Campbell R. Harvey's Hypertextual Finance Glossary

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B: Fifth letter of a NASDAQ stock symbol specifying that it is the Class 'B' shares of the company.
B.A.N.: See: Bank anticipation notes
B.I.S.: See: Bank for International Settlements
Back away: Used in the context of general equities. To withdraw from a previously declared interest, indication, or transaction; broker-dealer's failure, as a market maker in a given security, to make good on a bid/offer for the minimum quantity.
Backed in: Used in the context of general equities. Scenario whereby unanticipated events allow for a purchase at a discount or a sale at a premium.
Back-end loan fund: A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from 4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a designated time, such as one year. The commission decreases the longer the investor holds the shares. The formal name for the back-end load is the contingent deferred sales charge, or C.D.S.C.
Back fee: The fee paid on the extension date if the buyer wishes to continue the option.
Back office: Brokerage house clerical operations that support, but do not include, the trading of stocks and other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory compliance.
Back on the shelf: Used in the context of general equities. Permanently cancelled order/interest in a stock by a customer. See: take a powder.
Back-to-back financing: An intercompany loan channeled through a bank.
Back-to-back loan: A loan in which two companies in separate countries borrow each other's currency for a specific time period and repay the other's currency at an agreed upon maturity.
Back-up: (1) When bond yields rise and prices fall, the market is said to back-up. (2) When an investor swaps out of one security into another of shorter current maturity, he/she is said to back up.
"Back up the truck": Used in the context of general equities. "Prepare for a very large buyer."
Backwardation: A market condition in which futures prices are lower in the distant delivery months than in the nearest delivery month. This situation may occur when the costs of storing the product until eventual delivery are effectively subtracted from the price today. The opposite of contango.
Bai-kai: Mainly applies to international equities. Two-sided market picture, in Japanese terminology.
Baker Plan: A plan by former U.S. Treasury Secretary James Baker under which 15 principal middle-income debtor countries (the Baker 15) would undertake growth-oriented structural reforms, to be supported by increased financing from the World Bank and continued lending from commercial banks.
Balance of payments: A statistical compilation formulated by a sovereign nation of all economic transactions between residents of that nation and residents of all other nations during a stipulated period of time, usually a calendar year.
Balance of trade: Net flow of goods (exports minus imports) between countries.
Balance sheet: Also called the statement of financial condition, it is a summary of a company's assets, liabilities, and owners' equity.
Balance sheet exposure: See: accounting exposure.
Balance sheet identity: Total Assets = Total Liabilities + Total Stockholders' Equity
Balanced fund: An investment company that invests in stocks and bonds. The same as a balanced mutual fund.
Balanced mutual fund: This is a fund that buys common stock, preferred stock and bonds. The same as a balanced fund.
Balloon maturity: Any large principal payment due at maturity for a bond or loan with or without a sinking fund requirement.
Bank anticipation notes (B.A.N.): Notes issued by states and municipalities to obtain interim financing for projects that will eventually be funded long term through the sale of a bond issue.
Bank collection float: The time that elapses between when a check is deposited into a bank account and when the funds are available to the depositor, during which period the bank is collecting payment from the payer's bank.
Bank discount basis: A convention used for quoting bids and offers for Treasury bills in terms of annualized yield, based on a 360-day year.
Bank draft: A draft addressed to a bank.
Bank line: Line of credit granted by a bank to a customer.
Bank wire: A computer message system linking major banks. It is used not for effecting payments, but as a mechanism to advise the receiving bank of some action that has occurred, e.g. the payment by a customer of funds into that bank's account.
Banker's Acceptance: A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts to face value in the secondary market. These instruments have been a popular investment for money market funds. They are commonly used in international transactions.
Bank for International Settlements (B.I.S.): An international bank headquartered in Basel, Switzerland, which serves as a forum for monetary cooperation among several European central banks, the Bank of Japan, and the U.S. Federal Reserve System. Founded in 1930 to handle the German payment of World War I reparations, it now monitors and collects data on international banking activity and promulgates rules concerning international bank regulation.
Bankruptcy: State of being unable to pay debts. Thus, the ownership of the firm's assets is transferred from the stockholders to the bondholders.
Bankruptcy cost view: The argument that expected indirect and direct bankruptcy costs offset the other benefits from leverage so that the optimal amount of leverage is less than 100% debt financing.
