Trading Terms Starting With C

  • CAC 40

    a capitalization-weighted index that represents 40 of the largest companies traded on the Paris Bourse (stock exchange), now Euronext Paris. The acronym stands for Cotation Assist\0x8ee en Continu (continuous assisted quotation).
  • CBOE

    the Chicago Board Options Exchange.
  • CBOE S&P 100 Volatility IndexSM (VXO)

    the CBOE Volatility Index (VIX) was first introduced in 1996, based on prices of S&P 100 (OEX) options. In 2003, CBOE made enhancements to VIX methodology and revised the formula to base it on S&P 500 (SPX) options as it is today. However, CBOE continues to calculate and disseminate the original volatility index based on S&P 100 (OEX) options under the name CBOE S&P 100 Volatility IndexSM and with ticker symbol VXO. See also CBOE Volatility Index (VIX).
  • CBOE Volatility Index® (VIX)

    the CBOE Volatility Index, or VIX, is an implied volatility index that measures the market's expectation of 30-day volatility for the S&P 500 (SPX) using S&P 500 options data.
  • CBOT

    the Chicago Board of Trade which merged with the Chicago Mercantile Exchange (CME) to form the CME Group.
  • CD

    certificate of deposit. A debt instrument issued by a bank that has a short- or mid-term maturity date, pays a specific interest rate and can be issued in any denomination. Some CDs may be traded in the open market.
  • CEO

    chief executive officer. Person who is responsible for the overall management of a company or organization. It is often either the president or the chairman of the board.
  • CFO

    chief financial officer. Person who is the principal officer of a company or organization responsible for its financial activities, including financial planning, managing financial risk and record keeping.
  • CFTC

    the Commodity Futures Trading Commission. Futures trading is not currently available at TradeKing.
  • CME

    the Chicago Mercantile Exchange which merged with the Chicago Board of Trade (CBOT) to form the CME Group.
  • COGS

    cost of goods sold, or a company's direct costs for producing a finished product. These include the price paid for raw materials and the expense of manufacturing.
  • COO

    chief operating officer. Person who is the principal officer of a company or organization responsible for its day to day operations
  • CPI

    Consumer Price Index, a measure of the pace of inflation published monthly by the U.S. Department of Labor which tracks changes in the price of a fixed basket of goods and services typically purchased by households. These include such things as housing, utilities, food, transportation, apparel, medical care and recreation.
  • Calendar spread

    an option strategy established by buying a back month option and writing a front month option with the same underlying and strike price, with both options being calls or both puts. Profit and loss potential are both limited. Also termed Time spread.
  • Call buying

    see Long Call.
  • Call option (equity)

    an option that gives its owner the right to buy 100 shares of the underlying stock at the strike price at any time before it expires. The call writer, on the other hand, has the obligation to sell 100 shares at the strike price if assigned. This is referred to as physical settlement.
  • Call option (index)

    an option that gives its owner the right to receive upon exercise a cash amount based on the option's intrinsic value multiplied by the index multiplier, known as the cash settlement amount. The call writer, on the other hand, has the obligation to pay the cash settlement amount if assigned. This is referred to as cash settlement.
  • Call selling

    see Short call.
  • Callable security

    generally a form of convertible preferred stock or convertible bond with an attached call provision. The issuer has the right to call, or redeem, the security before maturity, but must indicate in advance the circumstances under which that might occur.
  • Called away

    refers to the required delivery of a long stock position if assigned on a short equity call, or the required early redemption of a callable security.
  • Cancel

    give instructions to a brokerage firm to make a buy or sell order null and void.
  • Capital

    money and property in excess of liabilities that a company or organization uses for transacting business and growth.
  • Capital appreciation

    the increase in value of any capital asset.
  • Capital asset

    a tangible, long-term investment that a company uses in the normal course of business to generate profits. Not easily convertible into cash, such assets include buildings, equipment and real estate.
  • Capital gain

    the value of a security or other asset in excess of its purchase price, it may be realized or unrealized.
  • Capital gains tax

