Glossary - B

Backwardation

A condition where spot prices exceed forward prices

Back-Testing

A strategy is tested on historical data and then the strategy is applied to new data to see if the results are consistent.

Basis

The difference between spot (cash) prices and the futures contract price.

Basis Points

A measure for the yield on any security; one basis point equals 0.01% of the yield. For example, if an interest rate or yield moves from 6% to 6 .25% it is said to rise by 25 basis points.

Basket Trades

Large transactions made up of a number of different stocks.

Bear Market

A period of declining market prices.

Bear Spread

In most commodities and financial instruments, the term refers to selling the nearby contract month, and buying the deferred contract, to profit from a change in the price relationship.

Bear Trap

A signal that suggests the rising trend of an index or stock has reversed but the signal proves to be false.

Beta (Coefficient)

A measure of the market/non diversifiable risk associated with any given security in the market. The higher the beta the greater the expected volatility of a given stock relative to a specific movement in the market, and vice versa. If a stock increased in value by 12% while the market increased by 10%, the stock's beta would be 1.2. Other things being equal a portfolio with a high beta would be expected to out perform the market on the upside and under perform on the downside.

Bias

The difference between the expected value of an estimator and the actual value to be estimated.

Bid

An expression indicating a desire to buy a commodity at a given price, opposite of offer.

Binary Option

A type of option that features a discontinuous pay-off.

Black-Scholes Option Pricing Model

A model developed to estimate the market value of option contracts.

Block Trades

Large transactions of a particular stock sold as a unit.

Blow-Off Top

A steep and rapid increase in price followed by a steep and rapid drop in price. A blow-off is interpreted as an exhaustion move.

Book Entry Securities

Electronically recorded securities that include each creditor's name, address, Social Security or tax identification number, and dollar amount loaned, (I.e., no certificates are issued to bond holders, instead the transfer agent electronically credits interest payments to each creditor's bank account on a designated date).

Boolean

Describes a variable that may have one of only two possible values:  true or false.

Breakaway Gap

A gap develops on a chart when the trading range for one period exceeds that of the previous chart leaving a gap or blank space in the chart. A breakaway gap occurs when the gap is associated with a breakout of some kind. Typically, such gaps appear at the completion of important chart formations.

Breakout

A price move that takes a security beyond a specific measurable benchmark. Examples would be a moving average crossover, trendline violation or price pattern completion.

Broadening Formations with Flat Bottom

Are formed after the price makes a series of successively higher peaks (the broadening part). The reactions are turned back at approximately the same level (the flat part). Downside breakouts below the horizontal level of support are often followed by sharp declines.

Broadening Formations with Flat Top

Are formed when a price makes a series of successive new lows (the broadening part) but each rally is held back at approximately the same level (the flat part). Upside breakouts that are accompanied by heavy volume are often associated with very powerful moves.

Broker

A company or individual that executes futures and options orders on behalf of financial and commercial institutions and/or the general public.

Bull Market

A period of rising market prices.

Bull Spread

In most commodities and financial instruments, the term refers to buying the nearby month, and selling the deferred month, to profit from the change in the price relationship. 

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