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- https://www.interactivebrokers.com/en/software/tws/twsguide.htm#ordertypestop.htm%3FTocPath%3DOrder%2520Types%7C_____0
- ORDER ENTRY
- Shortable stock: stock which is in the securities availability of Interactive Brokers (IBKR) for shorting, i.e. is may be borrowed to open
- a short position.
- Option chain: a matrix listing for a single underlying asset showing all puts, calls, strike prices, and pricing information for a given
- maturity period. The majority of online brokers and stock trading platforms display option quotes in the form of an option chain using
- real-time or delayed data. The chain display allows quick scanning of activity, open interest, and price changes. Traders can hone in on
- the specific options required to meet a particular options strategy.
- Option features:
- - implied volatility: as we know, volatility is the statistical measure of the dispersion of returns for a given security or market index.
- In most cases, the higher the volatility, the riskier the security; for an option, it is that value of the volatility of the underlying
- instrument which, when input in an option pricing model (such as Black–Scholes) will return a theoretical value equal to the current
- market price of the option; theoretically, a higher value for volatility results in a higher theoretical value of the option
- -open interest: number of currently open options contracts; any put or call is open until the position is closed or settled
- -volume: number of traded option position per unit of time, usually day
- -bid, ask, size:
- If an investor looks at a computer screen for a quote on the stock of XYZ, it might look something like this:
- Last: 20.01 Bid: 20 Ask: 20.25 Bid Size: 1200 Ask Size: 500
- The translation: the stock of XYZ is being bid at $20 a share and offered at $20.25 per share. There are 1200 shares bid for and 500
- shares offered [note: some brokers may display these size numbers in hundreds, so 12 and 5 in the above example instead of 1200 and 500].
- If you are looking to sell stock, now you know there is a firm willing to pay (that's the bid side of the market) $20 for your stock, and
- that you could sell at least 1200 shares of stock at that price. Those are the two parts of the bid side of a market on a stock: the price
- and the quantity of shares at that price.
- If you are looking to buy XYZ stock, you would have to pay $20.25 and could buy at least 500 shares of stock. Again, there are two parts
- to the ask side of the market: the price at which you can buy stock and the amount of stock you can buy.
- Usually the displayed bid is a maximum - the highest bid is the most you can get by selling a specific options. Dually, the ask is a
- minimum: if you want to buy the specific option it cannot be less than the price.
- -strike: the strike price of the option contract, so the price at which the option may be exercised; so:
- \call: if the strike is 60EUR, it means that the buyer can buy the underlying for 60EUR exactly, at the expiration date (european) or
- anytime up until the expiration (american)
- \put: for 60EUR, it means that the seller may sell the underlying for 60EUR exactly, at expiration (eur) or before that (us)
- -adaptive order: a buy/sell commanded by a particular dynamic strategy; ibkr offers:
- \MidPrice order is designed to split the difference between the bid and ask prices, and fill at the current midpoint of the NBBO or better
- (the National Best Bid and Offer is the guarantee by SEC that a broker offers always the lowest and highest buy and sell price
- respectively); "better" can be fixed by a threshold; the order is routed to a specific exchange
- \IBKR adaptive: particularly useful when the bid-ask spread is wide, it does not go directly to a market order price but rather starts in
- between bid and ask and seeks for increasingly better prices according to a patience user-defined parameter
- -limit order: executes at the specified price or better
- -market order: executes now, at the best available price now; not suggested; not to be placed outside market hours because if something
- happens overnight price may freefall or explode
- -pegged order: executes at a specified market or index (e.g. NBBO) value plus/minus some offset
- -trail limit: lets specify a limit on the possible loss without limiting the possible gain
- ...and... many more!
- GRAPHS:
- -candlestick: each candle is a time unit boxplot, where the following prices are shown:
- \open(ing) price
- \clos(ing) prince
- \high(est) price
- \low(est) price
- if open > close then the body bar is red, if open < close then it is green, yellow otherwise
- TICK:
- -EPS (earnings per share): the portion of a company's profit allocated to each share of common stock; net income divided by available
- shares; the higher the value the higher the company profitability
- -PE ratio (price-to-earnings ratio): current share price relative to earnings per share; market value over EPS; high PE: stock price is
- high relative to earnings which may mean overvalued; low PE: price low relative to earnings, possibly undervalued
- -market cap: total value of the outstanding shares
- -PB ratio (price-to-book ratio): market price per share divided by book value per share; a low PB might suggest that a company is
- undervalued but this should be benchmarked on some industry-specific PB ratio
- BUY/SELL ADVANCED:
- -hedge:
- \ beta: the beta is a coefficient defined as ratio between:
- covariance between an individual stock return and overall market
- variance of the overall market
- if it is 1: the stock moves with the market
- -1: it moves in the opposite way
- beta hedging simply means: for the buy X buying some Y too such that their beta(X,Y) is opposite
- \delta:
- \fx:
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