112 terms

Dictionary: O

Objective function: The single number an optimisation tries to maximise or minimise; the choice quietly decides what kind of strategy you end up with.
OCC (Options Clearing Corporation): The central clearing house that becomes the counterparty to every listed US option trade, guaranteeing performance and handling exercise and assignment.
OCO (one-cancels-other): Two linked orders where filling one automatically cancels the other.
Odd lot: An order or trade for fewer shares than the standard round lot, historically 100 shares in US equities.
Odd lot: An order for fewer than one round lot, under 100 shares in US equities; it executes normally but historically did not appear in the displayed quote.
Odd lot quote: A displayed interest for fewer shares than a round lot, historically excluded from the NBBO and therefore invisible in the headline quote.
OFAC: The US Treasury office that administers economic sanctions; brokers must screen customers and counterparties against its lists and block prohibited transactions.
Off-balance-sheet: Obligations or assets that do not appear on the balance sheet but still create real economic exposure, disclosed only in footnotes if at all.
Off-exchange trading: Share trading that happens away from public exchanges, through internalisers, wholesalers and dark venues, then printed to the tape afterwards.
Off-the-run: Any Treasury security that is no longer the most recently auctioned one at its maturity; slightly cheaper and less liquid than the on-the-run benchmark.
Offering discount: The gap between an offering's price and the market price just before it, the concession paid to get a large block of stock placed at once.
Office of the Comptroller of the Currency (OCC): The US Treasury bureau that charters and supervises national banks and federal savings associations; unrelated to the options clearing house with the same initials.
Official committee of equity security holders: A committee appointed in some bankruptcies to represent common shareholders, funded by the estate; its appointment is a rare sign the equity may not be worthless.
Offshore broker: A brokerage licensed in a jurisdiction with light regulation, often offering very high leverage and accepting clients that mainstream regulators would not.
OHLC: The four prices that summarise any chart period: the first trade, the highest trade, the lowest trade and the last trade.
OHLCV bar: Open, high, low, close and volume aggregated over an interval. The standard research format, and a lossy summary of what happened.
OIS (overnight index swap): A swap exchanging a fixed rate for compounded overnight rates over a period, used to read the market's expected average policy rate.
Okun's law: An empirical rule linking the output gap to the unemployment gap, usually with a coefficient near two: output one percentage point above potential goes with unemployment half a point below its natural rate.
OLS regression: Fitting a straight line by minimising the sum of squared errors. The workhorse of quantitative finance, and the source of most of its mistakes.
Omega ratio: The ratio of probability-weighted gains above a threshold to probability-weighted losses below it, using the whole return distribution.
Omission bias: Judging harm caused by doing nothing as less blameworthy than the same harm caused by acting.
Omnibus account: An account holding many underlying clients' positions in aggregate under one name, so the clearing layer sees the intermediary rather than the individual owners.
On-balance volume: A running total that adds the period's volume when price closes up and subtracts it when price closes down.
On-chain: Activity recorded directly on a blockchain, such as transfers and wallet balances, which anyone can inspect.
On-chain front-running: Submitting a transaction designed to execute before a pending one you can see, exploiting the fact that the mempool is public before settlement.
On-chain liquidation: The permissionless closing of an undercollateralised loan, where anyone may repay part of the debt and claim collateral at a discount.
On-chain volume: The total value moved on a chain in a period, distinct from exchange trading volume, which mostly happens in databases rather than on the chain.
On-the-run: The most recently auctioned Treasury security at a given maturity; it is the most liquid issue, trades at a premium to older ones, and is what quoted benchmark yields refer to.
One-time charge: A cost management labels as non-recurring, such as severance, plant closures or legal settlements, and usually excludes from adjusted earnings.
One-triggers-other (OTO): A pair of orders where the second is only submitted once the first fills, typically an entry that automatically arms a stop or target.
OPEC and OPEC+: The cartel of oil producing states, extended since 2016 to include Russia and others, whose production decisions are the largest scheduled supply variable in the crude market.
Open interest: The number of option or futures contracts currently outstanding and not yet closed, exercised, or expired.
Open interest change: The day-over-day change in contracts outstanding, published the following morning; the only public evidence of whether positions were opened or closed.
Open market operations (OMO): Central bank purchases and sales of securities, outright or through repo, used to add or drain reserves and keep the overnight rate inside the target range.
Open outcry: The rule that pit trades must be shouted publicly so any member can join, the floor's version of an order book.
Open trade equity (OTE): The unrealised profit or loss on open futures positions, which in futures is credited or debited in cash every night rather than sitting as a paper number.
