The lexicon used by traders and investment bankers on Wall Street is often portrayed by Hollywood in the following manner: a protagonist in an alluring job spouts off terms with braggadocious gusto.
Indeed, the equity, futures, options and commodities trading floors are still dominated by a heavy dose of testosterone. While traders rely less on open outcries to express their buy and sell orders with a combination of hand signals and shouting, the lingo allows them to voice their positions unequivocally.While the language sounds downright dirty and similar to raunchy come-ons from the '80s and '90s, the terms actually have underlying technical financial meanings.
Here are ten Wall Street terms that are commonly used and what they really mean.
Watch More with TheStreet:
- Inside Crystal Cruises' Mind Blowing Boeing 777 Private Jet That Seats Only 84 People
- Tesla's Elon Musk and 3 Other Business Titans Think Artificial Intelligence Will Send You the Pink Slip
- Why Your Dream Job Might Not Be Advertised Online
- How Birchbox Took on Macy's, J.C. Penney and the $500 Billion Beauty Counter
A position is the number of shares of a stock or commodity that a trader plans to buy, sell or short.
A long bond refers to the 30-year Treasury bond. It is "long," because the maturity of the bond is 30 years. The same lingo can be used for stocks, such as "I am taking a long position on this stock," which means the investor believes the stock will rise in value over time.
A short position is more complicated and involves a stock losing its value. Traders who are wrong can lose a lot of money since they are borrowing money from the broker.
The spread typically refers to the amount the stock is selling for on the market and what a trader wants to pay for it or the difference between a stock's value over a certain period of time. In the options market, a spread is buying one option and selling another. A spread position is entered by buying and selling an equal number of options of the same class on the same underlying security but with different strike prices or expiration dates. If you're feeling extra naughty, you might familiarize yourself with a crack spread, the difference between the crude oil price and the price of the petroleum products procured from it -- used both in the oil industry and the futures market.
4. Big swinging d---
This is the person on Wall Street who is able to bring in the largest client, close the insane deals and generate a huge bonus. The BSD is revered and the role model on Wall Street.
It may sound dirty, but straddles allow traders to capitalize on big moves in either direction. A long straddle is a two-part options strategy which includes the purchase of a call and a put at the same strike price with the same expiration date. The risk for this strategy is the combined price paid for both options.
This term sounds even naughtier, but a strangle is another options strategy when an investor purchases a call and a put with strike prices that are above and below the current stock, ETF or index price.
7. Butterfly spread
This complicated options strategy consists of three strike prices. Start with a long call butterfly when you purchase one call at the lowest strike price, write two calls at the middle strike price and buy one call at the highest strike price, according to the Options Industry Council. Then create a long put butterfly by buying one put at the highest strike price, writing two puts at the middle strike price and buying one put at the lowest strike price.
8. Fill-or-kill order (FOK)
This is another options strategy where order needs to be executed completely or not at all, according to the Options Industry Council.
"A fill-or-kill order is similar to an all-or-none (AON) order," according to the industry cooperative. "The difference is that if the order cannot be completely executed (i.e., filled in its entirety) as soon as it is announced in the trading crowd, it is killed (cancelled) immediately. Unlike an AON order, an FOK order cannot be used as part of a good-'til-cancelled order."
9. Swing trading
This occurs when someone is trading stocks or options and is attempting to capture short-term movements in the market, but it only last for a few days or up to a couple of weeks.
10. Reverse iron condor
The reverse iron condor is a long call spread and a long put spread designed to profit from a big move in the stock either way. The upside is limited because of the use of spreads to lower the costs. The risk is limited to the total debit for both spreads.
Don't Miss These Weekend Reads on TheStreet: