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Early Entry
A large price movement in one direction within the first 15 minutes after the open of the daily session.
Earnings
Net income for the company during the period.
Earning Asset
An income-producing asset, such as a computer used for the development and sale of software products, or a building used to obtain rental income. A computer used exclusively for administrative purposes or a building used exclusively to house the Company would not be earning assets.
Earnings Driven
At certain points in the business cycle, the market concentrates on earnings of companies as opposed to overall market conditions or interest rate factors. At this stage, companies that exhibit strong earnings potential are actively sought.
Earnings or Income Statement
A financial statement that shows a company's revenues and expenditures resulting in either a profit or a loss during a financial period.
Earnings Per Fully Diluted Share
The earnings per common share calculated on the assumption that all convertible securities are converted into common shares and all outstanding rights, warrants, options and contingents issued are exercised.
Earnings Per Share (EPS)
A corporation's net income available for common stock divided by its number of shares of common stock outstanding. For example, if a company made $1,000,000 in profit and has 1,000,000 shares outstanding, the EPS is $1/share.
Earnings Yield
A firm's current annual earnings per share divided by the share's market price. Reciprocal of the price-earnings ratio. Often viewed as a rough indicator of investment return. The inverse of the Price/Earnings ratio. It's the Total Twelve Months Earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage.
Efficient Markets
Typically defined as markets in which every investor has ready access to all relevant information, and in which any new information is instantaneously reflected in security prices.
Efficient Market Theory
All known information is already discounted by the market and reflected in the price due to market participants acting upon the information.
Elasticity
The ability to recover an original configuration.
Elliott Wave Theory
Elliott Wave Theory goes beyond traditional charting techniques by providing an overall view of market movement that helps explain why and where certain chart patterns develop. The three major aspects of wave analysis are pattern, time and ratio. The basic Elliott pattern consists of a 5-wave uptrend followed by a three-wave correction. Each "leg" of a wave in turn consists of smaller waves. Elliott waves can be used to successfully define where the market currently is in relation to "the big picture" is unreliable for short term trading.
Employee Stock Ownership Plan
Where by employees are permitted to purchase shares of the company through payroll, usually at a discount to the market.
End of Day
The close of the trading day when market prices settle.
Engulfing Pattern
In candlestick terminology, a multiple candlestick line pattern; a major reversal signal with two opposing-color real bodies making up the pattern. Also referred to as tsutsumi.
Envelope
Lines surrounding an index or indicator that is, trading bands.
EPS Rank
A rank given to companies by Investor's Business Daily. This ranks companies from 0 to 100 by strength of the company's earnings per share.
Equilibrium
A price region that represents a balance between demand and supply.
Equipment Trust Certificate
A common security that is generally issued by a railroad or airline to pay for new moveable equipment. It is secured by a first lien on the equipment.
Equity (EQ)
1. The ownership interest of common and preferred stockholders in a corporation.
2. In a margin or short account, equity equals what is owned minus what is owed.
Equity Capital
The capital in a firm that represents ownership. The difference between the assets and liabilities of a corporation-sometimes called the "net worth."
Equity Earnings
A company's share of an unconsolidated subsidiary's earnings. The equity accounting method is used when a company owns 20% to 50% of a subsidiary.
Equity Financing
Raising money for working capital or for capital expenditures by selling common or preferred stock to individual or institutional investors. In return for the money paid, the individuals or institutions receive ownership interests in the corporation.
Equity Investment
A type of investment that gives the investor ownership and the rights of ownership to the investment vehicle. (e.g., common stock, real estate, gold).
Equity Opportunity
Referred to as a stock or index.
Equivolume Chart
Created by Richard W. Arms, a chart in which the vertical axis is the high-low range for each day, while the horizontal axis represents the volume of shares of stock or the number of contracts traded for the day. The purpose of the chart is to highlight the relationship between price and volume.
Escrow Agreement
The certificate provided by an approved bank that guarantees that the indicated securities are on deposit at that bank. An investor who writes a call option and can present an escrow agreement is considered covered and does not need to meet margin requirements.
Escrowed or Pooled Shares
Outstanding shares of a company that, while entitled to vote and receive dividends, may not be bought or sold unless special approval is obtained. This technique is commonly used by mining and oil companies when treasury shares (authorized but unissued shares) are issued for new properties. Shares can be released from escrow (freed to be bought and sold) only with the permission of applicable authorities such as the stock exchange and/or the provincial securities commission.
Estimated EPS Change (%)
Change in estimated mean earnings for the current fiscal year from the last month, last three months and last six months to the current month.
Eurodollar
Dollars deposited in foreign banks, with the futures contract reflecting the rates offered between London branches of top US banks and foreign banks.