Bankruptcy risk: The risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk.
Bankruptcy view: The argument that expected bankruptcy costs preclude firms from being financed entirely with debt.
Bar: Slang for one million dollars.
Barbell strategy: A fixed income strategy in which the maturities of the securities included in the portfolio are concentrated at two extremes.
Bargain hunter: Used in the context of general equities. Purchaser who is extremely selective in the price sought on a transaction.
Bargain-purchase-price option: Gives the lessee the option to purchase the asset at a price below fair market-value when the lease expires.
BARRA's performance analysis (PERFAN): A method developed by BARRA, a consulting firm in Berkeley, Calif. It is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performances.
Barrier options: Option contracts with trigger points that, when crossed, automatically generate buying or selling of other options. These are exotic options.
Base currency: Mainly applies to international equities. Currency in which gains/losses from operating an international portfolio are measured.
Base interest rate: Related: Benchmark interest rate.
Base probability of loss: The probability of not achieving a portfolio expected return. Related: Value at risk.
Basic balance: In a balance of payments, the basic balance is the net balance of the combination of the current account and the capital account.
Basic business strategies: Key strategies a firm intends to pursue in carrying out its business plan.
Basic IRR rule: Accept the project if IRR is greater than the discount rate; reject the project if it is lower than the discount rate. It is wise to also consider Net Present Value for project evaluation.
Basis: Regarding a futures contract, the difference between the cash price and the futures price observed in the market. Also, it is the price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold.
Basis point: In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage point of yield in bonds equals 100 basis points. Basis points also are used for interest rates. An interest rate of 5% is 50 basis points greater than an interest rate of 4.5%.
Basis price: Price expressed in terms of yield to maturity or annual rate of return.
Basis risk: The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for price risk.
Basket: Applies to derivative products. Group of stocks that is formed with the intention of either being bought or sold all at once, usually to perform index arbitrage or a hedging program.
Basket options: Packages that involve the exchange of more than two currencies against a base currency at expiration. The basket option buyer purchases the right, but not the obligation, to receive designated currencies in exchange for a base currency, either at the prevailing Forex market rate or at a prearranged rate of exchange. A basket option is generally used by multinational corporations with multicurrency cash flows since it is generally cheaper to buy an option on a basket of currencies than to buy individual options on each of the currencies that make up the basket.
Basket trades: Related: Program trades.
Bear: An investor who believes a stock or the overall market will decline. A bear market is a prolonged period of falling stock prices, usually by 20% or more. Related: bull.
Bearer bond: Bonds that are not registered on the books of the issuer. Such bonds are held in physical form by the owner, who receives interest payments by physically detaching coupons from the bond certificate and delivering them to the paying agent.
Bearer share: Mainly applies to international equities. Security not registered on the books of the issuing corporation and thus payable to whoever possesses the shares. Negotiable without endorsement and transferred by delivery, thus avoiding some of the administrative hassles associated with ordinary shares. Dividends are payable upon presentation of dividend coupons, which are dated or numbered.
Bear hug: Often used in risk arbitrage. Hostile takeover attempt in which the acquirer offers an exceptionally large premium over the market-value of the acquiree's share so as to as to squeeze (hug) the target into acceptance.
Bear market: Any market in which prices are in a declining trend. For a prolonged period, usually falling by 20% or more.
Bear raid: Used in the context of general equities. Attempt by investors to opportunistically move the price of a stock by selling large numbers of shares short. These investors pocket the difference between the initial price and the new, lower price after this maneuver. This technique is illegal under S.E.C rules, which stipulate that every short sale must be on an uptick.
Bear spread: Applies to derivative products. Strategy in the options market designed to take advantage of a fall in the price of asecurity or commodity, usually executed by buying a combination of calls and puts on the same security at different strike prices in order to profit as the security's price falls.
Beating the gun: Used in the context of general equities. Gaining an advantageous price in a trade through a quick response to market developments.
Before-tax profit margin: The ratio of net income before taxes to net sales.
Beggar-thy-neighbor: An international trade policy of competitive devaluations and increased protective barriers where one country seeks to gain at the expense of its trading partners.
Beggar-thy-neighbor devaluation: A devaluation that is designed to cheapen a nation's currency and thereby increase its exports at the expense of other countries. Devaluation can also reduce a nation's imports. Such devaluations often lead to trade wars.

