P1:a/b P2:c/d QC:e/f T1:g
gloss JWBK182-McDowell April 25, 2008 16:35 Printer: Yet to come
194 GLOSSARYthen using that information to make an informed decision about which specific
parameter values to use in actual trading or investing.
options The right to buy or sell an underlying asset at a fixed price up to some
specified date in the future. The right to buy is acall option, and the right to sell is
aput option.
options market This is an open market to trade options.
oscillator Most oscillators go from 0 to 100. Analysts believe that when the indi-
cator is near zero, the price is oversold, and that when the price is near 100 it is
overbought.
overtrading You are overtrading when your commission fees are eating into your
profit or when you feel out of control. Stop and reverse (SAR) traders can overtrade
because of the speed of their entries and exits.
overbought/oversold indicator An indicator that attempts to define when prices
have risen (or fallen) too far, too fast, and hence are vulnerable to a reaction in the
opposite direction.
out-of-the-money When an option’s current market price is below the strike price
of a call or above the strike price of a put.
Pacific Stock Exchange (PCX) This was a regional stock exchange located in San
Francisco, California. Its history begins with the founding of the San Francisco
Stock and Bond exchange in 1882. Seven years later, the Los Angeles Oil Exchange
was founded. In 1957, the two exchanges merged to form the Pacific Coast Stock
exchange, though trading floors were kept in both original cities. A name change
to the Pacific Stock Exchange took place in 1973. Options trading began three
years later. In 1997,Stockwas dropped from the exchange’s name. In 1999, the
Pacific Exchange was the first U.S. stock exchange to demutualize. In 2001, the Los
Angeles trading floor was closed, and the next year the San Francisco trading floor
was closed as well. Pacific Exchange equities trading now takes place exclusively
through NYSE Arca (formerly known as ArcaEx), an Electronic Communications
Network. In 2003, the Pacific Exchange launched PCX plus, an electronic options
trading platform.
paper gain Unrealized capital gain on securities held based on a comparison of
the current market price to the original cost.
paper loss Unrealized capital loss on securities held based on a comparison of
the current market price to the original cost.
pattern recognition A price-forecasting method that uses historical chart pat-
terns to draw analogies to current situations.
pay off ratio Average winning trade divided by average losing trade equals the
pay off ratio. For example a 2 to 1 pay off ratio means that you are winning two
dollars for every one dollar you lose.