Concepts

The share of each sale left after variable costs, available to cover fixed costs and then produce profit; expressed per unit in dollars or as a percentage of price.

Annual or quarterly report

The portion of a margin purchase you must pay with your own equity when the position is opened, set at a minimum of 50% for margin-eligible stock by the Federal Reserve Board's Regulation T.

Margin agreement

The total market value of the positions in an account divided by the account's equity, showing how many dollars of exposure each dollar of your own money carries.

Brokerage statement

A contractual period after an initial public offering, usually agreed with the underwriters and disclosed in the prospectus, during which insiders and early investors may not sell their shares.

Prospectus

The minimum equity, as a percentage of the market value of the securities, that a margin account must keep after purchase; FINRA Rule 4210 sets the floor and brokers may require more.

Margin agreement

A demand from a broker to restore equity in a margin account to the required level, by depositing cash or marginable securities or by selling positions, issued when the account falls below an initial or maintenance requirement.

Brokerage statement

The interest a broker charges on the debit balance in a margin account, usually accrued daily at an annual rate set by the firm and posted to the account once a month.

Brokerage statement

Benjamin Graham's term for the difference between a security's estimated intrinsic value and its market price, expressed as a percentage of the estimated value.

Valuation model

The fraction of an additional dollar of income that a household or an economy spends on consumption, with the rest saved; a figure between zero and one.

Economic release

The rate of tax that applies to the next dollar of taxable income, set by the highest bracket that income reaches; it is usually higher than the overall effective rate.

Tax form

The largest percentage fall in an account's value from a peak to a subsequent low before a new peak is reached, measured over a given period.

Brokerage statement

A short put held in a margin account without cash set aside for the full purchase at the strike, secured instead by a margin requirement that moves with the stock.

Option chain

A bank's interest income minus its interest expense, divided by the average assets that earn interest, showing what it earns on the spread between lending and funding.

Earnings release

The total value of the underlying shares an option or other derivative position controls, found by multiplying the number of contracts by the contract multiplier and the share price.

Option chain

The degree to which a company's operating income changes faster than its revenue because a large share of its costs are fixed and do not move with sales.

Annual or quarterly report

The underlying stock price at expiration at which an option's payoff equals the premium paid, so the buyer neither gains nor loses.

Option chain

A distribution that pays back part of an investor's own capital; it isn't taxed when received and instead reduces the investor's cost basis in the shares.

Tax form

The potential gain on a trade from entry to target divided by the potential loss from entry to stop, used to judge whether a setup pays enough for the risk it carries.

Chart

The return available on an investment treated as having no default risk, in practice the yield on short-term US Treasury bills, used as the baseline for judging other returns.

Economic release

A Regulation T record kept alongside a margin account that tracks excess equity above the initial requirement, which can be used as buying power or withdrawn, subject to the maintenance requirement.

Brokerage statement

A prop firm loss limit set as a fixed account value when the account opens, so the floor stays in place however high the balance later climbs.

Prop firm rules

The charge for borrowing shares to sell short, quoted as an annual rate and accrued daily on the market value of the open short position.

Brokerage statement