Glossary E

Early-Exercise

A feature of American-style options that allows the buyer to exercise a call or put at any time prior to its expiration date.

Enterprise Value

Often referred to as the theoretical takeover price of a company because it includes a company’s debt. It is calculated by its market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

Equity

Equity can have several meanings, including 1) stock, as it represents ownership in a corporation, or 2) in a margin account, equity represents a client's ownership in his account; it is the amount the trader would keep after all his positions have been closed and all margin loans paid off.

Equity Options

See Stock options.

European-Style Options

An option contract that can only be exercised upon its expiration date. Compare to American-style options.

Excess Equity

The value of cash or securities held in a margin account that exceeds the federal requirement.

Exchange

An association of persons (members) who participate in buying and selling securities. It also refers to the physical location where the buying and selling takes place.

Exchange-Listed Security

Securities that have met certain requirements and have been admitted for full trading privileges on an exchange such as the NYSE or NASDAQ.

Ex-Dividend

Describes a stock whose buyer does not receive the most recently declared dividend. Dividends are payable only to shareholders recorded on the books of the company as of a specific date of record (the "record date"). If you buy the stock any time after the record date for a particular dividend, you won't receive that dividend.

Ex-Dividend Date

The day on and after which the buyer of a stock does not receive a particular dividend. This date is sometimes referred to simply as the "ex-date," and can apply to other situations beyond cash dividends, such as stock splits and stock dividends. On the ex-dividend date, the opening price for the stock will have been reduced by the amount of the dividend, but may open at any price due to market forces.

Execution

The actual completion of an order to buy or sell stock or options.

Exercise

If the buyer of a stock option wants to buy (in the case of a call) or sell (in the case of a put) the underlying stock at the strike price or, in the case of a cash-settled option, to receive the index price and the strike price settlement amount, the option must be exercised. To exercise an option, a person who is long an option must give his broker instructions to exercise a particular option (or if the option is .01 in-the-money at expiration it will be automatically exercised for a client) Someone with short option positions must be aware of the possibility of being assigned at any time up until the option expires, regardless of the in-the-money amount (American Style Option), or on expiration day, (European Option) the client must make sure he has adequate buying power or positions available in his account to cover any such potential assignment.

Exercise Price (Strike Price)

The cost per share at which the holder of an option may buy or sell the underlying security.

Expiration Cycle

The expiration cycle has to do with the dates on which options on a particular underlying security expire. A stock option, other than LEAPS, will be in one of three cycles, the January cycle (with options listed in January, April, July or October), the February cycle (with options listed in the February, May, August or November) or the March cycle (with options listed in March, June, September or December). At any given time, an option will have contracts with four expiration dates outstanding.

Expiration (Expiration Date)

On the expiration date, an option and the right to exercise it cease to exist. Every option contract becomes null and void after its expiration date. For standard stock options, this date is the Saturday following the third Friday of the expiration month.

Extrinsic Value (Time Value)

The difference between the entire price of an option and its intrinsic value. For example, if a call option with a strike price of $50 has a price of $2.75, with the stock price at $52, the extrinsic value is $.75. The price of an out-of-the-money (OTM) option is made up entirely of extrinsic value.