Odd Lot: Anything less than the standard unit of trading.
Off-Balance Sheet Risk: Risk relative to operations that are not reflected in the variation of the institution's assets or liabilities, when undertaken, but are reflected when profit or loss occurs.
Offshore Company: Company incorporated in a country other than that in which its main operations take place, usually where there is little government control and/or low taxes.
Offer Document: As per SEBI DIP guidelines, an offer document means a Prospectus in case of a public issue or offer for sale and a Letter of Offer in case of a rights issue.
Offer For Sale: An offer of securities by the existing shareholder(s) of a company to the public for subscription, through an offer document.
Offer Period: The period between the date of entering into a Memorandum of Understanding or the public announcement, as the case may be, and the date of completion of offer formalities relating to the offer.
Offer Price: The price at which units can be bought from a Trust. It may or may not include an entry fee. The term also refers to the price at which the market maker is proposed to sell.
Ombudsman: An independent person appointed to hear and act upon citizens’ complaints about government services. Invented in Sweden, the idea has been widely adopted. For example, groups of banks, mortgage lenders, and insurance companies in various countries have appointed ombudsmen to attend to the complaints of their customers. Customers who use the ombudsman’s (free) service retain their full right to take legal action should they not agree with the ombudsman’s decision.
Open Ended Scheme: An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. Open-ended funds are collective investment schemes in which the number of units in the fund varies from day to day according to the number of investors wishing to buy or sell holdings in the fund. The price of units is set by the manager of the scheme by reference to the net asset value of the fund.
Open Interest: The number of contracts outstanding for a given option or futures contract.
Open Market Operation: Purchase or sale of government securities by the monetary authorities (RBI in India) to increase or decrease the domestic money supply.
One-way Market: A market dominated by only buyers or sellers.
On Balance Volume (OBV)(TA): A technical indicator that manipulates volume figures. If the stock price falls to a new low and the OBV does not, the indicator is interpreted as a positive sign; if the stock price rises to a new high and the OBV does not, the indicator is interpreted as negative.
OPEC: Organization of Petroleum Exporting countries, a group of countries that collaborate in order to manage their exportation of crude oil to the rest of the world.
Open Economy: An economy that engages in international trade, without very many import quotes and restrictive import policy. The Indian economy is still only partly open.
Open Order: An order to buy and sell a security that remains in effect until it is either canceled by the customer or executed.
Opening Price: The rate at which the first transaction in security is struck after the opening of the market.
Operating Income: Net Sales less cost of sales, selling expenses, administrative expenses, and depreciation. The pre-tax income from normal operations.
Operational Risk: The risk that deficiencies in information systems or internal controls could result in unexpected losses.
Open position: Trading position unprotected from price fluctuations in which an operator has bought but has not sold, or sold without having the stocks or commodity, or currency in hand. In the former case, if the price drops the operator stands to lose, in the latter the loss will result if the price rises. An open position can either be a bull position or a bear position.
Operating Ratios: These measure a company’s operating efficiency by comparing various income and expenditure figures from the balance sheet and profit and loss accounts. Some of these ratios are sales to cost of goods sold, operating income to operating expenses, net profit to cost of goods sold, operating income to operating expenses, net profit to gross income, and net income to net worth. These ratios are compared with the company’s previous results and the industry averages.
Opportunity Cost: Cost of missing out on the best choice when making an investment decision. For example, a large fund may be too big to purchase an attractive share without moving the market price against itself and would miss out on this opportunity compared with a smaller fund that would not move the price.
Optimization: A test performed on historical data to determine what would have resulted in the maximum profit during a given period of time.
Option: The right of choice, bought at a price called premium, to buy or sell a particular, stock, index, or commodity at a particular future date at a particular price called the strike or exercise price. The buyer of an option is not obliged to buy or sell at the exercise price, he will do so only if it suits him. The buyer may let the option lapse, in which case all that he loses is the premium that he paid to buy the option. An option to buy is called a call option. An option to sell is called put option. A call option is bought in the expectation of a rise in price, while one buys a put option expecting the price to fall. Options protect an investor from unfavorable fluctuations in price. Traded options can be bought and sold on the exchange. An option is not like a futures contract which is binding.