Behind: Used for listed equity securities. At the same price but entered after your order/interest, such as on the specialist's book. Antithesis of ahead of you.
Bellwether issues: Related: Benchmark issues.
Benchmark: The performance of a predetermined set of securities, used for comparison purposes. Such sets may be based on published indexes or may be customized to suit an investment strategy.
Benchmark error: Use of an inappropriate proxy for the true market portfolio.
Benchmark interest rate: Also called the base interest rate, it is the minimum interest rate investors will demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on a comparable-maturity Treasury security that was most recently issued ("on-the-run").
Benchmark issues: Also called on-the-run or current coupon issues or bellwether issues. In the secondary market, it is the most recently auctioned Treasury issues for each maturity.
Beneath: Used for listed equity securities. 1) Behind; 2) Lower in price.
Beneficial ownership: Often used in risk arbitrage. Person who enjoys the benefits of ownership even though title is in another name. (Abused through the illegal use of a parking violation.)
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Best-efforts sale: A method of securities distribution/underwriting in which the securities firm agrees to sell as much of the offering as possible and return any unsold shares to the issuer. As opposed to a guaranteed or fixed price sale, where the underwriter agrees to sell a specific number of shares (with the securities firm holding any unsold shares in its own account if necessary).
Best-interests-of-creditors test: The requirement that a claim holder voting against a plan of reorganization must receive at least as much as he would have if the debtor were liquidated.
Beta: The measure of a fund's or stocks risk in relation to the market, or an alternative benchmark. A beta of 1.5 means that a stock's excess return is expected to move 1.5 times the market excess returns. E.g. if market excess return is 10% then we expect, on average, the stock return to be 15%. Beta is referred to as an index of the systematic risk due to general market conditions that cannot be diversified away.
Beta equation: The beta of a fund is determined as follows: Regress excess returns of stock y on excess returns of the market. The slope coefficient is beta. Define n as number of observation numbers. Beta=; [(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]/; [(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]; where: n = # of observations (36 months); x = rate of return for the S&P 500 Index; y = rate of return for the fund
Related: Alpha
Beta equation (Stocks): The beta of a stock is determined as follows:; [(n) (sum of (xy)) ]-[(sum of x) (sum of y)]; [(n) (sum of (xx)) ]-[(sum of x) (sum of x)]; where: n = # of observations (24-60 months); x = rate of return for the S&P 500 Index; y = rate of return for the stock
Biased expectations theories
: Related: pure expectations theory.
Bid price: This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically speaking, this is the available price at which an investor can sell shares of stock. Related: Ask , offer.
Bid-asked spread: The difference between the bid and asked prices.
Bid away: Refers to over-the-counter trading. Bid from another dealer exists at the same (listed) or higher (O.T.C.) price.
Bidder: A firm or person that wants to buy a firm or security.
Bidding buyer: Used in the context of general equities. Non-aggressive buyer who prefers to patiently await a natural seller in the hope of paying a lower price.
Bidding through the market: Used in the context of general equities. Aggressive willingness to purchase a security at a premium to the inside market. Contrast with bidding buyer.
Bid wanted: Used in the context of general equities. Announcement that a holder of securities wants to sell and will entertain bids.
Big Bang: The term applied to the liberalization in 1986 of the London Stock Exchange (L.S.E.) in which trading was automated with the use of computers.
Big Board: A nickname for the New York Stock Exchange (N.Y.S.E.). Also known as The Exchange. More than 2,000 common and preferred stocks are traded. Founded in 1792, the N.Y.S.E. is the oldest exchange in the United States, and the largest. It is located on Wall Street in New York City.
Big picture: Used in the context of general equities. To highlight trading interest due to the size of the trade (i.e., Two-way size).
Bill of exchange: General term for a document demanding payment.
Bill of lading: A contract between an exporter and a transportation company in which the latter agrees to transport the goods under specified conditions which limit its liability. It is the exporter's receipt for the goods as well as proof that goods have been or will be received.
Binomial option pricing model: An option pricing model in which the underlying asset can assume on only two possible, discrete values in the next time period for each value that it can take on in the preceding time period.
Black market: An illegal market.
Black-Scholes option-pricing model: A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return. Invented by Fischer Black and Myron Scholes in 1973.
Blanket inventory lien: A secured loan that gives the lender a lien against all the borrower's inventories.