Open trade risk: What a single live position would lose from the current price to its current stop, which changes as the stop moves.
Open-end fund: A fund whose share count expands and contracts with investor demand, since it creates new shares for buyers and cancels shares on redemption.
Opening auction: The single-price auction at the start of the regular session that establishes the official opening price by matching accumulated overnight orders.
Opening range: The high and low of the first minutes of the session, used as a reference for breakouts and reversals during the day.
Operating cash flow: Cash generated by running the business, starting from net income and adding back non-cash charges then adjusting for working capital movements.
Operating expenses: The costs of running the business that are not tied to producing each unit: selling, marketing, admin, and research and development.
Operating income: Profit from the core business before interest and tax: gross profit minus operating expenses. Often written EBIT.
Operating lease liability: The present value of future rent commitments, now recorded on the balance sheet alongside a matching right-of-use asset rather than disclosed in footnotes.
Operating leverage: How much profit moves for a given move in revenue, driven by the share of costs that are fixed. High operating leverage cuts both ways.
Operating margin: Operating income as a percentage of revenue; profitability of the core business before financing and tax decisions.
Operation Twist: A central bank operation that sells short-dated holdings and buys long-dated ones, lowering long yields without changing the size of the balance sheet.
Opex (expiration effects): The expiration date itself and the price behaviour around it, driven by hedges unwinding rather than by news.
Opex effects: The recurring market behaviours around monthly options expiration: pinning into Friday, elevated volume, and a change in character the following week.
Opportunity cost: The profit foregone on the part of an order that never filled, which is the hidden other half of transaction cost analysis.
Optimal f: Ralph Vince's sizing fraction that maximises geometric growth using the largest historical loss as the scaling unit.
Optimism bias: Expecting your own outcomes to beat the base rate, which is why every new trader knows the statistics and assumes they do not apply.
Optimistic rollup: A rollup that assumes posted batches are valid and relies on a challenge window in which anyone can prove fraud.
Option approval level: The tier a broker assigns to an account, controlling which option strategies it may trade — from covered calls up to naked short options.
Option class: Every listed option of one type on one underlying, across all strikes and expirations; for example all XYZ calls.
Option expiry and barrier levels: Round-number strikes and knock-out levels where large option positions expire, which tend to attract or repel spot as dealers hedge into the cut.
Option liquidity: How cheaply a contract can be entered and exited; judged by spread width, quoted size, open interest and daily volume together, not by any one of them.
Option on futures: An option whose underlying is a futures contract; exercise delivers a futures position, and margin is calculated under futures rules.
Option pricing inputs: The six things a model needs: underlying price, strike, time to expiry, interest rate, dividends, and volatility — of which only the last is unknown.
Option series: All contracts on one underlying that share the same type, strike and expiration; the single line you actually trade on a chain.
Option symbol (OCC symbology): The standardised ticker that encodes underlying, expiration date, call or put, and strike into one string.
Option tick size: The minimum price increment for a contract; typically a penny below $3 and a nickel above, unless the class is in a penny pilot.
Option volume: Contracts traded in a session; unlike open interest it resets daily and says nothing about how many positions remain outstanding.
Option-adjusted spread (OAS): The Z-spread after removing the value of any embedded options, so that callable, putable and mortgage bonds can be compared with plain bullet bonds on equal terms.
Options account approval levels: The tiered permissions a broker assigns before allowing options strategies, escalating from covered calls to spreads to naked short options, based on stated experience and finances.
Options chain: The table listing every available strike and expiration for an underlying, with bid, ask, volume, open interest, and Greeks.
Options Clearing Corporation (OCC): The central counterparty that clears and guarantees every US listed equity and index option, standing between buyer and seller so neither needs to trust the other.
Options commission: The per-contract fee charged on option trades, plus exchange and regulatory fees; a cost that scales with leg count, not with trade size in dollars.
Options flow: The stream of executed options trades, tagged by size, aggressiveness and venue, watched for evidence of informed positioning.
Options multiplier: The number of shares one option contract represents, normally 100 for US equity options.
Oracle: A service that reports off-chain information, usually prices, onto a blockchain so smart contracts can use it. The point where DeFi touches the outside world.
Oracle manipulation: Attacking a protocol by distorting the price it reads, usually by trading a thin market the oracle depends on, then exploiting the false valuation.
Order block: In smart-money-concept trading, the last opposing candle before a strong move, treated as a zone where institutions may have resting orders.
Order book: The live list of resting buy and sell limit orders at each price level for an asset.
