Trading Terms Starting With P

  • P/E ratio

    see Price/earnings ratio.
  • PEG ratio

    see Price/earnings to growth ratio.
  • PHLX

    the Philadelphia Stock Exchange, once the oldest stock exchange in the U.S., now merged with the Nasdaq Stock Market.
  • Paper loss

    a loss that has occurred but not yet realized by closing the position.
  • Paper profit

    a profit that has occurred but not yet realized by closing the position.
  • Paper trading

    the simulated trading of securities by pretending to buy and sell with imaginary money, generally as practice before trading with real money.
  • Par / par value

    see Face value (bond).
  • Parity

    literally means equality. With respect to options, the term parity refers to a call or put option's total premium (price) when it is equal to that option's current intrinsic value. When an option trades for this amount, or for its intrinsic value, it is "trading for parity." Only in-the-money options have intrinsic value, so only in-the-money options may trade for parity.
  • Partial execution / partial fill

    when an order to buy or sell a security has been executed in less than its entirety.
  • Partnership

    an unincorporated business generally structured so each general partner shares proportional liability for any claim brought against the partnership. The profits are divided proportionally among the partners who are taxed at their individual rates. The partnership itself pays no income tax. See also limited partnership.
  • Pass-through security

    a security that is composed of a pool of debt instruments, with income passed from the original debtors (lenders) to the shareholders; e.g., a mortgage-backed security.
  • Payoff diagram

    see Profit & loss graph
  • Penny stock

    a stock that usually trades for a price of $1 per share or less, or by some standards less than $5 per share. These companies generally have only a few million dollars in assets, a limited operating history and are traded over-the-counter. They are most often small cap stocks and illiquid.
  • Performance

    the financial results of a company's business activities over a given period of time. This may also refer to the return on an individual investment or to the return on the broader market over time.
  • Physical settlement / physical delivery

    an option settlement style that requires the actual underlying asset to change hands (be delivered) after exercise and assignment. All equity options are physical delivery because shares of underlying stock change hands when a contract is exercised by its owner.
  • Pink sheets

    a daily listing of over-the-counter stocks not listed on the Nasdaq Stock Market or Bulletin Board, published by the National Quotation Bureau. Included are daily bid-ask prices for each issue as well as the market maker(s) who trade them. Companies listed here are usually penny stocks, do not meet minimum filing requirements, do not file with the SEC, are illiquid, and are often the target of price manipulation. Named for the color of paper on which it is printed.
  • Pit

    referring to a trading pit, a localized area on a physical trading floor where an options or futures contract might be traded. Futures trading is not currently available at TradeKing.
  • Plus tick

    occurs when a security trades at a price higher than the preceding one. Opposite of Downtick. Also termed Uptick.
  • Poison pill

    any number of corporate actions a target company might take to avoid a hostile takeover. See also Hostile takeover.
  • Pooled fund

    see Commingled fund.
  • Portfolio

    a set of varied investments that might be held by an individual, organization, trust or fund. Components would include common stocks, preferred stocks, bonds, mutual funds, options or futures. One benefit of a portfolio is the estimated reduction of risk through diversification. Futures trading is not currently available at TradeKing.
  • Portfolio turnover

    the rate at which an individual investor or portfolio manager buys and sells components of a portfolio. This will generate short-term capital gains if profits are taken on investments held less than one year.
  • Position

    1. with respect to an individual security, the amount owned (a long position) or owed (short position) in a brokerage account.
    2. with respect to options, the number of long contracts owned or short contracts written and maintained in a brokerage account.
  • Position limit

    set by the option exchanges, the maximum number of call or put contracts on the same side of the market that can be held in one account or a group of related accounts. Long calls and short puts constitute one side of the market (bullish); short calls and long puts constitute the other side of the market (bearish). These limits vary from one option class (same underlying) to another.
  • Power of attorney

    a legal document allowing one person to authorize another person to act as agent on his or her behalf. The document generally includes the circumstances under which this authority will be in effect, and must be signed and notarized.
  • Precious metals

    metals that are rare and/or otherwise valuable, both for their intrinsic as well as production value. Many of these may be traded in a cash market, or as an underlying for options or futures contracts, including gold, silver, platinum, palladium and iridium. Futures trading is not currently available at TradeKing.
  • Preferred stock / preferred shares

    shares of stock that have characteristics of both common stock and debt instruments. They represent an equity position in a company like common stock, but with a claim prior to common stockholders on earnings, or assets in the event of liquidation. These shares generally pay a fixed dividend amount, stated in dollars or a percentage of the shares' par value, which is paid prior to common stock dividends. Preferred shares do not usually carry voting rights.
  • Pre-market trading

    see Before-hours trading.
  • Premium

    the price paid or received for an option in the marketplace. Equity option premiums are quoted on a price per share basis, so the total premium amount paid by the buyer to the seller in any option transaction is usually equal to the quoted amount multiplied by 100 (underlying shares). The total premium amount paid by the buyer to the seller for index options is multiplied by a multiplier (usually 100). Option premium consists of intrinsic value (if any) plus time (extrinsic) value.
  • Premium bond

    a bond that is purchased above face value, or over par, but will be redeemed for face value at maturity. If the bond carries no coupon it is called a zero coupon bond. Opposite of Discount bond.
  • Prepaid interest

    an interest payment received before it is actually earned.
  • Prepayment speed

    an estimated rate at which mortgage holders might be expected to fully pay off their loans ahead of the schedule specified in the mortgage contract. This is a factor in valuing certain mortgage-backed securities.
  • Price discovery

