Glossary

A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z

H

Hedge - The use of almost opposite direction securities, instruments, or futures contracts as a method of attempting to reduce market risk. A perfect hedge is one that eliminates the prospects of any future gains or losses. Investors frequently try to hedge against inflation by purchasing assets (e.g, gold) that will rise in value faster than inflation.

Hedger - An individual or company owning or planning to own a cash commodity–corn, soybeans, wheat, U.S. Treasury bonds, notes, bills etc.– and concerned that the cost of the commodity may change before either buying or selling it in the cash market. A hedger achieves protection against changing cash prices by purchasing (selling)futures contracts of the same or similar commodity and later offsetting that position by selling (purchasing) futures contracts of the same quantity and type as the initial transaction.

Hedging - The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. Hedgers use the futures markets to protect their business from adverse price changes. Selling (Short) Hedge - Selling futures contracts to protect against possible declining prices of commodities that will be sold in the future. At the time the cash commodities are sold, the open futures position is closed by purchasing an equal number and type of futures contracts as those that were initially sold. and Purchasing (Long) Hedge - Buyer futures contracts to protect against a possible price increase of cash commodities that will e purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. Also referred to as a buying hedge.

Held - A situation where a security is temporarily not available for trading. Market Makers are not allowed to display quotes of held securities.

High - The highest price of the day for a particular futures contract.

Historical volatility - The annualized standard deviation of percent changes in securities prices over a specific period. It is an indication of past volatility in the marketplace.

Holder - The purchaser of either a call or put option. Option buyers receive the right, but not the obligation, to assume a futures position. Also referred to as the Option Buyer.

Holding Company - A corporation that owns the securities of another, in most cases with voting control.

Horizontal spread - The purchase of either a call or put option and the simultaneous sale of the same type of option with typically the same strike price but with a different expiration month. also referred to as a calendar spread.

Hot Issue - If the price for an IPO increases in the first day of trading, it is considered a hot issue. Owners and employees of broker-dealers and other industry insiders are prohibited from participating in hot issues. A prohibited owner or employee is generally allowed to begin trading in the aftermarket.

House - A person or company doing business as a broker or dealer in securities, investment banking, or related services.

House Call - Brokerage firm notification that a client's margin account equity is below the firm's maintenance level. Once the equity declines below that point, the client must deposit additional funds or securities. If the client fails to deliver the required margin, securities in the account will be liquidated to cover the call. Normally, house call limits are higher than the limits set by the National Association of Securities Dealers (NASD) and the exchanges with jurisdiction over these rules.

House Maintenance - Requirement Brokerage house rules that are internally set in regard to a client's margin account. The required equity level should be maintained by client. Normally, house call requirements are higher than those set by the National Association of Securities Dealers (NASD) and the exchanges with jurisdiction over these rules.

House spread - Also called dealer spread. Among Market Maker firms, the house spread is the difference between the highest price bid for a security, and the highest price asked the difference between best bid and best ask.

Hypothecation - Pledging of securities or other assets as collateral to secure a loan, such as a debit balance in a margin account.

Glossary

A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z