Arbitrage- The purchase and sale of the same products in different markets to take advantage of price disparity in the different markets. Usually done in high volume because of the limited risk
Ask Price- The price in which a product, contract, etc. is offered for sale. When a buyer in that marketplace agrees that the price is fair, he will “take the offer” and a trade will transpire
Bid Price- The price in which a product, contract, etc. is proposed to be purchased. When a seller in that marketplace agrees that the price is fair, he will “hit the bid” and a trade will transpire.
Block Order- A large amount of stock (usually in increments of 10,000 shares) that is either bought or sold by one party (often an institutional trader). Could be referred to as “smart money”
Bottom Price- The lowest possible price of a product, contract, etc. that was established during a fixed period of time. (e.g. “I’m really jealous of Tommy. He got long at the bottom yesterday right before the big rally, he better pay the bar tab today”)
Call Option- A contract between a buyer and a seller where the buyer acquires the right, but not the obligation, to purchase a specific underlying contract at a pre-determined price by a pre-determined time/date. The seller has the obligation to sell the underlying contract if the buyer chooses to exercise the option.
Convergence- The coming together to a point. For purposes of sports gaming trading, it is the coming together of two separate values into one common value (see pair trading), with the lower value increasing and the higher value decreasing until they meet.
Currencies- A form of money issued by a government and circulated within an economy. Currency is the basis for trade, and the relative value of currencies is dynamic based on many factors. Like sporting contests, a currency’s value is determined as a relative strength value versus another currency.
Divergence- To go or move off in different directions. For purposes of sports gaming trading, a divergence is necessary in order to have a subsequent convergence (see pair trading)
Equities- Securities (usually stocks) that represent ownership interest in a company. Often used as simply a synonym for “common stock”
Fundamental Analysis- A method of evaluating products (securities, sports teams, etc.) by attempting to measure intrinsic value of that product. Fundamental analysis studies industry conditions, interest rates, market share, etc. (stocks) or injuries, weather, personnel matchups, incentive, etc. (sports teams).
Futures Contract- A contractual agreement to buy or sell a particular instrument that is offered in a marketplace at a certain determined price in the future. Futures contracts detail the quality and quantity of the instrument and are standardized
Long- When a speculator/trader/bettor/investor purchases (bets on) an instrument offered in a marketplace presuming that it will outperform its current market value in the future facilitating financial gain , a “long” position is established.
Lognormal Distribution- is a probability assumption of a random variable whose logarithm is normally distributed. In practical terms, a lognormal distribution is a random presumption of outcomes in certain contexts that is skewed to the upside because negative values do not exist as in stock prices and sporting event scores. For example, a stock price can go to $150 but it cannot go to -$150. A basketball game score can be 160-150 but it cannot be -160-(-150)
Marketmaker- An independent trader or trading firm which is ready to buy or sell products, contracts, issues in a designated market. A market maker is obligated to make a two sided (bid and ask) market in the product in question (see bookmaker, bookie, casino, sportsbook)
Marketplace- A gathering of people for the purpose of buying, selling, and trading at agreed upon prices
Mean Reversion- A theory that prices generally return to the average, mean or middle. This theory would lead to buying when pricing is “too low” and expecting a rise to the mean as well as selling when pricing is “too high” and expecting a fall to the mean. Generally based on theory of dialectic philosophy. (See pair trading, overbought, oversold)
Normal Distribution- A random probability distribution that plots the majority of outcomes around the mean and the minority of outcomes at the tails (i.e. bell curve, plinko game)
Overbought (Overvalued)- A point during the course of trading where a certain issue/market/team etc. has drastically risen in price or perceived value of the crowd. At the point of overvalue extension it is presumed that prices are too expensive based on crowd psychology and a downward correction is most likely imminent.
Oversold (Undervalued)- A point during the course of trading where a certain issue/market/team etc. has drastically decreased in price or perceived value of the crowd. At the point of undervalue extension it is presumed that prices are too cheap based on crowd psychology and an upward correction is most likely imminent
Odd Lot- An amount of security that is in an increment that is less than is usually used while trading that security. With stocks, it is less than 100 shares. Could be referred to as “dumb money”
Pair Trading- A stock trading strategy that incorporates two stocks in the same sector. The trader is long one stock while short the other stock. The presumption is that as mean reversion occurs and the stocks take turns at each ends of their trading channels, profits can be accumulated by taking action at the extremes (see mean reversion, overbought, oversold, thewolfline™)
Perceived Value- The value that a product, issue, stock, team, etc. is presumed to have at any given time by the crowd and the marketplace. Many times these levels reach inappropriate extremes and a profit can be realized when these inappropriate perceptions are exploited
Put Option- A contract between a buyer and a seller where the buyer obtains the right, but not the obligation, to sell a specific underlying contract at a specific pre-determined price by a specific pre-determined time/date. The seller has the obligation to buy the underlying contract if the buyer chooses to exercise the option
Resistance Level- A term used in technical analysis that refers to a price or level where an issue can trade but not exceed for a given period of time. Resistance levels are technical “sell points” and usually occur at top ends of a trading channel
Short- The opposite of “getting long”. When a speculator/trader/bettor/investor sells (bets against) an instrument offered in a marketplace presuming that it will underperform its current market value in the future, facilitating financial gain a “short’ position is established.
Specialist- A stock exchange member who stands ready to quote and trade certain securities either for his own account or for clients accounts. He is responsible for maintaining a fair and orderly marketplace (see bookmaker, casino, sportsbook, sports gaming marketplace)
Speculator- A person who enters into a marketplace presuming to make a financial gain by correctly forecasting future price and/or volatility activity in that marketplace (see trader, bettor, sports gaming participant)
Support Level- A term used in technical analysis that refers to a price or level where an issue can trade but not exceed for a given period of time. Support levels are technical “buy points” and usually occur at the bottom ends of a trading channel
Technical Analysis- A method of evaluating issues, products, sports gaming teams, securities, etc. by analyzing statistics generated by market activity. Technical analysts do not care about intrinsic value of an issue (see fundamental analysis, thewolfline™
Trading Channel- Trading channels are presumed by “range traders” that sell issues at the top level resistance points and buy back at the low level support points, making profits as they travel between the two price extremes. (see wolfline™, mean reversion, overbought, oversold, technical analysis)
Top Price- The highest possible price of a product, contract, etc. that was established during a fixed period of time (e.g. “I am jealous of Bobby. He got short at the absolute top yesterday before the crash. Drinks are on him.”)
Trend Reversal- Where the move is made. Isolating the points when a trend has gone too far in either direction and has now developed into an extreme level of crowd mispricing is the whole trading concept that leads to profits. When these levels are seen as two issues relate to each other, the ability to isolate the polar extremes is even that much more valuable (see thewolfline™, pair trading, technical analysis, perceived value, overbought, oversold)
Volatility- How much activity takes place in a determined marketplace in a determined amount of time (see wolfline™ over/under)
Future- How much activity will take place in the future (the wager of the speculator)
Historical- How much activity has taken place in the past
Implied- How much activity is expected by the market in the future (the “over/under” line, or the “total” line)
Volume- Total amount of shares/contracts traded in a given amount of time; or total amount of money wagered in a given amount of time (see “handle”)