Some definitions to guide traders and investors--a foray into humor

Occasionally we all need a break from the seriousness of life. Here, from way back in the past, though still available online, is an abbreviated version of one of Philip M. Halperin’s “Scribblings,” originally entitled "Devil's Dictionary for Options Trading."

FUNDAMENTAL ANALYSIS

A Method by which the practitioner can, after much study, predict the impact of news the market has already discounted in its pricing.

ECONOMETRIC FORECASTING MODEL

A Learned System for predicting the immediate past.

TECHNICAL ANALYSIS

A Learned System for predicting that what has happened before might happen again.

TECHNICAL ANALYSIS SYSTEM

A Learned System for mindlessly predicting that what has happened before might happen again.

DELTA NEUTRAL

A mathematical Method for losing money on long options, regardless of which way the market trades.

DIRECTIONAL TRADING

A Technique to lose money on options volatility.

VOLATILITY TRADING

A Technique to lose money on market direction.

RISK-REWARD RATIO

A Learned Method to compare what you will lose to what you might make, assuming you don't change your position and assuming the market goes your way.

HISTORICAL VOLATILITY

An estimate of how the average ratio of market prices in some underlying actually differed from some series of ratios of market prices, for some period in the past, often used to estimate what that ratio deviation might be now.

Indispensable for historically pricing options that have already expired.

IMPLIED VOLATILITY

An estimate of the market's best guess as to what historical volatility might ultimately turn out to be. This is computed on the basis of observed options premiums that are, in turn, based on the market's estimates as to what implied volatility might be now.

CORRELATION

The cop of the quantitative world. Never around when you need it.

NUMBER (Usage: Trade Number, Inflation Number, GNP Number)

A macroeconomic figure that provides the impetus for you to profit from your best guess as to what the consensus of everybody else's best guess about what the market's best guess of that same macroeconomic figure might have been, assuming your guess about the analysts' guess consensus about the market's guess was correct.