Options Contract: An options contract confers the right to buy or sell a specific quantity or a number of a particular asset at a specific price at or before some date in the future. It confers on the buyer the right but not the obligation to honor the contract. The obligation rests only with the seller or writer of the contract. If the buyer chooses not to exercise his option, the maximum loss he suffers is the premium he has paid to the writer of the contract.
Option Premium: The market price of an option that is paid by an option buyer to the option writer (seller) for the right to buy (call) or sell (put) the underlying security at a specified price (called “strike price” or “exercise price”) by the option’s expiration date.
Option Seller: Also called the option writer, the party who grants a right to trade a security at a given price in the future.
Option Spread: A spread is a type of option position where you buy an option and sell an option and both of them are from the same option class.
Optional Redemption: An optional call provision reserved by the issuer that becomes exercisable after a certain number of years from the issue date. This provision allows the clean-up of small amounts of remaining principal with thin marketability.
Order Book: It is an ‘electronic book’ that shows the demand for the shares of the company at various prices.
Ordinary Share: Share in the ownership of a company that gives the holder the right to receive distributed profits and to vote at general meetings of the company. An ordinary shareholder ranks behind all other creditors/investors if the company is wound up.
Organic Growth: Where a company grows its existing business as opposed to growing through mergers or acquisitions.
Original Plan Poison Pill: Also called a preferred stock plan. An early poison pill antitakeover defense in which the firm issues a dividend of convertible preferred stock to its common stockholders. If an acquiring firm passes a trigger point of share ownership, preferred stockholders (other than the large block holder) can put the preferred stock to the target firm (force the firm to redeem it) at the highest price paid by the acquiring firm for the target’s common or preferred stock during the past year. If the acquirer merges with the target, the preferred can be converted into acquirer voting stock with a market value no less than the redemption value at the trigger point.
Outperformance: Used to refer to the performance of a portfolio relative to its benchmark — a portfolio is said to outperform if its return is greater than that of its benchmark. Underperformance is defined similarly.
Over Bought: Term used in Technical Analysis to indicate a sharp rise in the price of a share or shares as a result of hectic buying by investors and speculators in the hope of further rise. An overbought share or market is prone to an imminent correction, as there are few buyers left to push the price up further. An overbought market is identified when the day’s opening prices are substantially higher than the closing price of the previous day’s trading and there is a clear gap, considered to be a signal to stay away from the share for time being.
Over Heated Market: A stock market situation in which too much money is chasing very few shares, leading to a sharp rise in prices and frequent GAPS. This is the last phase of a bull cycle and it usually portends an imminent onset of a bear cycle.
Over Sold: A term used in Technical Analysis to indicate that the price of a share or shares has fallen too fast as a result of excessive selling and there are few sellers left. An oversold share or market is prone to an imminent rise in price. An oversold situation can be detected by a GAP in which the opening price is considerably low below the closing price of the previous day.
Overvalued: Security that a fund manager perceives to be worth less than its market price, based on some other valuation criteria.
Overweight: (1) Exposure to a specific asset (or asset class) that is higher than the proportion it represents in the market index or benchmark against which the portfolio is measured. Investment managers may take overweight positions in shares or sectors they expect to outperform in order to add value to the portfolio. (2) Specific rating within a three-part credit rating system indicates whether fixed-income security should be bought (overweight), sold (underweight), or held (market weight).
OTC (Over the Counter): A financial transaction that is not made on an organized exchange. Generally, the parties must negotiate all the details of each transaction or agree to use simplifying market conventions.
Out of The Money option (OTM): An option is described as being out of the money when the current price of the underlying is below the strike or exercise price for a call, and above the strike price for a put. Options can also be described as being deep out of the money when they are likely to expire out of the money.
Overtrading: A broker/dealer overpays a customer for security to enable the customer to subscribe to another security offered by that broker/dealer at a higher markup than the loss to be sustained when the firm sells the customer’s first security at prevailing market prices.
Ownership Flip-in Plan: A poison pill anti-takeover defense often included as part of a flip-over plan. Target stockholders are issued rights to purchase target shares at a discount if an acquirer passes a specified level of share ownership. The acquirer’s rights are void and his or her ownership interest becomes diluted.
Stock Market Reference (A-Z)