Securities fraud is a variety of activities that are considered to undermine the integrity and efficiency of the securities markets. Securities Fraud Enforcement Securities fraud can fall afoul of one or both of civil regulators and criminal enforcement bodies. Civil infractions are generally regulated by the Securities and Exchange Commission, while criminal infractions are enforced […]
The Iron Condor is an options trading strategy that relies on low volatility to create a non-directional position with limited risk and limited profits. Establishing an Iron Condor An options trader establishes an Iron Condor position by selling an out of the money put option, buying an out of the money put option with an […]
The Greeks are a set of statistical measures used in options trading that are each represented by a letter from the Greek alphabet. Since options are priced based on the projected potential future price action of the underlying security, these statistical measures are essential to understanding the price of options. While many options traders use […]
Compound interest is the additional interest payment that is accrued based on the addition of past interest payments onto the original principal amount. Compound interest is considered to be one of the most important features of finance, as even small initial principal amounts can grow exponentially over many compounding periods. Similarly, the contrast between a […]
Churning is a regulatory term that describes excessive trading by a broker for a client account that is unnecessary for meeting the client’s investment goals. Brokers accused of churning are assumed to be conducting excessive trading with a client’s account to produce unnecessary commissions. Churning is illegal and the SEC will prosecute suspected cases of […]
Contango occurs when the future spot price of a commodity is expected to be below the current spot price and the price of futures contracts are above the expected spot price on their expiration dates. Contango results in an upward sloping futures curve, as the premium for future delivery increases with the expiration date of […]
The Securities and Exchange Commission, or SEC, is the federal regulatory body tasked with overseeing the American securities markets. Role of the Securities and Exchange Commission The Securities and Exchange Commission has a wide variety of roles in the US securities markets, which can be summarized under three official mandates: the protection of investors, the […]
The Chinese wall is made up of the formal and informal barriers within a company that limit the information shared between different divisions that might cause a conflict of interest. Example of a Chinese Wall For example, the wealth management division of a bank will not have access to the content of on-going mergers and […]
Commingling is the act of combining separate assets into one financial entity, of which the asset holders then own a proportional share. The most common example of commingling is in the case of mutual funds, where investors pool their personal resources into one shared fund that trades securities on their behalf according to an agreed-upon […]
The Chicago Board Options Exchange, or CBOE, is the world’s largest exchange for the trading of options contracts. The Chicago Board Options Exchange acts as a clearing house for options on a very large number of companies, indices and exchange-traded funds (ETFs). The CBOE is also the owner of the CFE, which pioneered the volatility […]
