Glossary of Financial Terms starting with Alphabet ‘O’

Glossary of ‘Financial Terms’ starting with Alphabet ‘O’, i.e. ‘Meaning’ or ‘Definition’ of Common and Unusual terms relating to Accounting, Auditing, Company Law, GST, Income Tax, Investments, etc., along with the ‘Context’ in which they are used.

Odd Lot

Anything less than the standard unit of trading.

Off Balance Sheet Risk

Risk relative to operations that are not reflected in variation of the institutions assets or liabilities, when undertaken, but are reflected when profit or loss occurs.

Offer Document

As per SEBI DIP guidelines, offer document means Prospectus in case of a public issue or offer for sale and Letter of Offer in case of a rights issue.

Offer For Sale

An offer of securities by existing shareholder(s) of a company to the public for subscription, through an offer document.

Offer period

The period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of completion of offer formalities relating to the offer.

Offer Price

Price at which units in trust can be bought. It often includes an entry fee. It also refers to the price at which securities are offered to the public.

Ombudsman

An independent person appointed to hear and act upon citizen’s complaint about government services. Invented in Sweden, the idea has been widely adopted. For example, groups of banks, mortgage lenders and insurance companies in various countries have appointed ombudsmen to attend to the complaints of their customers. Customers who use the ombudsman’s (free) service retain their full right to take legal action should they not agree with the ombudsman’s decision.

Open ended scheme

An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis.

Open interest

The number of contracts outstanding for a given option or futures contract.

Open market operation

Purchase or sale of government securities by the monetary authorities (RBI in India) to increase or decrease the domestic money supply.

Open Order

An order to buy and sell a security that remains in effect until it is either cancelled by the customer or executed.

Opening Price

The rate at which the first transaction in a security is struck after the opening of the market.

Operating Income

Net Sales less cost of sales, selling expenses, administrative expenses and depreciation. The pre-tax income from normal operations.

Operational risk

The risk that deficiencies in information systems or internal controls could result in unexpected losses.

Option

The contractual right, but not obligation, to buy (call option) or sell (put option) a specified amount of underlying security at a fixed price (strike price) before or at a designated future date (expiration date). The option writer is the party that sells the option. As per the Securities Contract Regulation Act (SCRA), “option in securities” means a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put, a call or a put and call in securities.

Option premium

The market price of an option that is paid by an option buyer to the option writer (seller) for the right to buy (call) or sell (put) the underlying security at a specified price (called “strike price” or “exercise price”) by the option’s expiration date.

Option Seller

Also called the option writer, the party who grants a right to trade a security at a given price in the future.

Option spread

A spread is a type of option position where you buy an option and sell an option and both of them are from the same option class.

Option Seller

Also called the option writer, the party who grants a right to trade a security at a given price in the future.

Optional Redemption

An optional call provision reserved by the issuer that becomes exercisable after a certain number of years from issue date. This provision allows the clean up of small amounts of remaining principal with thin marketability.

Order book

It is an ‘electronic book’ that shows the demand for the shares of the company at various prices.

Original Plan Poison Pill

Also called preferred stock plan. An early poison pill antitakeover defense in which the firm issues a dividend of convertible preferred stock to its common stockholders. If an acquiring firm passes a trigger point of share ownership, preferred stockholders (other than the large block holder) can put the preferred stock to the target firm (force the firm to redeem it) at the highest price paid by the acquiring firm for the target’s common or preferred stock during the past year. If the acquirer merges with the target, the preferred can be converted into acquirer voting stock with a market value no less than the redemption value at the trigger point.

OTC (Over the Counter)

A financial transaction that is not made on an organised exchange. Generally the parties must negotiate all the details of each transaction or agree to use simplifying market conventions.

Out of the money option

An option is described as being out of the money when the current price of the underlying is below the strike or exercise price for a call, and above the strike price for a put. Options can also be described as being deep out of the money when they are likely to expire out of the money.

Overtrading

A broker/ dealer overpays a customer for a security to enable the customer to subscribe to another security offered by that broker/ dealer at a higher markup than the loss to be sustained when the firm sells the customer’s first security at prevailing market prices.

Ownership Flip-in Plan

A poison pill anti-takeover defense often included as part of a flip-over plan. Target stockholders are issued rights to purchase target shares at a discount if an acquirer passes a specified level of share ownership. The acquirer’s rights are void and his or her ownership interest becomes diluted.

Leave a Reply