    in a free marketplace, the process of determining a security's price via supply and demand, or through the matching of bids and offers.
  • Price/earnings ratio (P/E)

    used in fundamental analysis, it a ratio calculated by dividing a stock's current market price by its after-tax earnings per share, generally over the last 12-month period. This ratio is sometimes called the stock's "multiple," and is commonly used as a relative measure of how expensive a stock is in comparison to another stock, other stocks in an industry group, or to the overall market. Also termed Trailing P/E. See also Forward P/E.
  • Price/earnings to growth ratio (PEG)

    used in fundamental analysis, it is a ratio calculated by dividing a stock's price/earnings (PE) ratio by its expected growth rate (forecast by proprietary sources). In other words, it measures how expensive a stock is today relative to both a company's reported earnings and its expected growth.
  • Price gap

    see Gap.
  • Price to book ratio

    used in fundamental analysis as a measure of a stock being overvalued or undervalued. It is calculated by dividing a stock's capitalization by the shares' book value. See also Capitalization and Book value.
  • Price-weighted index

    an equity index in which each component stock makes up a fraction of the overall index in proportion to its market price. This type of index gives greater influence to higher-priced stocks than to the largest companies, e.g., The Dow Jones Industrial Average. Opposite of Capitalization-weighted index.
  • Primary market

    a virtual marketplace in which investors buy new securities directly from their issuers. Subsequent trading in the shares takes place on the secondary market, e.g., an exchange.
  • Prime rate

    the lending rate at which banks lend money to their most creditworthy, corporate customers on a short-term basis. Heavily influenced by the fed funds rate, the prime rate is a benchmark for interest rates on business ands consumer loans.
  • Private placement

    the sale of shares or debt instruments by an issuing company directly to a limited number of favored institutional investors such as pension plans, mutual funds, banks and insurance companies. This is usually done at the initial stages of a company's operations, and is not subject to SEC registration.
  • Privatization

    the purchase of all of a company's publicly traded shares usually by either a private investor, a group of private investors or the company's employees. As a result, all shares previously in public hands are in private hands, and the stock stops trading on an exchange.
  • Pro forma

    with respect to accounting, a hypothetical balance sheet containing one or more assumptions. This might be presented in advance of an actual, formal balance sheet, or it might accompany a business plan or loan application.
  • Probability distribution

    See Normal distribution and/or Log normal distribution.
  • Probate

    the legal, judicial process of authenticating a will, as well as the legal process of an executor (if there is a will) or a court-appointed administrator (if there is no will) distributing the assets of a decedent.
  • Producer Price Index (PPI)

    a measure of the pace of inflation published monthly by the U.S. Department of Labor, it tracks changes in prices received by domestic producers for their output.
  • Profit

    1. an increase in the value of any investment.
    2. income in excess of expenditures.
    3. with respect to a transaction, proceeds received in excess of costs. Also termed Gain.
    4. Opposite of Loss.
  • Profit + loss graph

    a representation in graph format of the possible profit and loss outcomes of an option strategy over a range of underlying prices or values at a given point in the future, most commonly at option expiration.
  • Profit and loss 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. Also termed Income statement.
  • Profit taking

    a term that describes investor selling of either a particular security or securities in the broader market after a run up in price, in order to realize fairly quick returns. This selling pressure is generally short-term, and may be followed by a period of rising prices.
  • Profit warning

    a public company's announcement in advance of a formal earnings announcement that earnings will be less than generally expected in the marketplace. This is an action taken in an attempt to avoid a sell-off or significant price volatility after the formal announcement is made. See also Earnings surprise.
  • Program trading

    the automatic trading of a basket of stocks, as triggered by a computer when prices attain a certain relationship. Usually done as an arbitrage between a basket of stocks replicating a particular index and a futures contract based on that index. May also involve other types of securities. See also Fair value. Futures trading is not currently available at TradeKing.
  • Promissory note

    a written promise by one party to pay another party a specific amount of money at a future time or on demand. Paper currency is an example of a negotiable note. A bank certificate of deposit (CD) is another form.
  • Proprietary trading

    securities transactions made by a broker-dealer for it own account, but not for the accounts of its customers.
  • Prospectus

    a formal, legal document written to sell securities, required to be filed with the SEC and made available to prospective investors. It describes such things as the business plan for a proposed business enterprise or financial facts concerning an existing one, statement of a company's financial health and outlook, and planned use for the capital being raised. Its intent is to provide investors with information they need to make an informed investment decision.
  • Protective put strategy

    an equity options strategy that is established by the purchase of a put to protect an equivalent number of underlying shares already owned from a decline in price (one put for each 100 shares of stock). On the downside the stock risk is limited because the shares may be sold at the put's strike price upon exercise. On the upside the profit potential for the stock remains unlimited. See also Married put,
  • Proxy (vote)

    with respect to votes put to a company's shareholders on financial matters or for corporate elections, a vote authorized to be cast by one person or entity on behalf of others. Shareholders often authorize company management to vote in their absence.
  • Publicly traded

    a company who has sold shares through an initial public offering (IPO), which are now traded in the open market. Also termed Public company. Opposite of Private company.
  • Put buying

    see Long put.
  • Put option (equity)

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

    an option that gives its owner the right to receive upon exercise a cash amount based on the option's intrinsic value, or the cash settlement amount. The put writer, on the other hand, has the obligation to pay the cash settlement amount if assigned. This is referred to as cash settlement.
  • Put ratio back spread

    see Back spread with puts
  • Put selling

    see Short put.