Investment Terms

A strangle is an options strategy in which the investor holds a position in both a call and a put option with different strike prices, but with the same expiration date and underlying asset. A strangle is a good strategy if you think the underlying security will experience a large price movement in the near future but are unsure of the direction. However, it is profitable mainly if the asset does swing sharply in price.
A strangle is similar to a straddle but uses options at different strike prices, while a straddle uses a call and put it at the same strike price.
In a long strangle—the more common strategy—the investor simultaneously buys an out-of-the-money call and an out-of-the-money put option. The call option's strike price is higher than the underlying asset's current market price, while the put has a strike price that is lower than the asset's market price. This strategy has a large profit potential since the call option has theoretically unlimited upside if the underlying asset rises in price, while the put option can profit if the underlying asset falls. The risk on the trade is limited to the premium paid for the two options.
An investor doing a short strangle simultaneously sells an out-of-the-money put and an out-of-the-money call. This approach is a neutral strategy with limited profit potential. A short strangle profits when the price of the underlying stock trades in a narrow range between the breakeven points. The maximum profit is equivalent to the net premium received for writing the two options, with less trading costs.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

A straddle is a neutral options strategy that involves simultaneously buying both a put option and a call option for the underlying security with the same strike price and the same expiration date.
A trader will profit from a long straddle when the price of the security rises or falls from the strike price by an amount more than the total cost of the premium paid. The profit potential is virtually unlimited, so long as the underlying security price moves very sharply.
More broadly, straddle strategies in finance refer to two separate transactions which both involve the same underlying security, with the two-component transactions offsetting one another.
Investors tend to employ a straddle when they anticipate a significant move in a stock's price but are unsure about whether the price will move up or down.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

A shadow banking system is a group of financial intermediaries facilitating the creation of credit across the global financial system but whose members are not subject to regulatory oversight. The shadow banking system also refers to unregulated activities by regulated institutions. Examples of intermediaries not subject to regulation include hedge funds, unlisted derivatives, and other unlisted instruments, while examples of unregulated activities by regulated institutions include credit default swaps.
The shadow banking system has escaped regulation primarily because unlike traditional banks and credit unions, these institutions do not accept traditional deposits. Shadow banking institutions arose as innovators in financial markets who were able to finance lending for real estate and other purposes but who did not face the normal regulatory oversight and rules regarding capital reserves and liquidity that are required of traditional lenders in order to help prevent bank failures, runs on banks, and financial crises.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

A mad hatter is a chief executive officer whose ability to lead a company is highly suspect. Mad Hatter CEOs are often characterized by misconduct or impulsive and puzzling decisions that employees, board members, and shareholders may question. They often act spontaneously with little regard for viable alternatives or consequences.
The term Mad Hatter refers to a leader or CEO of a company who is ill-equipped for the role. They might have assumed power because they were founders of the company, through nepotism, or due to a poorly planned succession protocol.
Once in power, Mad Hatter CEOs tend to exhibit poor decision-making skills by acting out of self-interest, haste, ego, or gut feelings. As a result of incompetent, incapable, or misguided leadership at the top, the morale of managers and employees suffers.
Typically, Mad Hatter CEOs are either removed or stay in power until their companies are run into the ground.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

A wage assignment is an act of taking money directly from an employee's paycheck in order to pay back a debt obligation. Wage assignments may be either voluntary or involuntary, depending on the situation.
Such an automatic withholding plan may be used to pay back a variety of debt obligations, including back taxes, defaulted student loan debt, and both child and spousal support payments.
A wage assignment is typically a last resort of a lender to receive repayment from a borrower who has previously failed to pay a debt obligation. A wage assignment, when involuntary, may also be referred to as wage garnishment and requires a court order.1
Wage assignments are typically incurred for debts that have gone unpaid for a prolonged period of time. Wage assignments can be divided into two categories: voluntary and involuntary. Employees may sometimes opt for a voluntarily wage assignment to pay for things like union dues or to contribute to a retirement fund.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

