S-T

SCALPER: A floor trader on an exchange who hopes to profit by continually buying at the bid price and selling at the offer price in a specific market. Scalpers usually try to close out all positions at the end of each trading day.

SENSITIVITY: Exposure to a risk factor.

SERIES: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price. SHORT INTEREST: The number of shares that bearish traders and investors have sold short is known as the stock's short interest. Short interest signals potential future buying power, as the shares must eventually be repurchased.

SHORT POSITION: A position wherein a person's interest in a particular series of options is as a net seller.

SHORT SELLER: An individual who is betting on a security's price dropping by selling that security short. In such cases, the individual borrows the stock first (usually from a brokerage firm) in order to sell it. The hope is to buy the security back later at a lower price, in order to,collect a profit relative to the higher initial selling price.

SHORT SQUEEZE: When short sellers start to feel pressure from a rising stock, which is causing them losses as the stock continues to rise. This squeeze is considered to place pressure on the shorts to force them to buy back their bearish short positions in order to limit their losses. Short squeezes often result in dramatic share price gains in relatively short periods of time.

SKEWNESS: A lack of symmetry in a probability distribution. For example, a normal distribution has zero skewness because it is symmetric about its mean. A lognormal distribution has positive skewness.

SPECIALIST: An individual or trading firm prepared to risk its own capital by making a continuous market in a specific contract.

SPECULATOR: A trader who hopes to profit from a specific directional move in an underlying instrument.

SPOT: For immediate delivery.

SPDR ("Spyders"): Standard & Poor's Depository Receipts are instruments that trade like a stock, which allows investors to mirror the performance of the S&P 500 Index (SPX). If the SPX is at 1200, the SPDRS will trade at 120.

SPECIALIST: Those who provide the best bid and asked prices on the options floors of the AMEX, CBOE, etc. Specialists typically do not compete with each other, but rather focus on certain underlying stocks' options.

SPREAD: A position consisting of two or more option series (or underlying and one or more option series) in which theoretically any given underlying price movement affects one part of the position positively and another part negatively.

STANDARD & POOR'S 100 INDEX (S&P 100): This index, also known by its options ticker symbol OEX, measures the overall change in the value of 100 stocks of the largest US companies. (The breakdown between industrial, transportation, utilities and financial firms fluctuates depending on the market.)

STANDARD & POOR'S 500 INDEX (S&P 500): This index, also known by its options ticker symbol SPX, measures the overall change in the value of the 500 stocks of the largest firms in the US.

STANDARD DEVIATION: A measure of the dispersal in a random variable. Frequently used as a measure of the volatility of a random financial variable.

STATISTICAL RISK MEASURE: A risk measure which is based upon a probability distribution relating to a risk.

STOCK SPLIT: The creation of a lower share price with additional shares of stock. In a 2-for-1 stock split, if you own 1 shares of stock at a price of 80 before the split, you will own 200 shares of stock at a price of 40 after the stock split. While stock splits don't change the value of the stock by themselves, investors tend to like companies which split their stock, as these tend to be growth oriented companies whose shares prices have done well historically.

STOCK-TYPE SETTLEMENT: A settlement procedure in which the purchase of a contract requires full and immediate payment by the buyer to the seller. All profits or losses from the trade are unrealized until the position is liquidated.

STRADDLE: The precise definition of a straddle is: a 1:1 position (both long or both short) in a put and a call with the same strike price, expiration and underlying. Common usage of the term gives it a broader definition to include many different kinds of combined put/call positions with varying ratios, strike prices, and expiration dates.

STRANGLE: The purchase or sale of an equivalent number of puts and calls on a given underlying stock with the same expiration date but different exercise prices. It has recently also become a general term used to describe various kinds of positions which are primarily comprised of out of the money puts and calls.

STRIKE PRICE: The stated price per share for which the underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option buyer upon exercise of the option contract.

SYNTHETIC UNDERLYING: A 1:1 combination (one long and one short) of a put and a cal of the same strike, expiration and underlying, having almost exactly the same profit/loss profile as the stock itself. Thus, the position +1 Sep 120C and -1 Sep 120P (aka long combo) is the equivalent of +100 shares of stock or +1 future. -1 Sep 120C and +1 Sep 120P (aka short combo) is the equivalent of -100 shares of stock or -1 future.

SYSTEMATIC RISK: The risk inherent in the general market, due to broad macroeconomic factors, that affects all companies in the market. Also known as market risk.

SYSTEMIC RISK: Risk which threatens an entire financial system.

TAU: Also known by other names such as Vega, Sigma Prime, Zeta or Kappa, Tau is the sensitivity of an option's price to a 1% change in implied volatility. THEORETICAL VALUE: An estimated value for an option (or a spread) derived from a model, based on the price and volatility of the underlying, the strike of the option, the time left until expiration, and interest rates. Generally, a theoretical value is not a price prediction.

THETA: The rate of decay in an option's value over one day in time.

TICK: The smallest price increment in which a security can fluctuate can be considered a tick-if the latest tick is up from the prior tick, it is considered an "uptick", and if the latest tick is lower than the prior tick, it is called a "downtick".

TIME DECAY: An option is a 'wasting' asset. Thus as expiration approaches, the value of anoption will decrease in a nonlinear fashion with other variables remaining constant.

TIME SPREAD: Any spread which includes options of different expiration dates; also known strike price. as a calendar spread. Usually this term refers to spreads done 1:1 with options that have the same strikes.

TRUNCATED RISK: The ability of an investment to resist additional loss.

TYPE: The classification of an option contract as either a put or a call.