    with respect to individual investors, it is tax levied on a profit realized a security's sale (versus its adjusted cost basis). If the security has been held for a period of one year or longer it is a long-term capital gain taxed at a rate lower than that for ordinary income. If the security has been held for less than one year the profit is taxed as ordinary income.
  • Capital loss

    the value of a security or other asset that is less than its purchase price, it may be realized or unrealized.
  • Capital market

    a market for stocks, bonds, options and other investments.
  • Capitalism

    an economic system characterized by free markets, open competition, private investment, private ownership of the means of production and profit motive. Most trade and industry are privately controlled.
  • Capitalization / Cap

    the market value of a company calculated by multiplying the number of shares outstanding by its market price. Also termed Market capitalization or Market cap.
  • Capitalization-weighted index

    an equity index in which each component stock makes up a fraction of the overall index in proportion to its market capitalization. This type of index gives greater influence to larger companies than to those with higher priced stocks. e.g., the S&P 500. Opposite of Price-weighted index.
  • Carry costs

    the total costs involved with establishing and maintaining an option and/or stock position, such as interest paid on a margined long stock position or dividends owed for a short stock position. Also termed Cost-of-carry.
  • Cash

    money on hand or in a bank account, or marketable securities and cash equivalents that may be converted into money quickly with little or no material impact on their price.
  • Cash account

    a brokerage account that settles transactions on a cash basis. A customer with such an account is required by the Federal Reserve Board's Regulation T to pay for securities in cash in the required timeframe. Trading securities on margin is not allowed. Cash accounts may initiate a position with unsettled funds, but may not liquidate such a position until the funds used become settled. If liquidation occurs before funds are settled, the client will have committed a Reg-T violation (Free Riding) requiring the account to be put on a 90-day restriction.
  • Cash flow

    the difference between the amount of cash payments and cash receipts over a given period of time, it is one measure of a company's financial health.
  • Cash flow statement

    a summary of a company's cash flow for a given period of time. It is included in a company's annual report.
  • Cash-secured put

    an equity option strategy established by writing a put contract and collateralizing that short position by a deposit of sufficient cash in the same brokerage account. The cash is held aside to purchase the underlying shares at the strike price if the writer is assigned. Profit is limited to the premium collected. Loss may be substantial if the stock declines sharply.
  • Cash settlement

    a settlement style, generally characteristic of index options, in which cash changes hands after an option is exercised.
  • Cash settlement amount

    the total cash amount that changes hands after a cash-settled index option is exercised. It's calculated on the day of exercise as the difference between the strike price and the underlying index's cash settlement value, or its intrinsic value, multiplied by the index's contract multiplier (generally $100).
  • Cash settlement value

    the value, or level, of an underlying index used to calculate the cash settlement amount.
  • Cashier's check

    a check whose face value is paid to a bank and then written by that bank on its own funds when it is issued, guaranteeing payment to the recipient. May also be referred to as an official bank check. Trading may begin immediately upon deposit and fund verification by TradeKing. A remitter must be included on the check. Not to be confused with a money order, which TradeKing does not accept.
  • Central bank

    a country's main bank that is responsible for issuing currency, monitoring the money supply, and the administration of general monetary policy in order to stabilize the economy and the level of prices. It also facilitates the operations and liquidity of the country's banking system. In the United States it is the Federal Reserve System.
  • Certificate Of Deposit (CD)

    a debt instrument issued by a bank that has a short- or mid-term maturity date, pays a specific interest rate and can be issued in any denomination. Some CDs may be traded in the open market.
  • Chain

    a comprehensive listing of market information for all options on a given underlying grouped by expiration month and then strike price. The market information commonly includes current bid and ask prices, open interest, last sale price and volume. Some chains will also include theoretical information such as implied volatility and the Greeks. Also termed Option string.
  • Chapter 7 bankruptcy

    a bankruptcy proceeding filed under chapter 7 of the U.S. Bankruptcy Code in which a company stops all operations and ceases conducting business. Assets are liquidated, with proceeds distributed by a court-appointed trustee to pay off debt.
  • Chapter 11 bankruptcy