Block: Large quantity of stock or large dollar amount of bonds held or traded. As a rule of thumb, 10,000 sharesor more of stock and $200,000 or more worth of bonds would be described as a block.
Block call: Used in the context of general equities. Conference meeting during which customer indications and orders, along with the traders' own buy/sell preferences, are highlighted to the entire organization. See block list.
Block house: Brokerage firms that help to find potential buyers or sellers of large block trades.
Block list: Used in the context of general equities. Listing of stock the investment bank is looking for (wants to buy) or in touch with (want to sell) at the beginning of the day, whether on an agency or principal basis. Input on the previous day's trading, objectives for the coming trading session, and information throughout the trading day is received from O.T.C., international arbitrage, listed, and convertible traders, for review and discussion during a block call.
Block trade: A large trading order, defined on the New York Stock Exchange as an order that consists of 10,000 shares of a given stock or a total market-value of $200,000 or more.
Block trader: A dealer who will take a position in the block transactions to accommodate customer buyers and sellers of blocks. See dealer, market maker, principal.
Block voting: A group of shareholders banding together to vote their shares in a single block.
Blocked currency: A currency that is not freely convertible to other currencies due to exchange controls.
Blow-off top: A steep and rapid increase in price followed by a steep and rapid drop. This is an indicator seen in charts and used in technical analysis of stock price and market trends.
Blue-chip company: Used in the context of general equities. Large and creditworthy company. Company renowned for the quality and wide acceptance of its products or services, and for its ability to make money and pay dividends. Gilt-edged security.
Blue-sky laws: State laws covering the issue and trading of securities.
Bogey: The return an investment manager is compared to for performance evaluation.
Boilerplate: Standard terms and conditions.
Bolt: Used for listed equity securities. Block trading version of colt.
Bond: Bonds are debt and are issued for a period of more than one year. The U.S. government, local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.
Bond agreement: A contract for privately placed debt.
Bond covenant: A contractual provision in a bond indenture. A positive covenant requires certain actions, and a negative covenant limits certain actions.
Bond equivalent yield: Bond yield calculated on an annual percentage rate method. Differs from annual effective yield.
Bondholder: The firm often has stockholders and bondholders. In a liquidation, the bondholders have first priority.
Bond indenture: The contract that sets forth the promises of a corporate bond issuer and the rights of investors.
Bond indexing: Designing a bond portfolio so that its performance will match the performance of some bond index.
Bond points: A conventional unit of measure for bond prices set at $1 and equivalent to 1% of the $100 face value of the bond. A price of 80 means that the bond is selling at 80% of its face, or par value.
Bond value: With respect to convertible bonds, the value the security would have if it were not convertible apart from the conversion option.
Bond-equivalent basis: The method used for computing the bond-equivalent yield.
Bond-equivalent yield: The annualized yield to maturity computed by doubling the semiannual yield.
BONDPAR: A system that monitors and evaluates the performance of a fixed-income portfolio, as well as the individual securities held in the portfolio. BONDPAR decomposes the return into those elements beyond the manager's control--such as the interest rate environment and client-imposed duration policy constraints--and those that the management process contributes to, such as interest rate management, sector/quality allocations, and individual bond selection.
Boning: Charging a lot more for an asset than it's worth.
Book: A banker or trader's positions.
Book cash: A firm's cash balance as reported in its financial statements. Also called ledger cash.
Book profit: The cumulative book income plus any gain or loss on disposition of the assets on termination of the SAT.
Book runner: The managing underwriter for a new issue. The book runner maintains the book of securities sold.
Book to bill: Used in the context of general equities. High technology industry's demand to supply ratio of orders on a firm's book to number of orders filled. Measures if companies have more orders than they can deliver (>1), equal amounts (=1), or less (<1). This monthly figure is of major interest to investors/ traders in the high technology sector.
Book value: A company's book value is its total assets minus intangible assets and liabilities, such as debt. A company's book value might be more or less than its market value.
Book value per share: The ratio of stockholder equity to the average number of common shares. Book value per share should not be thought of as an indicator of economic worth, since it reflects accounting valuation (and not necessarily market valuation).
Book-entry securities: The Treasury and federal agencies are moving to a book-entry system in which securities are not represented by engraved pieces of paper but are maintained in computerized records at the Fed in the names of member banks, which in turn keep records of the securities they own as well as those they are holding for customers. In the case of other securities where a book-entry has developed, engraved securities do exist somewhere in many cases. These securities do not move from holder to holder but are usually kept in a central clearinghouse or by another agent.
