private investors, short selling shares is actually not an issue because of the high risk. Yet it certainly is sensible and useful to observe and note these kinds of transactions, about which is always reported. The DAI explains that this can give precise information on whether a market is oversold – through short selling – or through stocking up.

Short-Call

The position, which results from the sale of a call, and which binds the buyer to sell the basic security at the agreed price when exercising the option.

Short-Hedge

Entering a short position on the futures market to hedge a long position on the spot market.

Short-Position

The position, which results from the sale of an options contract.

Short-Put

The position, which results from the sale of a put and which binds the buyer to buy the basic security at the agreed price when exercising the option.

Shortened Fiscal Year

A shortened financial year, which emerges when the end of the financial year is offset. The shortened fiscal year covers the period between the end of the last financial year according to the old cycle and the start of the next fiscal year according to a new cycle. Example: RWE AG changed its financial year. After a financial year from 1st July to 31st December 2000, the holding’s financial year now corresponds to the calendar year.

Speculation

An activity, which is oriented towards capitalising on an expected change in the market, whereby a relatively high risk is taken.

Speculator

A market participant who orients his activities to capitalise on a future-expected price difference. Speculators generally take high risks and, through their activity, they contribute to the liquidity of the market.

Spot Market

The market on which deals are concluded for immediate delivery and payment.

Spot-Futures Arbitration

The purchase of a tool on the spot market and the simultaneous sale of the same tool on the futures market.

Spread

The simultaneous purchase and sale of the same type and class of options, yet with different basic prises and/or expiry dates.

Spread Order

An order for the simultaneous purchase and sale of the same class of options specifying the price difference between the bought and sold position, which is to be adhered to.

square

To cancel an open position through a corresponding offset transaction.

squared

The description of a position, which is neither long nor short.

Stock Index Future

A contractual agreement to buy or sell a standardised stock index value at a previously negotiated stock price at a later, standardised maturity date.

Stock Option

A contractually agreed right to buy or sell a certain number of shares within a set period of time at a fixed price.

Stock Split

In a stock split, a no-par share is divided into smaller shares, corresponding to the split ratio. Through this, a PLC’s stock of shares increases and shares with a high price level become visually more beneficial. For the shareholder, his share in the PLC does not change as he holds accordingly more shares than before the split.

Stop-Limit Order

Stop-market order: order to be bought or sold as soon as a certain price is reached. Stop-limit order: as above, except a limit is planned with the settlement. The advantage of stop-order or stop-limit orders is that the investor does not have to constantly monitor the market and the performance of the respective shares.

Stop-Loss Orders

Careful investors protect themselves against an unexpected stock exchange crash whereby they issue their bank with a stop-loss order. Then the shares are automatically sold as soon as the stock exchange prices fall below the value named by the investor. Admittedly, an instinct is necessary to place the stop-limit correctly. If it is set too close below the last highest price, the share rushes from the securities account with temporary price fluctuations and the investor misses out with the subsequent price boom. As a rule of thumb: with DAX securities, the shares should be hedged with a stop-limit of 10 percent below the current price. With second-line stocks and new market securities, a margin of 20 percent is better. Furthermore it is advisable to choose bent securities as a limit instead of round prices. Because if there are lots of stop-loss orders at the same level, exceeding the limit causes a flood of sales and the share price dramatically branches out. On the floor, stop-loss orders are automatically settled “best” once the limit has been reached - therefore, is sold at the next available sales price. However this does not apply to the Xetra trade. If the price here falls below the stop-limit, the order will be cancelled as unachievable. Therefore stop-orders in the Xetra should always be monitored.

Stop-Market Order

Stop-market order: order to be bought or sold as soon as a certain price is reached. Stop-limit order: as above, except a limit is planned with the settlement. The advantage of stop-order or stop-limit orders is that the investor does not have to constantly monitor the market and the performance of the respective shares.

Straddle

A strategy whereby the same number of puts and calls are bought or sold on the same basic security and with the same exercise price and the same expiry date.

Strangle

A trading strategy whereby the same number of puts and calls are bought or sold on the same basic security and with the same expiry date but where the exercise price of the call is higher than that of the put.

Strap

An options strategy comprising two calls and a put on the same basic security and with an identical exercise price and expiry date.

Strip

An options strategy comprising two puts and a call on the same basic security and with an identical exercise price and expiry date.

Swap

The simultaneous use of relative financial costs by two contracting partners.

Synthetic

The description of a position, which results from a combination of options and/or futures and which has the same profit/loss profile as the reproduced tool. Synthetic futures positions can be constructed from a combination of calls and puts, synthetic options from a combination of options and futures.

Current share price

 

Video



watch video
 

Share/Recommend

Links