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Glossary of Terms

off market

refers to a transaction which takes place outside the formal market, such as the transfer of shares between parties without going through a broker.

offer

the lowest price that an investor or dealer is prepared to sell a given security. the same as ask.

open interest

the net total number of futures or option contracts that have not yet been exercised, expired, or delivered.

open order

an order to buy or sell securities that has not been executed and which remains effective until it is executed, cancelled or changed to a different price.

option buyer/taker

the party who pays a premium to obtain the right to exercise a put or the call option. the party who sells them that right is the option writer.

option premium

the dollar amount per share that is paid by the option buyer to the seller (writer) for an option. the premium is determined by supply and demand, time left till expiry of the contract and volatility of the underlying share price.

option writer

the party who sells an option contract to another investor and receives premium income for doing so.

ordinary (common) shares

the most commonly-traded security, which grants ownership in a company. ordinary shareholders may receive payments in cash, called dividends, and capital appreciation if the company trades profitably. the ordinary shareholders have no preferential rights in the liquidation process if a company is wound up.

out-of-the-money

a call option whose strike price is higher than the current market price of the underlying security, or a put option whose strike price is below the current price of the underlying security.

over-the-counter option (otc option)

an option which is ‘tailor made' for a client by a financial institution. otc options are bought and sold through negotiation and are not traded on a listed exchange.

overbought

market condition where prices have risen too steeply and too quickly and are in danger of reversing.

oversold

market condition where prices have declined too steeply and too quickly and are in danger of reversing.

oversubscribed

term used to describe a situation in which the buyers for a new share issue want more shares than the amount to be allocated.

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