Glossary - O

Occupational pension
A type of pension scheme provided by an employer, who must make contributions into it.

OEIC
See open ended investment company

Offer
This indicates that a shareholder is prepared to sell at a particular price.

Offer for sale
One method by which a company can issue new shares and gain stock market listing. The company or its advisers invite the public to buy shares not yet in issue at a given price. Sometimes there is a minimum subscription level, and if subscriptions fall below this level the issue will be aborted.

Offer for subscription
Where the company coming to the market prepares all the necessary documentation itself and invites applications for the shares. Very rarely used now.

Offer price
The price at which a market maker will sell shares to investors (and therefore the price that the buyer pays). This is generally lower than the bid price. The difference between the two is known as the bid/offer spread.

Offering circular
Also known as the prospectus or red herring (preliminary version), this is the formal selling document for a security issue. The document must contain the information which will allow an investor to make an informed decision regarding their investment, including the company or fund’s history, its managers’ backgrounds, its objectives, a financial statement and other essential data. In the US, the offering circular for a public offering must be filed with the SEC.

Omega
The greek letter sometimes used to denote an option’s elasticity. The change in the gamma of an option for a unit change in the price of the underlying. It is only valid within limited criteria.

Open ended investment company (OEIC)
A collective investment fund similar to a unit trust. The major differences between OEICs and unit trusts are that OEICs quote a single price rather than a bid price and an offer price, and they are governed by company law rather than trust law. Most new funds launched today are established under the OEIC structure. It is widely predicted that, over time, most unit trusts will convert to OEICs.

Open Market Option (OMO)
Your right to shop around for the best annuity rate.

Open offer
An offer made by a quoted company to its shareholders inviting them to buy new shares in the company at a set price, which is normally lower than the current market price.

Opening purchase
A transaction in which the seller of an option becomes the writer.

Opening price
The price at which a stock starts dealing, either at market opening or when stock was first listed.

Option
The right, but not obligation, to buy or sell an underlying investment at a certain point in the future at the price agreed today.

Optional offer
An offer in which a client must make a decision in which to participate or not, such as an open offer.

Order
A dealing instruction submitted to a broker.

Ordinary shares
A common form of share. The holders of ordinary shares are the owners of that company. These holders also receive dividends, which vary in amount.

OTC options
See over-the-counter options

Out of the money
When the exercise price is above (in the case of calls) or below (in the case of puts) the current market price of the underlying security. That is, it has no intrinsic value.

Out-performance option
An option on the performance of one asset in excess of the performance of another. Typically, the out-performance is measured by the excess of the one return or rate of return over the other. One might also measure the out-performance as the excess of the ratio of the two final prices over a benchmark ratio.

Over the counter (OTC) options
OTC foreign exchange (FX) options give the holder the right, but not the obligation, to buy (call options) or sell (put options) an agreed amount of one currency for another at a fixed rate, on a predetermined date. They can offer a potentially greater returns compared to futures contracts and can be a good way to hedge against future exchange risk.

Oversubscribed
Circumstances where people have applied for more shares than are available in a new issue.