Direct access routing offers traders direct access to the market where the actual trades take place. Direct access routing is contrasted with using an online broker, where the broker acts as the middleman and places the order on behalf of the individual trader, usually bundled together with a number of different orders. Not only […]
A convertible bond is a hybrid security that acts like a traditional bond until it is converted into equity in the issuing company according to the terms of the bond. Example of Convertible Bonds A company issues a $1,000 10-year bond paying 4% annual interest that can be converted into shares in the company at […]
Insider trading is the act of trading a security related to a public company using non-public information, such as information about a company that only employees of that company have access to. Insider trading is generally illegal, as it weakens the overall sense of trust and fairness that underpins the operations of modern capital markets. […]
Junk bond is a colloquial investing term for non-investment grade bonds. These bonds carry a rating or BB or less from Standard & Poor’s or Ba and below from Moody’s. Junk bonds typically offer a higher yield as compensation for their higher default risk. Otherwise there is no fundamental difference between a junk bond and […]
A market index is a basket of securities that is intended to represent the value of some specified market or market sector. Investors and financial professionals can then use this representative index to gauge the overall state of that market or market sector. One of the most widely-known examples of a market index is the […]
Table of contents Futures in Contemporary Markets The Difference Between Futures and Options Trading Futures Final Thoughts Futures are financial instruments that obligate the seller of the futures contract to sell the underlying asset and the buyer of the futures contract to buy that underlying asset at the contract price and date. Futures specify the […]
The Financial Industry Regulatory Authority, or FINRA, is the independent regulatory body that oversees all business conducted between investors, brokers and dealers. The Financial Industry Regulatory Authority regulates the major U.S. exchanges and is the highest authority involved in the education and certification of all financial professionals who operate in the securities industry (brokers and […]
Hedging is the act of taking out an opposing position to one or more existing positions that will offset these positions in the event of a loss. A hedging position will almost invariably be smaller than the main position, but a hedge can sometimes make a failed trade profitable if the hedging position was acquired […]
Liquidity describes the state of the market for an asset in terms of how quickly that asset can be traded without affecting its price. Markets for assets that can be sold quickly with little or no impact on the price of the asset are said to feature high liquidity, while the opposite features in a […]
Alpha is an investing performance measure that tracks the return of a position or portfolio relative to some representative benchmark. For example, the benchmark for a portfolio of U.S. equities may be the S&P 500, and any return above or below that of the S&P 500 for that year would be considered the portfolio’s alpha […]
