Scaling in/out refers to the process of entering (scaling in) or exiting (scaling out) an increasingly favorable trading position. Scaling In/Out Example Suppose that a day trader wishes to buy 100 shares of Company A. He expects the shares to drop around $5 per share over the course of the trading day, but is […]
An interest rate is a time-specific payment demanded of a borrower by a lender for the use of some asset. Interest Rate Example Suppose that a consumer borrows $1,000 from a bank, and the bank demands that the borrower pay back the $1,000 loan plus a $60 interest payment at the end of one year. […]
An acquisition occurs when one company purchases 50% or more of another company’s shares, thereby making it the dominant shareholder and giving it a controlling stake in the acquired company. Purpose of Acquisitions Acquisitions can be undertaken for a number of different reasons, the main ones being to expand market share, reduce costs, create synergies, […]
The Federal Reserve is the central bank of the United States of America, and is tasked with overseeing monetary policy and regulating the financial system. Purpose of the Federal Reserve The Federal Reserve has 5 main duties: conducting monetary policy, regulating banks, monitoring and protecting consumers’ credit rights, providing financial services to the federal government […]
An emerging market is a national economy that is in the process of becoming an advanced capitalist economy, but whose institutions are not yet fully developed. Contemporary Emerging Markets Depending on the classifying body, there are approximately 20-25 current emerging markets spread around the globe. There are currently 16 national economies that are considered emerging […]
An options roll up is the act of closing a position in an option contract while simultaneously opening a new position in the same option with a higher strike price. The opposite of an options roll up is an options roll down, where the existing position is closed at the same time that a new […]
An option is at the money when its strike price is equal to the underlying security’s current market price. At the Money Example Suppose that an investor purchases a call option for the stock of company A with a strike price of $75. If and when the market price of the shares of company A […]
A box spread is an options trading strategy that uses a bull call spread and a bear put spread with the same strike prices to profit from arbitrage. When the available options for the box spread are priced favorably, a day trader can achieve a risk-free profit from the use of the box spread options […]
The hanging man candlestick is a chart pattern used in technical analysis. The hanging man candlestick is used to identify potential downturns in uptrends, as it signals bull exhaustion in fighting a growing bearish sentiment. Hanging Man Candlestick Example The hanging man candlestick gets its name from its appearance as a small body positioned above […]
A yield curve is a chart that plots the relationship between maturity and yield for bonds of equal face value and creditworthiness but different maturity dates. Yield Curves in Financial Theory Generally bonds of otherwise equal face value and creditworthiness with later maturity dates will require a higher yield to compensate for the greater uncertainty […]
