L - Return to Index

Lambda - Is an option term sometimes used as a synonym for vega, kappa, or sigma. See Vega.

Last-In First-Out - Is the accounting technique whereby the last items in inventory are paired against the first items sold out of inventory.

Last Notice Day - Is the final day to indicate an intent to make a commodity delivery.

Last Trading Day - Is the final day of trading for a specific futures, options, or other derivative contract.

LBO - Is a Leveraged Buy Out. This transaction relies on borrowing funds. Often these borrowings are secured by various assets of the company which is targeted for acquisition.

Leg - Is a part or piece of a transaction or position. For example, in futures trading there is a long leg and a short leg to a spread position. See To Leg.

Legal List - Is the list of acceptable investments which can be made by banks, insurance companies, and other specified financial institutions. Often these lists are compiled by states. These lists often indicate that investment grade securities are only permissible for investment purposes.

Legs - Refers to a security or a market which has the capacity to continue an underlying trend.

Lending - Is the action of a creditor. The lending can be either funds or securities. When it is securities it is usually for short selling purposes. This short selling can be speculative or hedging oriented.

Leptokurtic (Leptokurtosis) - Describes the relatively peaked condition for a distribution. This condition is evaluated against the normal distribution and its attendant bell-shaped curve.

Lessee - Is the person who rents a property from its owner. These properties can be real estate, precious metals or other assets. When the asset is real estate the lessee is the tenant.

Lessor - Is the person who leases out a property to another person (lessee). The lessor either owns the property of holds a master lease which grants ownership-type powers. In the case of real estate, the lessor would be considered as the landlord.

Levels I, II and III - See NASDAQ.

Leverage - Refers to the concept of increasing, multiplying, or magnifying the market impact of an investment. Leverage magnifies both the gains or the losses. In corporate finance, leverage often means the amount of debt to equity. Borrowing can enhance shareholder equity returns because the interest is deductible but the profits remain for the common share investors.

For derivative products, little or no margin is required for placing positions. Depending on the instrument, market, exchange and other factors, valuation swings may have to be satisfied by new margin or performance bond monies.

For illustrative purposes, a $100,000 bond could be bought for cash. If the market moved one point in price, the investor would make or lose $1,000.

A person could acquire market performance of the same bond for an initial deposit of $2,500 via the futures markets. Again, a one point price swing would translate into $1,000, plus or minus.

Depending on whom you are you may be able to "repo" or borrow against this bond for 1-2 percent cash down and finance the difference.

As can be seen, paying all cash is effectively 100 percent margin and no leverage. A single futures or comparable derivatives transaction would result in an initial placement of $2,500 leaving $97,500 in reserve, so to speak. Or, one can engage in purchasing 40 contract equivalents which would represent $4 million dollars of bonds with no reserve. This would be result in an initial 40:1 leverage arrangement. Here, if the market rallied by 1 point in price then the investor would profit by $40,000. If the market declined by one point in price, then it would cause a $40,000 loss.

LIBOR - Is the London Interbank Offered Rate.

Licensed Warehouses - Are facilities approved for the storage of a futures exchange traded commodity. Sometimes, the term is used specifically to refer to some commodities such as copper versus a precious metal.

Licenses - See Series 3 for Commodities and Series 7 for General Securities. More licenses are listed in that section.

Lien - Is a claim against a property.

Life of Contract - Is the time period which covers the commencement and cessation of trading for a specific futures contract. This is different from all time history, all-time high, and all-time low.

LIFFE - Is the London International Financial Futures and Options Exchange.

LIFO - See Last In First-Out.

Light Crude Oil - Is petroleum with a low specific gravity and a high API gravity. It has a relatively high proportion of light hydrocarbon products or fractions. Compare to Heavy Crude Oil.

Limit - Is an order which is to be filled at that stated price or better. Or better means a lower than the stated price for a buy or a higher than the stated price for a sale.

Liquidation - Is the act of selling some or all positions to reduce or close out a portfolio.

Liquidation Value - Is the expected or realized value of cash remaining after a complete liquidation occurs.

Liquidity - Is a characteristic of a market where size and speed of executions are sufficient to absorb many orders with little disturbance in price and in a timely manner.

Listed - Refers to securities which are approved for trading on a recognized exchange. Is a security or instrument which is traded on a recognized exchange. This compares to the unlisted or Over-the-Counter market.

LME - Is the London Metal Exchange.

LMT - See Limit.

Local - Is a floor trader who is a member of an exchange. He trades for his own account as opposed to doing transactions for the accounts of customers.

LOI - Is a Letter of Intent.

Long - Is a purchased position or a party who is bullish on the market.

Long Hedge - Refers to the status of the open futures contract equivalent position. Here, it is understood that the hedger is long futures against a short actual position.

Long Industrials - Are investment grade U.S. corporate bonds. Maturities exceed 10 years.

Long the Basis - Refers to the status of the open cash or spot market position. Here, the hedger would be long the cash market and short the futures or forward market. Compare to Short the Basis.

Long Coupon - Refers to the initial coupon for a municipal security which reflects more than 6 months of accrued interest. The time of accrual is measure from the start of the Dated Date and continues until the end of the initial accrual period. Compare to Short Coupon.

Lookahead Time - Is the forward-looking time interval. Usually, it refers to one day but it can be more or less. For the calculation of SPAN® statistics it is usually set at one day, or from the present to the next day.

Lookback - Is an option which permits the holder to effectively buy the low in the case of a call or sell the high in the case of a put. The time frame is defined as the term to expiration for the option.

Lot - Is one contract, car, or unit of trading in the commodities markets.

LTV - Is the Loan-to-Value statistic. It is the percentage that a creditor is prepared to lend against an asset such as real estate. For example, an LTV of 70 (percent) would mean that $70,000 could be borrowed against $100,000 of acceptable collateral.

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