An X-mark signature is made by a person in lieu of an actual signature. Due to illiteracy or disability, a person may be unable to append a full signature in name to a document as an attestation that its content has been reviewed and approved. In order to be legally valid, the X-mark signature must be witnessed.
X-mark signatures are so named because historically the person signing the document simply makes a cross-hatched mark resembling a letter "X" rather than their full, customary signature. The actual form of the X-mark may not actually be a letter "X" and might take some other form of illegible mark meant to authenticate that the person understands and agrees to the stated terms.
Due to the obvious potential for fraud, doubts may arise about the validity and enforceability of documents signed with X-mark signatures. In some states, the presiding law can require courts to invalidate wills signed with an X unless the testator was physically or mentally incapable of signing their own full name.
An individual might use an X-mark signature if they have been injured in an accident and need to approve a legal document but cannot physically form a full signature. For example, the testator may need to grant power of attorney to a responsible party while they are being treated in a hospital.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

The term shark watcher refers to a professional or firm that specializes in the early detection of hostile takeovers. Shark watchers are hired by firms that are concerned about the possibility of being targeted by larger corporations. They monitor aspects of a firm's trading activity on the market that could indicate a possible takeover, such as who is accumulating shares and the number of shares acquired.
Large corporations often look at smaller companies and startups as easy takeover targets. The target firm may have a product or service worth acquiring, the acquirer may want to tap into a new market, its business operations may align with the acquirer, or the target may be competing with the larger company.
When a company doesn't want to be taken over, the potential acquirer may decide to pursue a hostile takeover. This occurs when the company behind the takeover tries to buy enough shares of the target on the open market or by purchasing shares from existing shareholders. Acquirers may also try to take control of the company and replace its management team to approve the takeover.
Companies may have experience problems with their share prices as a result of issues with management, finances, or its business. Potential targets have to be vigilant to prevent themselves from being taken over. One way to do so is by hiring what the financial industry calls a shark watcher.
The term is analogous to a large shark swimming around a body of water in search of smaller fish to swallow up.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

A currency peg is a policy in which a national government sets a specific fixed exchange rate for its currency with a foreign currency or a basket of currencies. Pegging a currency stabilizes the exchange rate between countries. Doing so provides long-term predictability of exchange rates for business planning. However, a currency peg can be challenging to maintain and distort markets if it is too far removed from the natural market price.
The primary motivation for currency pegs is to encourage trade between countries by reducing foreign exchange risk. Profit margins for many businesses are low, so a small shift in exchange rates can eliminate profits and force firms to find new suppliers. That is particularly true in the highly competitive retail industry.
Countries commonly establish a currency peg with a stronger or more developed economy so that domestic companies can access broader markets with less risk.
The U.S. dollar, the euro, and gold have historically been popular choices. Currency pegs create stability between trading partners and can remain in place for decades. For example, the Hong Kong dollar has been pegged to the U.S. dollar since 1983.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

The term Chinese wall, as it is used in the business world, describes a virtual barrier intended to block the exchange of information between departments if it might result in business activities that are ethically or legally questionable. In the United States, corporations, brokerage firms, investment banks, and retail banks have used Chinese walls to describe situations where there is a need to maintain confidentiality in order to prevent conflicts of interest.
Over the years, large financial institutions have used Chinese wall policies as a means to self-regulate their business dealings by creating ethical boundaries between departments. However, these efforts have not always been effective. Thus, the Securities and Exchange Commission (SEC) has enacted regulations governing how financial institutions share information.
The SEC has implemented fines, penalties, and legal consequences for companies that break these regulations.
The need for a Chinese wall in the financial industry became more critical after the enactment of the Gramm-Leach-Bliley Act of 1999. The law repealed federal regulations prohibiting companies from providing any combination of banking, investing, and insurance services.
The GLBA reversed restrictions on such combinations that had been in place since the Great Depression. The GLBA also enabled the creation of today's financial giants such as Citigroup and JPMorgan Chase.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.

A candlestick is a type of price chart used in technical analysis that displays the high, low, open, and closing prices of a security for a specific period. It originated from Japanese rice merchants and traders to track market prices and daily momentum for hundreds of years before becoming popularized in the United States. The wide part of the candlestick is called the real body and tells investors whether the closing price was higher or lower than the opening price (black/red if the stock closed lower, white/green if the stock closed higher).
The candlestick's shadows show the day's high and low and how they compare to the open and close. A candlestick's shape varies based on the relationship between the day's high, low, opening and closing prices.
Candlesticks reflect the impact of investor sentiment on security prices and are used by technical analysts to determine when to enter and exit trades. Candlestick charting is based on a technique developed in Japan in the 1700s for tracking the price of rice.
Candlesticks are a suitable technique for trading any liquid financial asset such as stocks, foreign exchange and futures.

Become a supporter of this podcast: https://www.spreaker.com/podcast/investment-terms--4432332/support.