Order book imbalance: The ratio of resting bid size to resting ask size, used as a very short-horizon signal of which way the next ticks are likely to go.
Order expiry: The rule that decides when an unfilled order dies: end of session, a chosen date, a clock time, or immediately on submission.
Order management system (OMS): The system of record for orders and positions: it captures intent, enforces compliance, tracks state from entry to settlement, and feeds books and records.
Order protection rule: The Reg NMS provision requiring venues to prevent executions at prices inferior to a protected quote displayed elsewhere, subject to defined exceptions.
Order reconciliation: Periodically comparing your system's belief about orders and positions with the broker's record, and treating the broker as authoritative when they differ.
Order rejection: A venue or broker refusing an order outright, so it never becomes live. Common causes are risk limits, bad prices, insufficient buying power and instrument restrictions.
Order routing: The decision about where an order is sent after you press the button: which exchange, dark pool or market maker actually receives it.
Order slicing: Breaking a large order into smaller pieces over time or across venues to reduce signalling and market impact.
Order-to-trade ratio: The number of order messages a participant sends per resulting trade, monitored by venues and regulators as a proxy for wasteful or abusive messaging.
Organic growth: Growth from the existing business, excluding revenue added by acquisitions and removed by disposals, and often excluding currency effects too.
Oscillator: An indicator that moves within a bounded range, designed to show whether price is stretched relative to its recent behaviour.
OTC markets: Dealer networks where stocks trade off-exchange, with tiers ranging from audited OTCQX companies down to unreported Expert Market names.
Other income and expense: The catch-all line below operating income for gains, losses and items that do not belong to the core business, such as currency moves and asset sales.
OTOCO (one-triggers-a-one-cancels-other): An entry order that, when filled, submits a linked profit target and stop where filling either one cancels the other.
Out of the money (OTM): An option with no intrinsic value: a call with the stock below its strike, or a put with the stock above it.
Out-of-sample: Data the strategy was never fitted on, used once to estimate how it will behave on data it has never seen.
Outcome bias: Grading a decision by how it turned out rather than by what you knew and how you acted when you made it.
Outcome goals: Targets stated in results - a dollar figure, a percentage, a payout - which motivate well and control badly.
Outlier: An observation far from the rest of the data. In markets it is usually either a data error or the single most important event in the sample, and telling them apart is the job.
Outlier dependence: How much of a strategy's profit comes from a handful of trades, which determines how repeatable the record really is.
Output gap: The difference between actual output and potential output, expressed as a percentage of potential; positive means the economy is running hot, negative means slack.
Outright forward: A single forward transaction quoted as one all-in rate for a future date, as opposed to the two-legged structure of an FX swap.
Outside bar: A bar with both a higher high and a lower low than the previous bar, meaning it traded through the entire prior range.
Over-the-counter (OTC): A market where trades are agreed bilaterally between two parties rather than matched on a central exchange; spot FX and retail CFDs both work this way.
Over-the-counter derivative: A derivative negotiated privately between two parties rather than traded on an exchange, customisable in every term and carrying direct exposure to the other side.
Overbought: A condition where an oscillator reads near the top of its scale, meaning price has risen quickly, not that it is due to fall.
Overconfidence: Believing your predictions and skills are more accurate than they are, which shows up as oversized positions and skipped stops.
Overfitting (curve fitting): Tuning a strategy so closely to past data that it captures the noise as well as the pattern, and therefore fails on new data.
Overnight exposure: Positions held through the close, when you cannot react and the next price you see may be far from the last.
Overnight exposure limit: A pre-set cap on how much risk or notional you will carry through the close, enforced before the bell not after it.
Overnight financing charge: The daily cost of holding a leveraged CFD position, calculated on the full notional value as a benchmark interest rate plus or minus the broker's spread.
Overnight high and low: The extremes of the session traded outside regular hours, often used as the first reference levels of the day.
Overnight index swap: A swap exchanging a fixed rate for the compounded average of an overnight rate, widely used to read market expectations for central bank policy.
Overnight margin: The full exchange-set margin that applies to any futures position still open at the end of the session.
Overnight reverse repo facility (ON RRP): A Fed facility where money funds and others park cash overnight at a fixed rate, setting a floor under short-term interest rates.
Overnight session: The part of the futures day outside US cash hours, driven by Asian and European trade and by scheduled foreign data.
Oversold: A condition where an oscillator reads near the bottom of its scale, meaning price has fallen quickly, not that a bounce is owed.
Overtrading: Taking more trades than your plan calls for, usually out of boredom, FOMO, or the need to make something happen.

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