Financy Glossary
The online dictionary of financial terms

c

Call Option

A call option (also known as callable option) gives the holder a right but not an obligation to purchase a stated quantity of the underlying instrument at a predefined price.

The opposite is a put option, which gives the holder a right but not an obligation to sell a stated quantity of the underlying instrument at a predefined price.

Canary Call

A Canary Call is a step-up bond where the issuer of the bond reserves the right to call back the bond until the first step has been reached. The bond can only be called on specific dates outlined in the bond contract. (In this regard, it is similar to a Bermuda option.)

Chinese Wall

In finance, a Chinese Wall is the practice of separating to departments within the same financial institution in order to prevent information from moving between the two departments. A bank may for instance have one department specializing in advice concerning takeovers and mergers, and another department that specializes in giving stock investment advice to clients. Both departments handle sensitive financial information, and conflicts of interest could easily appear if they weren’t properly separated from each other. If confidential information about an impending merger were to reach the investment advice department, there is a risk of illegal insider trading.

Chinese Walls are also utilized by law firms to prevent conflicts of interest.

Churning

Churning is the unjustified overtrading by a stockbroker or fund manager. A broker or manager that earns a commission whenever a trade is carried out has an incentive to carry out as many trades as possible, hence the risk of churning.

Closing 52 Week High

The highest closing price for a specific security over the last 52 weeks.

Closing 52 Week Low

The lowest closing price for a specific security over the last 52 weeks.

COMEX

The Commodity Exchange in New York (COMEX) is a division of the New York Mercantile Exchange (NYMEX) . COMEX is the main U.S. market for metal futures and metal options (except the ones for platinum and palladium).

Cost To Close

The cost of liquidating an outstanding contract at the current market price.

The term is commonly used by forward foreign exchange traders.

Covered Call Fund

A covered call fund is a pooled investment vehicle that combines stock investments with the sale (issuing) of call options based on stocks owned by the fund. If the owner of an option decides to exercise it, the fund owns the stock that it is obligated to sell. This means that the fund wont be forced to purchase stocks on the open market to honor their obligations.

A covered call fund will typically outperform the underlying stock portfolio in a bear market.

Cyclical Stock

Cyclical stock is the stock of a company whose profits tend to move in a cyclical manner in phase with the overall economy. If the economy is doing well, profits increase. If the economy is doing poorly, profits decrease. Many manufacturing companies are cyclical stock companies since they will sell more products in a prosperous economy and less products during recessions.

A popular investment strategy is to purchase cyclical stock just before the economy starts to rise again after a low-period. Of course, detecting this spot is notoriously difficult.