    a bankruptcy proceeding filed under chapter 11 of the U.S. Bankruptcy Code in which a company seeks bankruptcy court protection while reorganizing its business affairs. Along with an appointed trustee, the company develops a plan, which must ultimately be approved by the court, to restructure its debts and schedule of payments to creditors. Under these proceedings, the company remains in possession of its assets and continues to conduct business subject to the oversight of both the court and a committee of the company's creditors.
  • Chapter 13 bankruptcy

    a bankruptcy proceeding filed under chapter 13 of the U.S. Bankruptcy Code. Because the rules define limits on both secured and unsecured debt, this filing is typically made by individuals who have a regular income. Following a plan approved by the court, payments are made out of future income to an appointed trustee to repay all or part of the debt owed to creditors. Chapter 13 also includes a provision for an individual to catch up on secured debt while avoiding foreclosures and/or repossessions.
  • Charge off

    to no longer assign a value to all or part of any debt that is deemed uncollectible.
  • Chart

    a stock's past price activity displayed in a diagram used by technical analysts to predict future market trends. These may include line, bar, candlestick and point-and-figure charts. See also Technical analysis.
  • Chart analysis

    the process through which a technical analyst studies charts to predict future market trends. See also Chart.
  • Chartist

    a trader who applies technical analysis in making short-term buy and sell decisions. See Technical analysis.
  • Chief executive officer (CEO)

    the officer who is responsible for the overall management of a company or organization. It is often either the president or the chairman of the board.
  • Chief financial officer (CFO)

    the principal officer of a company or organization responsible for its financial activities, including financial planning, managing financial risk and record keeping.
  • Chief operating officer (COO)

    the principal officer of a company or organization responsible for its day to day operations.
  • Churning

    a broker's practice of excessive trading in a client's full service account in order to increase commissions. In contrast, TradeKing's clients are self-directed, and therefore make there own decisions when trading.
  • Circuit breakers

    measures adopted by equity and equity derivative exchanges to restrict trading when the market falls too far too fast. The breakers are a series of trading halts triggered when the market has fallen by specified amounts within specified timeframes, and are intended to allow rebalance of buy and sell orders. The three circuit breaker thresholds are 10%, 20%, and 30% and are calculated at the beginning of each quarter.
  • Class

    all options of the same type (calls or puts) and with the same underlying.
  • Class A shares / Class B shares

    two types of classified common stock. While both share classes carry the same rights to profits and ownership of the company issuing them, the difference lies in voting rights. Typically, Class A shares have more votes per share than Class B shares, are issued only to company executives and certain large shareholders, and are not available for trading. The purpose of these shares is to provide management greater voting rights in order to have more control over corporate actions (stock splits, mergers, takeovers, etc.) and board elections. Typically, Class B shares are those sold to public investors, have one vote per share and are available for trading in the marketplace. Ultimately, however, the rights of Class A vs. Class B shareholders are determined by a company's charter and/or bylaws.
  • Clearing

    the process of a clearing corporation verifying the counterparties (buyer and seller) involved in a securities transaction prior to settlement.
  • Clearing corporation

    an organization associated with an exchange responsible for clearing and settlement of transactions in a prompt and efficient manner. For each transaction, it becomes the buyer to the seller and the seller to the buyer, thereby removing counterparty risk. The Options Clearing Corporation is one such entity.
  • Clearing member

    a member firm of a clearing corporation that executes client trades and is responsible for monitoring the financial capability of its clients.
  • Closed-end fund

    a fund that raises capital only once, by issuing a fixed number of outstanding shares via an initial public offering. Thereafter, the shares may be bought and sold like stock, typically a securities exchange. The net asset value (NAV) of each share is determined by dividing the total value of the fund's portfolio by the number of shares outstanding. However, the day-to-day trading price for the shares is determined by supply and demand in the marketplace, so the shares may trade for less than NAV ("at a discount") or more than NAV ("at a premium").
  • Closed fund

    a mutual fund which is still held by shareholders that no longer sells shares to the public, but in some cases may allow current shareholders to buy more shares
  • Closing price

