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Trading Terms Starting With H

  • Haircut

    with respect to securities trading, the amount of capital required of a broker-dealer or professional trader to meet the net evaluated capital at risk associated with all positions in a trading account. The more capital at risk the higher the haircut is, and vice versa.
  • Hang Seng Index (HSI)

    a capitalization-weighted index that represents the 42 largest companies traded on the Stock Exchange of Hong Kong (SEHK).
  • Hedge / hedged position

    a position established with the intention of reducing the risk or protecting the profits of another position. An existing stock position might be hedged with various option positions that to some degree offset its risk, or protect unrealized profits. An existing option position may be hedged with an underlying stock position or with other option contracts to achieve the same purpose.
  • Hedge fund

    a private investment partnership that generally uses aggressive investment strategies unavailable to most mutual funds. In spite of the word "hedge" used to describe them, these funds often take highly leveraged long and/or short positions in the form of swaps and other non-standardized derivative contracts. Many funds develop their own proprietary mathematical models to identify and trade over- and undervalued products, or to arbitrage price differentials between two or more products that do not conform to their models' valuations. Investment in these funds can come with very high risk, the required investment levels can be substantial, and the numbers of investors is usually limited. Securities laws limit participation in most hedge funds to accredited investors whose assets and investing experience meet or exceed Securities and Exchange Commission (SEC) guidelines.
  • Hedge ratio

    the amount of shares needed to be either bought or sold to offset the delta risk of a particular option; an alternative term for an option's delta, or its price sensitivity to fluctuating value of its underlying.
  • Hedger

    in the futures industry, an individual or group who is naturally long or short the underlying commodity and uses futures contracts to hedge risk, e.g., a corn farmer who trades corn futures to offset risk. Opposite of Speculator. Futures trading is not currently available at TradeKing.
  • High

    with respect to an individual security, the highest trading price within a given timeframe. With respect to an index, its highest value during a given timeframe.
  • High-grade bond

    a bond assigned one of the two highest ratings, typically AAA or AA, by a credit agency such as Moody's Investors Service or Standard & Poor's (S&P).
  • High yield bond

    a bond that produces a high rate of return, or high yield. Generally, at the time of purchase such a bond will be assigned a very low grade by a credit agency, reflecting a relatively high chance of default. The issuer must therefore resort to high yields to attract investors. Sometimes synonymous with Junk bond.
  • Historical volatility

    a measurement of the actual, observed volatility of a specific stock over a given period of time in the past, such as a month, quarter or year. Like other forms of volatility it is expressed as the standard deviation in percentage form, generally annualized, of daily changes in closing stock price (or index value) usually using the difference from one day's closing price to the next. Also termed Statistical or Stock volatility.
  • Hit the bid

    the practice of an investor agreeing to sell a security at the current bid price disseminated from its marketplace with the goal of the trade being executed immediately. Opposite of Take the offer.
  • Holding company

    a corporation that controls another company through ownership of enough voting stock to have control over its management and business operations, or the election of its directors. A holding company might receive tax relief from any dividends it receives, as well as some insulation from the owned company's liabilities through its shareholder status.
  • Hostile takeover

    a merger that proceeds against the wishes of the target company's management because of disagreement with the transaction terms. Opposite of Friendly takeover.
  • Hot issue

    a stock newly issued through an initial public offering (IPO) with demand for the new shares far exceeding its supply. It is expected that once trading begins the share price will rise steeply because of intense investor interest.