European Style Option
An option contract that can only be exercised on the expiration date.
Evening Star Pattern
The bearish counterpart of the morning star pattern; a top reversal, it should be acted on if it arises after an uptrend.
Exchange
Place where an asset, option, future, stock or derivative is bought and sold. The most well known exchange is the New York Stock Exchange.
Exchange Desk
A specific desk where an actual trade is to take place.
Ex-Date
The first date on which a security is traded without entitling the buyer to receive distributions previously declared.
Ex-Dividend
A.K.A. ex-stock dividend, this is the opposite of Cum Dividend, and literally means without dividend. The buyer of the stock in question will not receive the dividend that was just declared. The ex-dividend is taken into factor, as reflected in the stock price that will usually drop by the amount being paid. If you buy shares quoted cum dividend, i.e,. before the ex-dividend date, you will receive an upcoming already declared dividend.
Ex-Dividend Date
The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend payment. This date set by the NYSE (and generally followed on other US exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is marked with an X in newspaper listings on that date. Option contracts are usually adjusted for stock dividends but not for cash.
Execution
The process of completing an order to buy or sell securities. Once a trade is executed, it is reported by a Confirmation Report; settlement payment and transfer of ownership occurs in the U.S. 5 days after an order is executed. Settlement times for exchange-listed stocks are in the process of being reduced to three days in the U.S.
Exempt List
Large professional buyers of securities, mostly financial institutions, that are offered a portion of a new issue by one member of the banking group, on behalf of the whole syndicate.
Exempt Market
An unregulated market for sophisticated participants in government bonds, corporate issues and commercial paper. A prospectus is not required to raise money privately from these private investors (largely institutions, but also individual investors) and registration of the issue with a securities commission is not needed.
Exempt Purchaser
A category of institutional investors to which the sale of a new issue of securities does not require the issuer to file a prospectus with the applicable securities commission.
Exercise
To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security. When you exercise an option, you carry out the terms of an option contract.
Exercise Settlement Amount
The difference between the exercise price of the option and the exercise settlement value of the index on the day an exercise notice is tendered, multiplied by the index multiplier.
Expected Earnings
An expectation of what a company's earnings will be in the future. Financial analysts usually make this expectation.
Expected Return (Securities)
A term used in security analysis to indicate the expected value (or statistical mean) of all the likely returns of investments comprising an investment portfolio. Also known as the Mean Return. The purpose of the analysis of investment portfolios is to quantify the relationship between risk and return. The underlying assumption is that investors have different risk-value preferences and that rational investors will always seek the maximum return rate for every level of acceptable risk (the mean return).
Expense Ratio
The percentage of the assets that were spent to run a mutual fund (as of the last annual statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1 (distribution and advertising) fees. The expense ratio does not include brokerage costs for trading the portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of Additional Information (SAI).
Expert Systems
Dynamic but not adaptable, these are rule-driven systems that cannot learn as the result of new information being fed into its system, as opposed to neural networks, which can.
Expiration
The date and time after which an option may no longer be exercised.
Expiration Cycle
An expiration cycle relates to the dates on which options on a particular security expire. A given option will be placed in 1 of 3 cycles, the January, February or March cycle. At any point in time, an option will have contracts with 4 expiration dates outstanding, 2 in near-term months and 2 in far-term months
Expiration Date
The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the 3rd Friday of the expiration month; however, brokerage firms may set an earlier deadline for notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.
Expiration Time
The time of day by which all exercise notices must be received on the expiration date.
Explained
The relative reduction in the variation of variable Y that can be attributed to knowledge of variable X and its relationship to Y.
Explosive
An opportunity that can yield large profits with usually a limited risk in a short amount of time.
Exponential Moving Average (EMA)
The EMA for day D is calculated as: where PR is the price on day D and a (alpha) is a smoothing constant. Alpha may be estimated as 2/(n+1), where n is the simple moving average length.
Exponential Smoothing
A mathematical-statistical method of forecasting that assumes future price action is a weighted average of past periods; a mathematic series in which greater weight is given to more recent price action.
Ex-Rights
This means "without rights." Buyers of shares quoted ex-rights are not entitled to forthcoming rights.
Extendibles
Debt that provides the holder with the option to extend the maturity beyond that original date.
Extra
Short for "extra dividend." A dividend in the form of either stock or cash in addition to the regular common dividend the company usually pays to shareholders. Also referred to as a special dividend.
Extreme
The highest or lowest price during any time period, a price extreme; in the CBOT Market Profile, the highest/lowest prices the market tests during a trading day.
Extrinsic Value
The price of an option less its intrinsic value. An out-of-the money option's worth consists of nothing but extrinsic or time value.
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