    the price of the final transaction for a given security on a given trading day. If the security did not actually trade that day, it will be assigned a closing value based on the quotes at the session close.
  • Closing transaction

    a transaction that eliminates (or reduces) an open option position. A closing sell transaction eliminates or reduces a long position. A closing buy transaction eliminates or reduces a short position.
  • Collar

    an option strategy generally used to protect unrealized profits on an existing long stock position. With the stock at a given price, generally an out-of-the-money put is purchased and an out-of-the-money call is written. The position performs on the downside like a protective put, and to the upside like a covered call. Profit and loss potential are both limited.
  • Collateral

    securities or other property promised to secure a loan. Buying stock on margin is a transaction in which an investor borrows from a brokerage firm a portion of the funds required to purchase the shares. Under the Federal Reserve Board's Regulation T, the shares themselves may serve as part of the collateral needed for the loan.
  • Collective bargaining

    a method of settling labor disputes in which authorized union representatives meet with members of a company's management team to negotiate the terms of a new labor contract.
  • Combination / combo

    an option strategy involving both a call and put on the same "underlying" with one option bought and the other sold, with the same or different strike prices, and different expiration months. Profit and loss may be substantial or unlimited depending on how the combination is created.
  • Commercial bank

    a bank that offers a variety of checking, savings and money market accounts as well as extends loans to businesses and individuals.
  • Commercial paper

    short-term, unsecured debt obligations issued by a corporation to help meet immediate needs for cash, with maturities up to 270 days.
  • Commingled fund

    a fund that pools and invests money from multiple investors and/or several accounts, primarily to reduce brokerage fees and administrative costs. Such funds are run by professional investment managers with stated investment goals, but they are neither regulated by the SEC nor publicly traded.
  • Commingling

    the mixing, or pooling, of customer account securities with securities owned by a brokerage firm. This can blur the line between broker and client making it difficult to effect an equitable distribution of profits and losses between the two. This practice is generally illegal in the U.S.
  • Commission

    the fee collected by a broker to act as an agent in the execution of a stock or option order on a customer's behalf.
  • Commodity

    usually a raw material, such as an agricultural product, precious metal or oil, used to produce consumer goods, and is generally bought or sold via futures contracts.
  • Commodity futures

    a contract to buy or sell a standardized quantity and quality of a specific commodity on a delivery date in the future. The price is determined by supply and demand in the marketplace at the time the contract is entered into.
  • Common stock / common shares

    securities that represent shared equity ownership in a company. Stockholders generally have the right to vote on matters such as corporate objectives and policies, corporate actions (stock splits, mergers, takeovers, etc.) and the election of directors. They are also entitled to participate in a company's success through share appreciation and dividend payments if made by the company. In the event the company is liquidated, common stockholders have the right to its assets, but only after the claims of bondholders and owners of preferred stock have been met. Also termed Ordinary shares.
  • Compound interest

    interest that is calculated on both the principal and any interest accrued to date.
  • Condor

    an option position established by purchasing one option with a given strike price, writing an option with higher strike, writing another option with an even higher strike, and then buying an option with a still higher strike. The options must be either all calls or all puts, have the same underlying and expiration month, as well as the same intervals (difference) between the strike prices. Profit and loss potential are both limited.
  • Confirmation

    acknowledgment from a brokerage firm, in either paper or electronic form, that a transaction has taken place as well as the price(s) at which it was executed.
  • Conglomerate

    a corporation that consists of multiple companies in different businesses that often seem unrelated.
  • Consensus

    the mean of aggregated forecasts for a company's future performance made by research and financial analysts.
  • Consolidated tape

    a high-speed, electronic system that provides the latest price and volume data on sales of exchange-listed stocks in all markets in which they are traded. The various markets include all securities exchanges, electronic communications networks (ECNs), and third market broker-dealers.
  • Consolidation

    with respect to technical chart analysis, a period of lateral price movement.
  • Consumer Confidence Index (CCI)

    a measure of consumer optimism about the current state of the economy as well as expectations for the future, that reflects surveyed participants' impressions of both business conditions and the job market. Not reported by the U.S. government, it is released by the Conference Board, an independent business research organization.
  • Consumer Price Index (CPI)

