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Day Trading Terms

Out of the Money

This is technical way of saying not profitable. The actual term means that in the instance of a call option, the price of a given security is below the strike price and in the case of a put option, the security exceeds the strike price. This brings into question what a call option, put option, and strike price actually are. A strike price is the stated price of an option contract. This contract states the price at which the security could be bought or sold. A call option refers to a contract to buy a particular stock. This contract gives the holder the right to purchase the stock at a set price before a set expiration date. A put option is the exact opposite of a call option. It gives the holder of the contract the right to sell a stock at a set price before a designated expatriation date.

In the Money

In the money is a term used in place of the word profitable. A security is said to be in the money when the price of the security exceeds the strike price in the case of a call option. In the case of a put option, the price of the security must be below the strike price to be called in the money.

Dead Cat Bounce

This term uses humor to depict the way in which actual stocks react. The term describes a stock that is on a fast decline and recovers for a short period of time only to resume its sharp downward decent.

Chinese Wall

This term refers to the imaginary barrier that exists between different divisions within a firm. This prevents insider tips from being illegally passed. For example, the investment division of a firm would not be allowed to communicate information that could be used to get a jump on the market to the trading division. This activity would be considered illegal.

Diamonds

This is the nickname given to the security that appears on the stocks ticker as DIA. This particular security tracks the overall performance of the Dow. Thus, if a person wants to invest in the overall outcomes of the market’s performance he or she would obtain this security.

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