Glossary

Occupational Superannuation Standards Act (OSSA)
Commonwealth Government legislation passed in 1987, governing superannuation funds and establishing the former regulatory framework administered by the Insurance and Superannuation Commission. Much of OSSA was repealed in 1993 to make way for the new regulatory regime under the SIS Legislation, which took effect on 1 July 1994.

Odd Lot
A parcel of shares that is below the minimum number necessary to be traded. See also Marketable Parcel.

OECD
Abbreviation for Organisation for Economic Co-operation and Development, an international grouping of nations, including Australia, established to promote economic development and conduct economic research.

Off-balance-sheet
Referring to financial commitments or liabilities that do not generally appear in a company's balance sheet (eg. operating leases or derivative contracts).

Offer
The price at which a person is willing to sell. (Also known as Ask).

Off Market
Relating to a transaction which occurs outside a formal market eg. transactions in unlisted securities or transactions involving listed shares which were not executed on a stock exchange. Off market transactions are conducted through negotiation rather than an `auction' system.

OPALS
Abbreviation for Optimised Portfolios As Listed Securities.

Open-end Fund
A fund in which participants buy and sell at a unit price based on the appraised value of total assets. Participants can leave and enter at any time and assets may be continually added to the fund. (Opposite of Closed-end Fund).

Opening Price
The price at which a security commences trading at the opening of a trading day.

Open Interest
The number of open contracts on a particular option indicating whether the option is liquid (ie. tradeable).

Open Order
An order to buy or sell at a stipulated price, which remains effective until it is executed, cancelled or changed to a different price.

Open Outcry
In relation to futures markets, the method of making all bids and offers verbally in the trading pit.

Open Position
In foreign exchange the situation of someone who is exposed to exchange rate movements (ie. their assets and liabilities in a particular currency do not match). The term similarly applies to exchange-traded futures and options (ie. where a buying or selling contract is not offset by its opposite position).

Operating Standards
The regulatory standards under the SIS Legislation which must be fulfilled by Superannuation Funds, Pooled Superannuation Trusts and Approved Deposit Funds to be granted complying fund status by the ISC and to qualify for concessional taxation treatment.

Operations Risk
The risk that is entailed within the operational structure of a company (eg. the separation of duties between front office and back office). It is related to the proper demarcation of responsibilities and controls on an operational level.

Optimal Portfolio
The portfolio which best meets the investor's needs and risk/return expectations among the range of all feasible portfolios.

Optimisation
A mathematical process which creates a compromise between conflicting objectives (eg. between maximising return and minimising risk). An optimisation program will identify the asset mix which is likely to give the highest return for a given risk level, or alternatively, the lowest risk portfolio to achieve a desired return. (See also Portfolio Optimisation).

Optimised Index Fund
See Index Fund.

Optimised Portfolios As Listed Securities (OPALS)
A derivatives instrument based on international equities represented by the MSCI Indices that allows investors to buy exposure to an entire overseas market in a single trade.

Optimised Sampling
See Index Fund.

Option
An agreement which conveys the right to the holder to buy (receive) or sell (deliver) a specific security at a stipulated price and within a stated period of time. If the option is not exercised during that time, the money paid for it (but no more than that amount) is forfeited. (See also Call Option and Put Option).

Option Buyer/Taker
The party who obtains the right conveyed by an option. Only the option buyer has a right to exercise the put or the call option. Opposite of Option Writer.

Option Premium
The dollar amount paid to the seller (writer) for an option. This amount is determined generally by supply and demand, duration of the contract and volatility of the underlying share price.

Option Strategy
The implementation of a market strategy through the use of option derivatives.

Option Trade
The purchase or sale of an option.

Option Writer
A person usually an investor with a large portfolio who sells put and/or call option contracts to other investors. The primary objective of the option writer is to obtain capital gain or income or to purchase stock in the future at lower than current market prices. In recent years, large financial institutions have been showing more interest in writing options against their portfolios as a way of earning more and establishing the prices at which they will buy or sell stocks.

Ordinary Shares
Securities which represent an ownership interest in a company. If the company has also issued preference shares, both have ownership rights. The preference shareholder normally is limited to a fixed dividend, but has prior claim on dividends and, in the event of liquidation, assets. Ordinary shareholders assume the greater risk, but generally exercise the greater control and may gain the greater reward in the form of dividends and capital appreciation. If the company is wound up, the ordinary shareholders generally rank behind secured creditors, including debenture holders, in the liquidation process.

Organistion for Economic Co-operation and Development
See OECD.

OSSA
Abbreviation for Occupational Superannuation Standards Act.

OTC Option
Abbreviation for Over-the-Counter Option.

Out-of-the-Money Option
A call option with an exercise price above, or to a put option with an exercise price below, the current price of the asset on which the option is written. (Opposite of In-the-Money Option).

Outperformance
Achievement of a higher investment return than a benchmark or other measure against which that return is being compared. For example, an equity fund would be said to have outperformed the All Ordinaries Index if the fund achieved a 5% return against a 3% return by the Index over the same period. (Opposite of Underperformance).

Outperformance Option
An option where value is derived from the outperformance of one security over another predetermined security, for a specified amount invested. The owner of the option has the right to receive the additional return generated by one security compared to another, calculated on the amount invested.

Overbought
Referring to a market condition under which heavy liquidation of long positions appears imminent. (Opposite of Oversold).

Overlay Manager
An investment manager engaged to manage a specific aspect of an investor's portfolio (eg. currency), on an <169>overlay<170> basis through the use of derivative instruments, usually where some or all of the underlying assets are managed by other managers. (See also Currency Overlay, Protection Overlay, and Tactical Asset Allocation Overlay).

Oversold
Referring to a market condition under which heavy liquidation of short positions appears overdue. (Opposite of Overbought).

Over-subscribed
Referring to a situation in which the value of applications received (eg. for a new share issue) exceeds the amount to be allocated.

Over-the-Counter Option (OTC Option)
Any option which is not traded on a listed exchange. It is 'tailor made' for a client by a financial institution and can only be re-sold by negotiation.

Overweight
Having a greater exposure to a particular sector or stock in an investment portfolio, compared with a neutral or benchmark position. (Opposite of Underweight).

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