    a measure of the pace of inflation published monthly by the U.S. Department of Labor, it tracks changes in the price of a fixed basket of goods and services typically purchased by households. These include such things as housing, utilities, food, transportation, apparel, medical care and recreation.
  • Contango

    a market condition in which a futures price is lower for the nearest month than for a distant delivery month. Opposite of backwardation. Futures trading is not currently available at TradeKing.
  • Contingency order

    a type of order used with stock, options, or option spreads, with instructions that one or more conditions be met before it becomes a live order to then be executed.
  • Continuous compounding

    the process of calculating interest on a continuous, or instantaneous, basis. At each instant, accrued interest begins to earn interest on itself.
  • Contra broker

    in a buy transaction the broker on the sell side would be the contra broker. In a sell transaction the broker on the buy side would be the contra broker.
  • Contrarian investor

    an investor who buys and sells stocks in opposition to the prevailing trend in the marketplace. This investor relies on the belief that crowd behavior among other investors results in aberrant stock prices that are exploitable for profit.
  • Contrary opinion

    a market opinion that is in opposition to the prevalent opinion in the marketplace.
  • Contribution

    money paid to an annuity, into an individual retirement account (IRA), or into an employer-sponsored or other type of retirement plan.
  • Control stock

    stock owned by an individual or a group of shareholders acting in kind who have a controlling interest in a company. See also Controlling interest.
  • Controlling interest

    a legal controlling interest in a company's shares would be 50% plus one share. In practice, however, a controlling interest might represent a much smaller portion of shares because:
    1. not every shareholder who is qualified actively votes;
    2. some shares carry more than one vote, a situation that varies from one company to another.
    See also Class A shares / Class B shares.
  • Controlling shareholder

    a shareholder who either singly or allied with a group acting in kind has a controlling interest in a company. See also Controlling interest.
  • Conversion (options)

    a form of option arbitrage in which an investor attempts to lock in a small profit with minimal risk until expiration. It is established by writing a call, purchasing a put, and purchasing an equivalent number of underlying shares (100 shares for each pair of options), with the call and put having the same expiration month and strike price.
  • Conversion (Security)

    the practice of actually converting a convertible security, such as certain bonds or preferred stock, into shares of common stock.
  • Conversion price (security)

    the price an investor will pay for converting a convertible bond or share of convertible preferred stock into common stock.
  • Conversion ratio (security)

    the number of shares of common stock an investor will receive after converting one convertible bond or a single share of convertible preferred stock.
  • Convertible bond

    a specialized corporate bond that permits its conversion into a set number of common shares, at a certain ratio of bonds to shares and at a fixed conversion price.
  • Convexity

    a measure of the sensitivity of the duration of a bond to fluctuations in interest rates. In general, the higher the convexity, the less sensitive the bond price is to interest rate changes and vice versa.
  • Cooking the books

    presenting fraudulent or misleading information in a company's financial statements to give a biased picture of the company's financial situation. The intent is to make the picture look better than it is in reality in order to satisfy stockholders, attract new investors, meet projected budgets, or to either maintain or increase executive bonuses. This is an entirely illegal practice.
  • Cooling off period

    the timeframe after a company files a preliminary prospectus with the SEC and before the actual initial public offering (IPO), during which the company, its investment bankers and underwriters are not permitted to discuss the offering with investors. The purpose is to avoid an artificial inflation of the IPO's price. This timeframe is usually 20 days. Also termed Waiting period or Quiet period.
  • Cornering the market

    a practice in which an individual, firm or cartel buys a large amount of a commodity or security in an attempt to gain control of the supply and manipulate its price. This practice is entirely illegal in U.S. markets.
  • Corporate action

    any step taken by a corporation, approved by its board of directors, that changes its capital structure and/or fiscal condition, and could therefore affect its shareholders and bondholders financially. Examples include a full or partial call of certain convertible securities, early maturation and redemption or conversion of debt, stock splits, spin-offs, mergers, offering new securities, liquidation and even a name change.
  • Corporate bond