Bootstrapping: A process of creating a theoretical spot rate curve using one yield projection as the basis for the yield of the next maturity.
Borrow: To obtain or receive money on loan with the promise or understanding that it will be repaid.
Borrower fallout: In the mortgage pipeline, the risk that prospective borrowers of loans committed to be closed will elect to withdraw from the contract.
Bottom-up equity management style: A management style that de-emphasizes the significance of economic and market cycles, focusing instead on the analysis of individual stocks.
Bought deal: security issue where one or two underwriters buy the entire issue.
Bourse: A term of French origin used to refer to stock markets.
Box: Used in the context of general equities. Quotation machine or battery march.
Bracket: A term signifying the extent of an underwriter's commitment in a new issue, e.g., major bracket or minor bracket.
Brady bonds: Bonds issued by emerging countries under a debt reduction plan.
Branch: An operation in a foreign country incorporated in the home country.
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Breadth of the market: Used in the context of general equities. Percentage of stocks participating in a particular market move. Technical analysts say there was significant 'breadth' if 2/3 of the stocks listed on an exchange moved in the same direction during a trading session. See: A/D line.
Break: A rapid and sharp price decline. Related: Crash
Break-even analysis: An analysis of the level of sales at which a project would make zero profit.
Break-even lease payment: The lease payment at which a party to a prospective lease is indifferent between entering and not entering into the lease arrangement.
Break-even payment rate: The prepayment rate of an MBS coupon that will produce the same CFY as that of a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon the prepayment rate that will produce the same CFY as that of the benchmark coupon; and for coupons lower than the benchmark coupon the lowest prepayment rate that will do so.
Break-even tax rate: The tax rate at which a party to a prospective transaction is indifferent between entering into and not entering into the transaction.
Break-even time: Related: Premium payback period.
Breakout: A rise in a security's price above a resistance level (commonly its previous high price) or drop below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing move in the same direction. Can be used by technical analysts as a buy or sell indicator.
Break price: Used in the context of general equities. Change one's offering or bid prices to move to a more realistic, tight level where execution is more feasible. Often done to trim one's position, thus "breaking price" from where the trades occurred (if long, "break price" downward 1/8 a point or more).
Breeden, Douglas T.: Inventor of one of the foundational asset pricing models in finance, the consumption based capital asset pricing model. Duke University professor and Chairman of Smith Breeden Associates.
Bretton Woods Agreement: An agreement signed by the original United Nations members in 1944 that established the International Monetary Fund (I.M.F.) and the post-World War II international monetary system of fixed exchange rates.
Bridge financing: Interim financing of one sort or another used to solidify a position until more permanent financing is arranged.
"Bring it out": Used in the context of general equities. "Make stock available for sale to indicated buyers".
British clearers: The large clearing banks that dominate deposit taking and short-term lending in the domestic sterling market.
Broken up: Used for listed equity securities. Prevented from executing a trade (committed to upstairs) due to exchange priority rules excluding one's order (i.e., Higher bid/lower offer on floor, market order must be satisfied).
Broker: An individual who is paid a commission for executing customer orders. Either a floor broker who executes orders on the floor of the exchange, or an upstairs broker who handles retail customers and their orders. Person who acts as an intermediary between a buyer and seller, usually charging a commission. A "broker" who specializes in stocks, bonds, commodities, or options acts as agent and must be registered with the exchange where the securities are traded. Antithesis of dealer.
Broker loan rate: Related: Call money rate.
Brokered market: A market where an intermediary offers search services to buyers and sellers.
Bubble theory: Security prices sometimes move wildly above their true values until the "bubble bursts".
Buck: Slang for one million dollars.
Budget: A detailed schedule of financial activity, such as an advertising budget, a sales budget, or a capital budget.
Budget deficit: The amount by which government spending exceeds government revenues.
Buck investor: An investor who knows the market will rise over the next 30+ years, using time as his greatest asset. Related: Bull and Bear
Buck market: Any 30+ year market where prices will be in an upward trend, where time is the greatest asset. Related: Bull and Bear
Build a book: Used in the context of general equities. Develop customer orders to gather demand/supply in order to make a bid or an offer.
