Price at which the holder of an option can buy (call option) or sell (put option) the underlying stock. Also referred to as strike price.
Similar financial termsExercise limit
The maximum number of option contracts that can be exercised within a five-day period.
The exercise or assignment of an option prior to expiry.
The price at which a market maker is prepared to sell a security. Also known as offer price.
The price at which a market maker is prepared to sell a security. Also known as ask price.
The price at which a market maker is prepared to buy a security.
The average of the prices that a futures contract trades for immediately before the bell signaling the close trading for a day. It is used in mark-to-market calculations.
Variable price security
A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.
The price at which one unit of a firm sells goods or services to another unit of the same firm.
Theoretical futures price
Also called the fair price, the equilibrium futures price.
Price that the existing shareholders are allowed to pay for a share of stock in a rights issue.
The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.
Stated conversion price
At the time of issuance of a convertible security, the price the issuer effectively grants the security holder to purchase the common stock, equal to the par value of the convertible security divided by the conversion ratio.
The current marketprice of the actual physical commodity. Also called cash price.
Reverse price risk
A type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an investor at rates prevailing at application but sets the note rates when the borrowers close. The lender is thus exposed to the risk of falling rates.
The price at which the asset will be sold if a put option is exercised. Also called the strike or exercise price of a put option.
A relationship espoused by some technical analysts that signals continuing rises and falls in security prices based on accompanying changes in volume traded.
Adjustment mechanism under the classical gold standard whereby disturbances in the price level in one country would be wholly or partly offset by a countervailing flow of specie (gold coins) that would act to equalize prices across countries and automatically bring international payments back in balance.
Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price.
Price value of a basis point (PVBP)
Also called the dollar value of a basis point, a measure of the change in the price of the bond if the required yield changes by one basis point.
The market has already incorporated information, such as a low dividend, into the price of a stock.
Individuals who respond to rates and prices by acting as though they have no influence on them.
The risk that the value of a security (or a portfolio) will decline in the future. Or, a type of mortgage-pipeline risk created in the production segment when loan terms are set for the borrower in advance of terms being set for secondary market sale. If the general level of rates rises during the production cycle, the lender may have to sell his originated loans at a discount.
The percentage change in the quantity divided by the percentage change in the price.
Price discovery process
The process of determining the prices of the assets in the marketplace through the interactions of buyers and sellers.
The limitation of the price appreciation potential for a callable bond in a declining interest rate environment, based on the expectation that the bond will be redeemed at the call price.
Determined by dividing current stock price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding.
Shows the "multiple" of earnings at which a stock sells. Determined by dividing current stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher "multiple" means investors have higher expectations for future growth, and have bid up the stock's price.
Also called the option premium, the price paid by the buyer of the options contract for the right to buy or sell a security at a specified price in the future.
The range of prices at which the first bids and offers were made or first transactions were completed.
Price quotations on futures for a period in which no actual trading took place.
Minimum price fluctuation
Smallest increment of price movement possible in trading a given contract. Also called point or tick. The zero-beta portfolio with the least risk.
Maximum price fluctuation
The maximum amount the contract price can change, up or down, during one trading session, as fixed by exchange rules in the contract specification.
Marketplace price efficiency
The degree to which the prices of assets reflect the available marketplace information. Marketplace price efficiency is sometimes estimated as the difficulty faced by active management of earning a greater return than passive management would, after adjusting for the risk associated with a strategy and the transactions costs associated with implementing a strategy.
The amount of money that a willing buyer pays to acquire something from a willing seller, when a buyer and seller are independent and when such an exchange is motivated by only commercial consideration.
Market price of risk
A measure of the extra return, or risk premium, that investors demand to bear risk. The reward-to-risk ratio of the market portfolio.
Market conversion price
Also called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security and then exercising the conversion option. This price is equal to the market price of the convertible security divided by the conversion ratio.
Low price-earnings ratio effect
The tendency of portfolios of stocks with a low price-earnings ratio to outperform portfolios consisting of stocks with a high price-earnings ratio.
This is the day's lowest price of a security that has changed hands between a buyer and a seller.
Maximum price fluctuation
Law of one price
An economic rule stating that a given security must have the same price regardless of the means by which one goes about creating that security. This implies that if the payoff of a security can be synthetically created by a package of other securities, the price of the package and the price of the security whose payoff it replicates must be equal.
Gives the lessee the option to purchase the asset at a price below fair market value when the lease expires.
Price expressed in terms of yield to maturity or annual rate of return.
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a specified call date.
Bond price excluding accrued interest.
Consumer Price Index
The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S. Department of Labor publishes the CPI very month.
The contractually specified price per share at which a convertible security can be converted into shares of common stock.
Daily price limit
The level within many commodity, futures, and options markets are allowed to rise or fall in a day. Exchanges usually impose a daily price limit on each contract.
The price when the supply of goods matches demand.
Equilibrium market price of risk
The slope of the capital market line (CML). Since the CML represents the expected return offered to compensate for a perceived level of risk, each point on the line is a balanced market condition, or equilibrium. The slope of the line determines the additional expected return needed to compensate for a unit change in risk. The equation of the CML is defined by the Capital Asset Pricing Model (CAPM).
Known price item
When a good whose price is widely known by members of the public is priced to attract customers.
Variable Price Limit
A price limit schedule, determined by an exchange, that permits variations above or below the normally allowable price movement for any one trading day.
Commodity Price Index
Index or average, which may be weighted, of selected commodity prices, intended to be representative of the markets in general or a specific subset of commodities (for example, grains or livestock).
Price discrimination occurs whenever a firm charges differential prices across customers that are not related to differences in production and distribution costs. Thus, discriminating firms seek to exploit the perceived consumer surplus and maximize producer surplus.