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Trading Terms Starting With I

  • INDU

    a ticker or quote symbol often used for the Dow Jones Industrial Average.
  • IPO

    an Initial Public Offering, or a company's first sale of stock to investors for public trading.
  • IRA rollover

    the tax-free transfer of a distribution from one IRA custodian to another, or from a 401(k) plan to an IRA. Usually this transfer must be completed within 60 days from when funds are released from the outgoing custodian in order to avoid tax or early withdrawal consequences for the account holder.
  • ISE

    the International Securities Exchange.
  • Illiquid / illiquidity

    1. when an asset such as a security cannot be quickly converted into cash without significantly affecting its current market price. An illiquid market is one characterized by low trading volume and/or wide bid-ask spreads.
    2. when a company does not have sufficient cash flow to meet the needs of daily operations, including its debt obligations. Maybe referred to as "cash poor."
  • Illiquid market

    a trading environment characterized by low volume, infrequent transactions, wide bid-ask spreads and relatively few buyers and sellers ready and willing to trade at any given time. Just a few small trades can upset the balance in supply and demand enough to impact the security's market price significantly, resulting in high volatility. Also termed Thin market or Thinly traded. Opposite of Liquid market.
  • Imbalance of orders

    a situation in which supply and demand for a security is out of balance, e.g., there are many more interested buyers than interested sellers, or vice versa. This situation can result in a gap increase (more buyers) or gap decrease (more sellers) in the security's market price, and/or may result in a delayed opening of trading or a trading halt during trading hours.
  • Immediate-or-cancel order (IOC)

    a type of option order with instructions that be it executed in whole, or in part, immediately upon its arrival at an exchange. Any portion of the order not executed at once is then cancelled.
  • Implied volatility

    a consensus in the marketplace of an underlying stock or index's expected volatility as predicted, or implied, by an option's price. It can be calculated with an option pricing model as the volatility assumption that would be used to generate a theoretical value for a call or put that is equal to its current market price, and is expressed as annualized standard deviation in percentage form.
  • Imputed interest

    an accounting term referring to interest that is considered to have been paid to the investor, even though no cash has been received. Such interest might be an amount accrued on a zero-coupon bond that does not actually pay interest until its maturity.
  • In kind

    with respect to securities, payment to shareholders for interest or principal in the form of securities or similar instruments rather than in cash.
  • Incentive stock option

    see Employee stock option (ESO)
  • Income fund

    a mutual fund whose objective is to provide the investor income from dividends, bonds or preferred stocks as opposed to asset growth. Like the investments they make, these funds tend to be less volatile when compared to growth stocks / funds.
  • Income statement

    a company's written accounting of its revenues, expenses and net income for a given timeframe. This is generally included in the company's annual report.
  • Index

    a stock, or equity, index is the compilation of the prices of numerous component stocks into a single number that is intended to serve as a performance indicator for the composite group. It may be designed to track moves in broad, diverse markets (e.g. S&P 500®), more specific portions of the market (Nasdaq-100®) or in industry sectors such as airlines, pharmaceuticals or energy. Indexes commonly serve as benchmarks against which the performance of a stock or portfolio might be measured. Indexes are also based on commodity markets, bond markets, and even volatility levels.
  • Index fund

    a mutual fund whose managers construct its portfolio to track the performance of a specific index. The portfolio generally consists of all of the securities in the index, or a representative sample according to their weighting, with securities added or sold only when the index's components change.
  • Index option

    an option contract whose underlying entity is an index (e.g. S&P 500 index), not shares of any particular stock.
  • Individual Retirement Account (traditional IRA)

    a plan that encourages people to save for their retirement through certain tax incentives. An IRA may be opened with a financial services firm such as a bank, a brokerage firm or an investment company as custodian, with contributions to the account being potentially tax deductible and any gains in the account tax-deferred. The accounts are self-directed, meaning the account holder may choose to invest contributed funds among any investments the custodian makes available. Distributions (withdrawals) from the account may begin at age 59 1/2, with a penalty charged for withdrawals before that age. Annual minimum required distributions begin at age 70 1/2. Distributions are taxed at the account holder's regular tax rate as they are withdrawn.
  • Inflation

    the rate at which the general level prices for goods and services is increasing as measured by an index such as the Consumer Price Index. Moderate inflation typically accompanies economic growth, but as the rate increases consumer dollars begin losing more of their purchasing power. The Fed tries to keep inflation in check by decreasing money supply and tightening the availability of credit.
  • Initial margin

    the amount of cash or eligible securities required by a brokerage firm to be deposited in an account at the time a derivative or underlying security position is established. The initial margin requirement may be set by Federal Reserve regulations as a minimum, but a brokerage firm may require more if it feels necessary for its own as well as its customer's protection.
  • Initial Public Offering

    a company's first sale of stock to investors for public trading.
  • Inside day

    a trading day in which the price range of a security is within its price range of the previous trading day.
  • Insider

    an officer or director of a company, or any investor holding more than 10% of its voting stock. Also termed Affiliated person or Control person.
  • Insider trading