    as an alternative to issuing new shares, a bond issued by a corporation to raise cash for expansion or other business needs. Typically deemed to be a higher risk investment when compared to government or municipal bonds, corporate bonds generally pay higher interest rates. Often times the interest an investor earns is fully taxable.
  • Corporate tax

    tax levied by both local and federal governments on a corporation's taxable profits.
  • Correlation

    used in advanced portfolio management, it is the statistical measure of the degree to which the values of two securities move in relation to each other in response to changing economic and/or market conditions.
  • Cost-of-carry

    the total costs involved with establishing and maintaining an option and/or stock position, such as interest paid on a margined long stock position or dividends owed for a short stock position.
  • Cost of goods sold

    a company's direct costs for producing a finished product. These include the price paid for raw materials and the expense of manufacturing.
  • Counterparty risk

    with respect to listed option contracts, this risk is to an equity option owner who exercises, and is that the writer who is assigned will not live up to his or her contractual obligation to sell (for a call) or buy (for a put) shares of underlying stock. To an index option owner this risk is that the assigned writer will not live up to his or her contractual obligation to pay the cash settlement amount. The Options Clearing Corporation acts as the intermediary for listed option contracts and therefore removes this risk
  • Coupon rate

    for bonds, notes and other fixed income securities, it is the stated annual interest rate that the security issuer promises to pay the security owner over the security's lifetime, expressed as a percentage of its face value.
  • Cover

    to close an existing short stock, short call or short put position with a closing buy transaction.
  • Covered call / covered call writing

    a strategy that is established by writing an equity call that is "covered" by an equivalent number of underlying shares that are currently owned (one call for each 100 shares of stock). Premium received from the call's sale provides limited stock price protection on the downside, and provides income in addition to any dividends paid. To the upside, profit on the stock is capped by possible assignment on the short call and sale of the long shares at the strike price. On the downside the loss potential from the long stock is substantial. See also Buy-write.
  • Covered call option

    a short call position that is offset by an equivalent number of long underlying shares (one call for each 100 shares), or by a long call on the same underlying with the same expiration month or longer and with an equal or lower strike price.
  • Covered put option

    a short put position that is offset by an equivalent number of short underlying shares (one put for each 100 shares), or by a long put on the same underlying with the same expiration month or longer and with an equal or greater strike price.
  • Credit

    any funds received in an account, from the sale of an option or stock position, that results in an increase in the cash balance.
  • Credit rating

    a qualitative measure of the likelihood a bond issuer will default on a loan and/or interest payments, it is based on the issuer's creditworthiness. Ratings typically range from AAA (least likely to default) to D (most likely to default). Independent agencies that rate bonds include Moody's Investors Service and Standard & Poor's (S&P).
  • Credit rating agency

    a company whose business is assigning credit ratings for debt securities as well as for the issuers of those securities. Among the more familiar agencies are Moody's Investors Service and Standard & Poor's (S&P).
  • Credit spread

    an option strategy involving multiple parts (legs) in which the total cash amount received is greater than the total cash amount paid. The result is a net increase in the cash balance of an account. Can be done with calls or puts.
  • Creditor

    an organization which extends credit to others in the form of a loans.
  • Crossed market

    an abnormal market condition in which the normal relationship between a bid and ask price is reversed; e.g., the posted bid price for a security is higher than the posted ask price.
  • Currency exchange rate

    the value of one country's currency expressed in terms of a different country's currency.
  • Currency option

    represents the right to buy (for a call) or sell (for a put) a contractually fixed quantity of an underlying foreign currency at the strike price. Currency options traded in the U.S. are generally European-style.
  • Currency risk

    the risk faced by an individual or company that the value of an investment could be adversely affected by a changing foreign currency exchange rate, e.g., a change in the price of one currency against another. Also termed Exchange rate risk.
  • Cyclical stock

    shares issued by a company whose sales are sensitive to business cycles, showing improvement during economic upturns, and vice versa. Industries whose sales are typically impacted by cycles of general economic expansion and contraction are those which produce durable goods, or services that are discretionary: steel, paper, chemicals, automobiles, construction, airlines and hotels.