Best To Deliver
In trading, to go "short" something is to bet against it. If you short a stock, you think the stock will go down in value. The mechanics of the short involves borrowing the security from someone else, selling it at current prices, then looking to rebuy the security at a later date, hopefully at a lower price. Then, once you've bought the security back, you can return it to the person or company that loaned it to you in the first place.
Stocks aren't the only thing that can get shorted. You can short bonds as well. Bonds, however, come in variety of types. They have different durations and different yields (a 10-year bond at 5% vs. a 15-year bond at 8%, etc.). With all this variety, an investor involved in a short has a lot of choices about what they will buy back in order to close the short.
That's where "best to deliver" comes in. This terminology designates what type of bond is acceptable to deliver in order to close out a short position. It represents an agreement between the parties about what the person running the short will return to the bond owner once the position has run its course.
The term also refers to a Yelp-like ranking of surgeons who are specialists in removing the liver. But that's different.
Related or Semi-related Video
Finance: What is the Arms Short Term Tra...13 Views
finance a la shmoop what is the Arms Short Term Trading Index not to be
confused with the short arms term trading index a run by this guy all [Man with dinosaur for a head sitting at a desk]
right Richard Arms invented it in the 70s and then a journalist cleverly
renamed it Trin.... short for trading index very clever
yeah well Trin as in Rin Tin is just an index for the advanced decline ratio in
the stock market and if you haven't seen our video on it oh well you should we've
had George Clooney of fortune so directed the computation of the Trin [George Clooney directing a show]
looks like this Trin equals advanced issues divided by declining issues all
over advanced volume divided by declining volume....
So note that this equation maps volume as an element of the computation so it's
meaningfully more useful than just the vanilla advanced decline ratio and hey [Man discussing equation]
just keeping it real their advanced decline ratio we love you but you're [Advanced decline ratio laying on sofa eating doughnuts]
just not as good all right well so if we compute things we get a value of 1 and
well that's good or rather a bullish sign that the market "wants to go
up" above one is bearish and at premiums of 30 40 50 percent ie [Bear walking by a river]
calculations of 0.5 very bullish to 1.5 very bearish well those are signs that
have been validated by actual market performance over time well why would we
care about this calculation in the first place, well if we get the answer right as [Man staring at a crystal ball]
to where the markets going well you know we can make a fortune
yeah ask Warren Buffett... [Warren eating dinner]
Up Next
What is short interest theory? Watch this not-so-short video to find out.
What is short covering and squeezing the shorts? Hit play to find out.
What's the long and short of short sales and shorting stock? Hit play to find out.