    1. the purchase or sale of shares by a company insider, which generally must be reported to financial regulators when certain volume or ownership thresholds are reached or exceeded.
    2. the trading activity of any person who uses non-public information in which to make illegal profits or avoid illegal losses.
  • Insolvent

    a company (or individual) not capable of paying debts, with its liabilities exceeding its assets.
  • Instinet®

    a widely used electronic communication network (ECN). See Electronic Communications Network.
  • Institution

    an organization or corporation in the business of holding and managing assets either for themselves or for clients. This includes banks, insurance companies, pension funds, mutual funds and trusts.
  • Institutional investor

    an institution making investments for either itself or a client. See also institution.
  • Interbank Rate

    London Inter-Bank Offer Rate (LIBOR).
  • Interest option

    an option contract in which the underlying is an interest-bearing security, or debt obligation.
  • Interest rate

    the percentage of a debt security's face value, or the percentage of an amount of borrowed funds, at which interest is computed.
  • Interest rate swap

    a binding agreement between counterparties, standardized to their requirements, to periodically exchange interest payments on a predetermined principal amount, or the notional principal amount. Such a swap may involve exchanging a fixed interest payment for a payment that is not fixed, or based on a floating rate which is often the LIBOR.
  • International Monetary Fund (IMF)

    an international organization established in 1944 to stabilize international exchange rates of member countries, lower trade barriers and to lend money to poorer, developing countries upon the condition they pursue sound economic policies.
  • In-the-money

    a call option is in-the-money when its strike price is less than the current underlying stock price (for an equity option) or index value (for an index option). A put option is in-the-money when its strike price is greater than the current underlying stock price or index value. Only in-the-money options have intrinsic value; they may also have time value.
  • In-the-money amount

    a call or put option's intrinsic value.
  • Intrinsic value

    the in-the-money portion (if any) of a call or put contract's current market price.
  • Inverted market

    See Crossed market.
  • Inverted yield curve

    an uncommon situation in which short-term interest rates are higher than long-term interest rates. Also termed Negative yield curve.
  • Investment / investing

    the creation of more money through the use existing capital. For an investor this is the purchase of a security or other financial instrument with the expectation that it increases in market value. For a company this may mean the purchase of a durable good, like raw materials or equipment, in the hope of business growth.
  • Investment adviser

    a person or a company who professionally offers investment advice (for a fee) either to an individual investor or a fund. Advisers managing more than a certain amount of money must register with the SEC.
  • Investment bank

    a financial institution which offers a variety of services including: helping companies take new securities issues to the market and acting as underwriter; offering strategic advice for mergers, acquisitions, and reorganizations; investment advisory services and brokerage for individual and institutional clients.
  • Investment capital

    funds received by a company from issuing common shares, debt securities and/or preferred shares to be used for business operations and growth.
  • Investment company

    a corporation or trust that for a fee invests the pooled capital of numerous investors in specific investments that are appropriate for their investment objectives. Such companies are registered with, and their activities are regulated by, the SEC.
  • Investment grade bond

    a bond awarded a minimum of a Baa or BBB or equivalent rating by credit rating agencies. In general, institutional investors are allowed to invest only in bonds with this rating or higher. Opposite of High yield bond or Junk bond.
  • Investment trust

    a closed-end fund regulated by the Investment Company Act of 1940 that has a fixed number of shares which trade like a stock. The market price for these shares may trade at a discount below or at a premium above their net asset value (NAV).
  • Investor relations

    a corporate department serving as an interface with present and/or prospective investors. Any questions relating to business activities, business plans, earnings announcements, issues concerning its shares and dividends, annual meetings and voting should be addressed through this department.
  • Iron butterfly

    an option strategy established by writing a call and a put with the same strike price, purchasing a put with a lower strike price, and purchasing a call with a higher strike price. The options must have the same expiration month and same intervals (difference) between the strike prices. Profit and loss potential are both limited.
  • Issue / issuer

    a specific financial asset, like a stock or bond, which has been offered for sale by the issuer (a corporation, government, agency, or investment trust) through an underwriter. May be an initial public offering (IPO) or private placement.
  • Issue date / issue price

    the date on which a financial asset like a stock or bond is issued as well as its price.