E

Earnings Per Share (EPS)

The EPS is the company's profit divided by the number of its outstanding shares.

If a company earning USD 10 million in one year had USD 10 million shares of stock outstanding, its EPS would be USD 1 per share.

Companies often use a weighted average of shares outstanding over the reporting term when calculating EPS.

Equities

A financial instrument that represents partial ownership of a company. Known as Stocks, equities, or shares.

European-style Option

Options that can only be exercised on the expiration date.

Exchange

A market where securities, Options, Futures and/or commodities are traded.

Exchange rate

What one currency is worth in terms of another. For example, one Argentine dollar might be worth 58 US cents or 70 Japanese yen. Currencies traded freely in foreign-exchange markets have a spot rate (applying to trades settled 'spot', that is, two working days hence) and a forward rate (which is the spot rate adjusted for the interest rate differential between the two currencies until maturity). Countries can determine their exchange rates in several ways:

  • A floating exchange rate system, where the currency finds its own level in the market.
  • A crawling or flexible peg system, which is a combination of an officially fixed rate and frequent small adjustments that in theory work against a build-up of speculation about a revaluation or devaluation.
  • A fixed exchange-rate system, where the value of the currency is set by the government and/or the central bank.

Excercise

You exercise an Option when you invoke the right to purchase or sell the underlying asset at the price stated in the Option contract.

Expiration date

The expiration date is the day on which the Option expires. Options that can only be exercised on the expiration date are called European Options. There are also Options that can be exercised at any time after the creation of the Option contract and up to and on the expiration date, or just at discrete intervals during the contract period. These are respectively called American and Bermudan (also Mid-Atlantic) Options.

Exposure

Being subject to risk, such as an exposure to foreign currency exchange-rate fluctuations.

Exposure coverage

The percentage of the exposure covered by funds available for margin.

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