Business Glossary

ratio obtained by dividing odd lot short sales by total odd-lot sales, using New York Stock Exchange (NYSE) statistics; also called the odd-lot selling indicator. Historically, odd-lot investors-those who buy and sell in less than 100-share round lots-react to market highs and lows; when the market reaches a low point, odd-lot short sales reach a high point, and vice versa. The oddlot ratio has followed the opposite pattern of the NYSEmember short sale ratio.

ratio of the total shares sold short for the accounts of New York Stock Exchange members in one week divided by the total short sales for the same week. Because the specialists, floor traders, and off-the-floor traders who trade for members' accounts are generally considered the best minds in the business, the ratio is a valuable indicator of market trends. Aratio of 82% or higher is considered bearish; a ratio of 68% or lower is positive and bullish. The member short sale ratio appears with other NYSE round lot statistics in the Monday edition of The Wall Street Journal and in Barron's, a weekly financial newspaper.

selling securities (or commodities futures contracts) not owned by the seller. The investor (seller) earns a profit when the market price of the security declines, and loses money when the purchase price is higher than the original selling price. To make a short sale, the broker borrows stock and loans it to the investor. Later on, hopefully when the market price is lower, the investor buys the shares to repay the lending broker. Assume an investor sells short 50 shares of stock having a market price of $25, for a total of $1250. The broker borrows the shares and holds onto the proceeds of the short sale to secure the loan and satisfy margin requirements. Later on, the investor buys the stock at $20 a share, repays the 50 shares, earning a per share profit of $5, or a total of $250.

Investors "sell short against the box" when they sell short shares they actually own ( not borrowed shares). Short sales against the box may occur so that a loss is minimized or the tax consequences of a long sale may be postponed to a subsequent tax year.

ratio of the amount of stock sold short by specialists on the floor of the New York Stock Exchange to total short sales. The ratio signals whether specialists are more or less bearish (expecting prices to decline) on the outlook for stock prices than other NYSE members and the public. Since specialists must constantly be selling stock short in order to provide for an orderly market in the stocks they trade, their short sales cannot be entirely regarded as an indication of how they perceive trends. Still, their overall short sales activity reflects knowledge, and technical analysts watch the specialist's short-sale ratio carefully for a clue to imminent upturns or downturns in stock prices. Traditionally, when the ratio rises above 60%, it is considered a bearish signal. A drop below 45% is seen as bullish and below 35% is considered extremely bullish.