Builder buydown loan: A mortgage loan on newly developed property that the builder subsidizes during the early years of the development. The builder uses cash to buy down the mortgage rate to a lower level than the prevailing market loan rate for some period of time. The typical buydown is 3% of the interest-rate amount for the first year, 2% for the second year, and 1% for the third year (also referred to as a 3-2-1 buydown).
Bull: An investor who thinks the market will rise. Related: bear.
Bull-bear bond: Bond whose principal repayment is linked to the price of another security. The bonds are issued in two tranches: in the first tranche repayment increases with the price of the other security, and in the second tranche repayment decreases with the price of the other security.
Bull CD, Bear CD: A bull CD pays its holder a specified percentage of the increase in return on a specified market index while guaranteeing a minimum rate of return. A bear CD pays the holder a fraction of any fall in a given market index.
Bull market: Any market in which prices are in an upward trend.
Bull spread: A spread strategy in which an investor buys an out-of-the-money put option, financing it by selling an out-of-the money call option on the same underlying security.
Bulldog bond: Foreign bond issue made in London.
Bulldog market: The foreign market in the United Kingdom.
Bullet contract: A guaranteed investment contract purchased with a single (one-shot) premium. Related: Window contract.
Bullet loan: A bank term loan that calls for no amortization.
Bullet strategy: A fixed income strategy in which a portfolio is constructed so that the maturities of its securities are highly concentrated at one point on the yield curve.
Bullish, bearish: Words used to describe investor attitudes. Bullish refers to an optimistic outlook while bearish means a pessimistic outlook.
Bundling, unbundling: A trend allowing creation of securities either by combining primitive and derivative securities into one composite hybrid or by separating returns on an asset into classes.
Business cycle: Repetitive cycles of economic expansion and recession. The official peaks and troughs of the U.S. cycle are determined by the National Bureau of Economic Research in Cambridge, MA.
Business failure: A business that has terminated with a loss to creditors.
Business risk: The risk that the cash flow of an issuer will be impaired because of adverse economic conditions, making it difficult for the issuer to meet its operating expenses.
Busted convertible: Related: Fixed-income equivalent. Mainly applies to convertible securities. Convertible bond selling essentially as a straight bond. Assuming the issuer is "money good," or will continue to meet credit obligations, such issues can be highly attractive since the price virtually makes no allowance for the bond's call on the common stock; however, such issues usually carry high premiums.
Butterfly shift: A non-parallel shift in the yield curve involving the height of the curve.
Butterfly spread: Applies to derivative products. Complex option strategy that involves selling two calls and buying two calls on the same or different markets, with several maturity dates. One of the options has a higher exercise price and the other has a lower exercise price than the other two options. The payoff diagram resembles the shape of a butterfly.
Buy: To purchase an asset; taking a long position.
Buy-and-hold strategy: A passive investment strategy with no active buying and selling of stocks from the time the portfolio is created until the end of the investment horizon.
Buy-back: Another term for a repo.
Buydowns: Mortgages in which monthly payments consist of principal and interest. During the early part of the loan positions of these payments are provided by a third party to reduce the borrower's monthly payments.
Buyers/sellers on balance: Used for listed equity securities. Indicates that at a given point in time (usually before the opening of a stock/market or at expiration time), there are more buyers/sellers in the marketplace, usually with market orders. See: imblance of orders.
Buy in: To cover, offset or close out a short position. Related: evening up, liquidation.
Buying the index: Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the same return.
Buy limit order: A conditional trading order that indicates a security may be purchased only at the designated price or lower. Related: Sell limit order.
Buy minus order: Used in the context of general equities. Rare market or limit order to buy a stated amount of a stock provided that the price to be obtained is not higher than the last sale if the last sale was a minus or zero-minus tick, and is not higher than the last sale minus the minimum fractional change in the stock if the last sale was a plus or zero-plus tick. (if limit, then the buy cannot occur above the limit, regardless of tick.)
Buy on close: To buy at the end of the trading session at a price within the closing range.
Buy on margin: A transaction in which an investor borrows to buy additional shares, using the shares themselves as collateral.
Buy on opening: To buy at the beginning of a trading session at a price within the opening range.
Buyout: Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buy-out is done with borrowed money.
Buy-side analyst: A financial analyst employed by a non-brokerage firm, typically one of the larger money management firms that purchase securities on their own accounts.
"Buy them back": Used for listed equity securities. "Cover my short position that resulted from my print."

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