An amount of cash or margin-eligible securities that must be maintained on deposit in a client's account to maintain a particular position. If a client's equity in his account drops to, or under, the maintenance margin level, the account may be frozen or liquidated until the client deposits more money or margin-eligible securities in the account to bring the equity above the maintenance margin level.
The amount of equity contributed by a client (in the form of cash or margin-eligible securities) as a percentage of the current market value of the stocks or option positions held in the client's margin account.
An account that allows a client to borrow money from a brokerage firm against cash and margin-eligible securities held in the client's margin account at that brokerage firm.
The document a client signs when opening a margin account with a broker-dealer; this document allows the firm to liquidate a portion or all of the client's account if the client fails to meet margin requirements set by the firm or Exchange.
This document displays a client's trading activity, positions and account balance. The SEC requires the statement be sent quarterly, however, TD Ameritrade’s client Futures statements will be sent daily via email. All statements may be accessed on line at any time day or night.
The amount a client has borrowed, using cash or margin-eligible securities as collateral, in his margin account.
A brokerage firm's demand of a client for additional equity in order to bring margin deposits up to a required minimum level. If the client fails to deliver more equity in the account, the client's positions may be liquidated.
Margin Elgible Securities
Securities, such as stocks or bonds, that can be used as collateral in a margin account. Options are not margin-eligible securities.
The minimum equity required in an account to initiate or maintain a position in stock or options.
Mark is the midpoint between the bid and the ask.
1) A quote, that is a bid and ask price for a stock or option, ex. the market on the XYZ Dec 75 calls is 2 ½ - 3, or 2) a term for all stocks as a whole, ex. the market is going up means stocks in general are rising, or 3) a place to trade.
Market (Price) Order
An order to buy or sell stock or options that seeks immediate execution at the current market price. Compare to a limit order or stop order, which specifies requirements for price or time of execution.
The simultaneous purchase and sale of the same security in different markets to take advantage of price disparity between the two markets. For example, purchasing a call or put on the CBOE subsequently selling the contract at the PHLX at a higher price.
The Market Capitalization is often regarded as the total dollar value of a company. To calculate, take the share price multiplied by the number of shares outstanding.
Market If Touched (MIT)
A type of stock order that becomes a market order when a particular price on a stock is reached. A buy MIT order is placed below the market; a sell MIT order is placed above the market.
A term for a broker/dealer that trades for its own account in order to facilitate trading in a security. Market makers compete with each other to provide the best bid and ask prices for stocks and options to the public.
Market On Close (MOC)
MOC orders must be placed at least 20 minutes prior to the closing time of the market or exchange. Short Sell MOC orders may not execute. Orders entered between 3:40:01p.m. and 4:00:00 p.m. ET, if accepted, will be executed on a best efforts basis for the current session.
The daily updating of the value of stocks and options to reflect profits and losses in a margin account.
The purchase of a put option and the underlying stock on the same day. Special tax rules may apply to this position. Consult a qualified tax advisor for more information.
An annualized “covered return” if the cover always expired out-of-the-money (meaning all of the cash was collected from the cover and another can be sold on the same position)
Max covered return = call mark + out of the money amount / stock price * 365 / calendar days to expiration.
The act of combining two or more corporations into one corporate entity. Options on stocks involved in mergers can be difficult to evaluate.
Minimum Price Fluctuation
The smallest possible increment of price movement for a stock or option. It is often referred to as a "tick".
Any one of the various option pricing models used to value options and calculate the "Greeks". Models typically use six factors in their calculations: the underlying stock price, the strike price, the time until expiration, dividends, interest rates, and the volatility of the stock. TD Ameritrade uses the Black-Scholes model for European-style options, and the Binomial model for American-style options.
Money Market Fund
A special type of mutual fund that invests only in short-term, low-risk fixed-income securities, such as bankers' acceptances, commercial paper, repurchase agreements and Treasury bills. The money market fund manager tries to maintain a share price of $1.00. Money market funds are not federally insured, even though the money market fund's portfolio may consist of guaranteed securities.
When the same stock or option is listed on two or more different exchanges. For example, IBM options are traded on the CBOE, PHLX and AMEX.
Refers to the number, typically $100, used to calculate aggregate strike prices and premiums for options. The multiplier affects profit/loss calculations on options positions.