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that of the parent company on its domestic exchange. ADRs offer international
companies greater exposure and investors the chance to invest in well-known
foreign companies.
Arbitrage
The simultaneous buying and selling of the same or closely related securities, in
different markets to take advantage of price disparities. Arbitrage attempts to
realize a profit with minimal to no risk, but generally transaction fees and market
inefficiencies will substantially minimize profitability for the retail investor.
Around the Money
For strangles and collars, strike prices of the call and put lie on opposite sides of
the current price of the underlying security.
Ask
The ask price is the displayed price at which a market maker or specialist offers to
sell a stock.
At the Money
An option is at-the-money if the strike price of the option equals the market price
of the underlying security.
Bar Chart
In a bar chart, each time period is represented by a vertical bar that represents the
range between the high and low prices. A bar chart displays more information than
a line chart, which only shows the closing price for each period. Some variations on
the standard bar chart are the following: HL (only the high and low price for each
time period), HLC (the high, low, and close), and OHLC (open, high, low, and
close).
Bear Trap
A bear trap occurs when prices break below a significant level and generate a sell
signal (q.v.), but then reverse course and negate the sell signal, thus trapping the
bears that acted on the signal with losses.
Below the Market
A limit order to buy or sell a security for a specific price that is lower than the
current market price. Buy orders may be placed below the bid in an attempt to
purchase at lower prices. However, if the market does not reach these prices, the
order will go unfilled.
Below the Money
For straddles and collars, strike prices of the call and the put are below the current
price of the underlying security.
Beta
Beta is a measure of the security's systematic or market risk. The level of the beta
indicates the degree of correlation between a security and a market benchmark,
usually the S&P 500. The market is the benchmark and has a beta of 1. A beta
greater than 1 is more volatile than the overall market, while a beta less than 1
indicates that the security's price is more stable than the market (in general and
over a long time period).
Bid
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