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Trading Terms Starting With R

  • Rally

    a substantial increase in the price of a security, futures contract or the broader market. Futures trading is not currently available at TradeKing.
  • Random walk theory

    an investment theory that runs counter to technical analysis. It suggests that market prices follow a random path, and are just as likely to go up as down. Historical price movements have no bearing on the direction prices will take so it is impossible to predict price behavior.
  • Ratio back spread with calls

    see Back spread with calls.
  • Ratio back spread with puts

    see Back spread with puts.
  • Ratio call spread

    see Front spread with calls.
  • Ratio put spread

    see Front spread with puts.
  • Real estate investment trust (REIT)

    a corporation or trust that pools investors' cash like a fund and invests it in income-producing real estate, loans secured by real estate or a combination of the two. Once capital has been raised and invested, a REIT will trade like stock on an exchange, with no additional capital sought and no new shares issued. In this way a REIT works like a closed-end mutual fund. To qualify as a REIT, the corporation must distribute at least 90% of its net earnings to shareholders.
  • Real time

    quotes from an exchange that are current, as opposed to delayed by a number of minutes.
  • Realign (asset mix)

    see Rebalance.
  • Realized gain / realized profit

    for a given securities position, a paper profit that becomes real by making a closing transaction. Examples include to sell a long stock position, to buy in a short stock position, to sell to close a long option position, or to buy to close a short option position.
  • Realized loss

    for a given securities position, a paper loss that becomes real by making a closing transaction. Examples include to sell a long stock position, to buy in a short stock position, to sell to close a long option position, or to buy to close a short option position.
  • Rebalance (asset mix)

    to periodically adjust the asset allocation of a portfolio, for both risk control and expected return. Also termed Realign.
  • Receivership

    a form of corporate bankruptcy that involves a receiver, appointed by a bankruptcy court, taking control of a company from its owners and/or shareholders. Hopefully the company in "receivership" will be able to reorganize its debts while continuing to do business and avoid liquidation.
  • Recession

    a period of significant decline in general economic activity over a period of time. It is defined as two consecutive quarters of negative growth in the gross domestic product (GDP).
  • Recovery (economic)

    the period in a business cycle that follows a recession, characterized by growth in the gross domestic product (GDP).
  • Recovery (market)

    after a period of declining prices in a specific security or the broader market, a gradual increase in prices toward pre-decline levels.
  • Redemption

    1. at maturity or before, the repayment of an investor's principal in a debt security such as a bond or preferred stock.
    2. the liquidation of mutual fund shares for their net asset value (NAV).
  • Redemption price

    the specified price at which a callable security may be redeemed by its issuer before maturity. Also termed Call price. See also Callable security.
  • Registered representative

    the formal title for an individual who works for a brokerage firm and is licensed by the SEC to act on customers' orders to buy and sell securities. Also termed Stockbroker or Account executive.
  • Reinvesting dividends

    see Dividend reinvestment plan.
  • Reinvestment risk

    usually associated with Fixed Income, the risk that proceeds produced by an investment in the future might not produce the same rate of return as the current investment when reinvested.
  • Relative return

    the difference between the actual return produced by a portfolio over a period of time and the return of a benchmark over the same timeframe.
  • Relative strength

    the change in a stock's price up or down over a given period of time compared to the change in a benchmark index's value over the same timeframe.
  • Relative strength index

    with respect to technical analysis, a measurement of how overbought or oversold a security currently is. It represents the magnitude of a security's gains (closing price to closing price) over a given period of time relative to the magnitude of the security's losses (close to close) over the same timeframe.
  • Repurchase (repo) agreement

    used primarily in government debt securities markets, a contract in which the seller of a security agrees to buy it back from the purchaser at a specified time and at a specified price.
  • Required minimum distribution

    see Individual Retirement Account.
  • Resistance

    with respect to technical analysis, a presumed upper limit on a security's price due to past selling pressure at this level. The price is expected to rise up to this level, bounce off and retreat downward. If the price breaks through the upper limit this is considered a buy signal for a technical analyst.
  • Restructure

    action taken by a company to reorganize and/or streamline its operations, rearrange it assets and liabilities, or take other measures to reduce the financial strain of continuing business as is. The objective is to become more efficient and adaptable in a changing market environment. This process is often undertaken during bankruptcy, or in an effort to avoid it.
  • Retained earnings

    net profits that a company keeps instead of paying out in the form of dividends, to reinvest in the operation of its core business and/or to pay off debt. Also termed Accumulated earnings, Unappropriated profit, or Earned surplus.
  • Return on equity (ROE)

    a commonly used measure of a company's efficiency, it is calculated as the company's net income divided by shareholder equity. It quantifies the net income a company is able to earn as a percent of stockholders' investment, or how well the company is investing the total money invested in it.
  • Return on investment (ROI)

    the overall profit (or loss) seen on an investment expressed as a percentage of the money invested. It is calculated as the amount of profit (or loss) divided by investment amount.
  • Reversal (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 purchasing a call, writing a put, and selling short 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. Also termed Reverse conversion.
  • Reverse stock split

    a corporate action that in effect reduces the number of a company's outstanding shares and increases the share price proportionately, so it has no affect on the value of the company's market capitalization or of what shareholders own. An example would be a 1 for 3 reverse split in which each stockholder receives 1 share for each 3 shares already owned, but with the new shares worth 3 times as much as the old so the amount invested remains the same. Companies frequently use reverse splits to attract investors when they feel share price is too low.
  • Revocable trust

    a trust that may be modified or terminated at any time during the grantor's lifetime.
  • Rho

    one of the Greeks derived from a pricing model, it is the amount an option's theoretical value will change for a corresponding one-unit (percentage-point) change in the interest rate used to price the option contract.
  • Risk-free return

    the annualized rate of return on what is considered a risk-free investment, often a U.S. government debt security or Treasury (bill, note, bond).
  • Roll

    to simultaneously close one option position and open another with the same underlying, but a different strike price and/or expiration month. Rolling a long position involves selling those options and buying others. Rolling a short position involves buying the existing short position and writing other options to create a new short position.
  • Rollover

    the tax-free transfer of cash or assets from one retirement account to another within a 60-day timeframe. This may often be a transfer from an employer-based 401(k) account to an Individual Retirement Account (IRA).
  • Roth IRA

    a specific type of Individual Retirement Account in which contributions are made with after-tax dollars. Under certain circumstances withdrawals of both principal and earnings are tax-free.
  • Round lot

    the most common unit for trading stock, which is 100 shares. Any number of shares not in units of 100 is called an odd lot.
  • Round turn

    with respect to futures trading, a complete transaction including both an opening trade and a closing trade. Futures commissions are generally charged on a round turn basis rather than on a single transaction of buying or selling. Futures trading is not currently available at TradeKing.
  • Rule of 72

    a simple formula that allows an investor to quickly estimate how long it will take a cash investment to double in value given a certain compounding interest rate: divide the number 72 by the compounding rate to get the approximate number of years. For example, a 4% interest rate would require 18 years (72 Ö 4 = 18) for an investment to double in value.
  • Russell 2000® Index

    a capitalization-weighted index that measures the performance of the small-cap segment of the U.S. equity market. The index's component stocks are the smallest 2000 companies that comprise the Russell 3000® Index.