Objective (mutual funds)
\nThe fund’s investment strategy category as stated in the prospectus. There are more than 20 standardized categories.<\/p>\n
Odd lot
\nA trading order for less than 100 shares of stock.<\/p>\n
Odd lot dealer
\nA broker who combines odd lots of securities from multiple buy or sell orders into round lots and executes transactions in those round lots.<\/p>\n
Offer
\nIndicates a willingness to sell at a given price. Related: bid<\/p>\n
Offering memorandum
\nA document that outlines the terms of securities to be offered in a private placement.<\/p>\n
Official statement
\nA statement published by an issuer of a new municipal security describing itself and the issue<\/p>\n
Offset
\nElimination of a long or short position by making an opposite transaction. Related: liquidation.<\/p>\n
Omnibus account
\nAn account carried by one futures commission merchant with another futures commission merchant in which the transactions of two or more persons are combined and carried in the name of the originating broker, rather than designated separately.<\/p>\n
One-factor APT
\nA special case of the arbitrage pricing theory that is derived from the one-factor model by using diversification and arbitrage. It shows the expected return on any risky asset is a linear function of a single factor.<\/p>\n
One-Touch Option
\nAn Option that pays off as soon as the trigger price touches the barrier. Often, it is a Binary Option (q.v.).<\/p>\n
One-way market
\n(1) A market in which only one side, the bid or asked, is quoted or firm. (2) A market that is moving strongly in one direction.<\/p>\n
OPEC (Organization of Petroleum Exporting Countries)
\nA cartel of oil-producing countries.<\/p>\n
Open account
\nArrangement whereby sales are made with no formal debt contract. The buyer signs a receipt, and the seller records the sale in the sales ledger.<\/p>\n
Open contracts
\nContracts which have been bought or sold without the transaction having been completed by subsequent sale or purchase, or by making or taking actual delivery of the financial instrument or physical commodity.<\/p>\n
Open interest
\nThe total number of derivative contracts traded that not yet been liquidated either by an offsetting derivative transaction or by delivery. Related: liquidation<\/p>\n
Open (good-til-cancelled) order
\nAn individual investor can place an order to buy or sell a security. That open order stays active until it is completed or the investor cancels it.<\/p>\n
Open position
\nA net long or short position whose value will change with a change in prices.<\/p>\n
Open repo
\nA repo with no definite term. The agreement is made on a day-to-day basis and either the borrower or the lender may choose to terminate. The rate paid is higher than on overnight repo and is subject to adjustment if rates move.<\/p>\n
Open-end fund
\nAlso called a mutual fund, an investment company that stands ready to sell new shares to the public and to redeem its outstanding shares on demand at a price equal to an appropriate share of the value of its portfolio, which is computed daily at the close of the market.<\/p>\n
Open-market purchase operation
\nA systematic program of repurchasing shares of stock in market transactions at current market prices, in competition with other prospective investors.<\/p>\n
Open-outcry
\nThe method of trading used at futures exchanges, typically involving calling out the specific details of a buy or sell order, so that the information is available to all traders.<\/p>\n
Opening price
\nThe range of prices at which the first bids and offers were made or first transactions were completed.<\/p>\n
Opening purchase
\nA transaction in which the purchaser’s intention is to create or increase a long position in a given series of options.<\/p>\n
Operating cycle
\nThe average time intervening between the acquisition of materials or services and the final cash realization from those acquisitions.<\/p>\n
Operating exposure
\nDegree to which exchange rate changes, in combination with price changes, will alter a company’s future operating cash flows.<\/p>\n
Operating profit margin
\nThe ratio of operating margin to net sales.<\/p>\n
Operating lease
\nShort-term, cancelable lease. A type of lease in which the period of contract is less than the life of the equipment and the lessor pays all maintenance and servicing costs.<\/p>\n
Operating leverage
\nFixed operating costs, so-called because they accentuate variations in profits.<\/p>\n
Operating risk
\nThe inherent or fundamental risk of a firm, without regard to financial risk. The risk that is created by operating leverage. Also called business risk.<\/p>\n
Operationally efficient market
\nAlso called an internally efficient market, one in which investors can obtain transactions services that reflect the true costs associated with furnishing those services.<\/p>\n
Opportunity cost of capital
\nExpected return that is foregone by investing in a project rather than in comparable financial securities.<\/p>\n
Opportunity costs
\nThe difference in the performance of an actual investment and a desired investment adjusted for fixed costs and execution costs. The performance differential is a consequence of not being able to implement all desired trades. Most valuable alternative that is given up.<\/p>\n
Optimal contract
\nThe contract that balances the three types of agency costs (contracting, monitoring, and misbehavior) against one another to minimize the total cost.<\/p>\n
Optimal portfolio
\nAn efficient portfolio most preferred by an investor because its risk\/reward characteristics approximate the investor’s utility function. A portfolio that maximizes an investor’s preferences with respect to return and risk.<\/p>\n
Optimal redemption provision
\nProvision of a bond indenture that governs the issuer’s ability to call the bonds for redemption prior to their scheduled maturity date.<\/p>\n
Optimization approach to indexing
\nAn approach to indexing which seeks to Optimize some objective, such as to maximize the portfolio yield, to maximize convexity, or to maximize expected total returns.<\/p>\n
Option
\nThe right but not the obligation to buy (call) or sell (put) an underlying asset at a predetermined and fixed price, enter into a long or short futures position, or receive a payoff that simulates a purchase or a sale.<\/p>\n
OTM
\nOut-of-the-Money. Having an Intrinsic Value of zero.<\/p>\n
Outperformance Option
\nAn option on the performance of one asset in excess of the performance of another. Typically, one measures the outperformance by the excess of the one return or rate of retun over the other. One might also measure the outperformance as the excess of the ratio of the two final price over a benchmark ratio.<\/p>\n
Option elasticity
\nThe percentage increase in an option’s value given a 1% change in the value of the underlying security.<\/p>\n
Option not to deliver
\nIn the mortgage pipeline, an additional hedge placed in tandem with the forward or substitute sale.<\/p>\n
Option premium
\nThe option price.<\/p>\n
Option price
\nAlso 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.<\/p>\n
Option seller
\nAlso called the option writer , the party who grants a right to trade a security at a given price in the future.<\/p>\n
Option-adjusted spread (OAS)
\n(1) The spread over an issuer’s spot rate curve, developed as a measure of the yield spread that can be used to convert dollar differences between theoretical value and market price. (2) The cost of the implied call embedded in a MBS, defined as additional basis-yield spread. When added to the base yield spread of an MBS without an operative call produces the option-adjusted spread.<\/p>\n