RiskPicksWhat is a Security?
A security is any tradable financial asset. The term covers a wide range of instruments, but in everyday trading it almost always refers to stocks. When a regulation says "buying or selling securities" or a broker says "securities in your account," they mean the stocks, ETFs, options, and bonds you hold or trade.
Types of securities
- Equity securities (stocks): shares of ownership in a company. This is what most people mean when they say "securities"
- Debt securities (bonds): loans to a government or corporation that pay interest
- Derivative securities (options, futures): contracts whose value is based on an underlying asset like a stock or index
- Fund securities (ETFs, mutual funds): pooled investment vehicles that hold baskets of other securities
Why this term is confusing
New traders often see the word "security" in legal documents, brokerage agreements, or SEC rules and do not realize it just means "stock" in most contexts. The SEC, FINRA, and financial regulations use "security" as the formal legal term because it covers all tradable instruments, not just stocks. But for day and swing traders, 99% of the time "security" means a stock or ETF.
Common places you will see this term
- SEC filings: "the security was purchased on..."
- Brokerage disclosures: "risk of loss in trading securities"
- PDT rule: "buying and selling the same security in the same day"
- Tax documents: "proceeds from sale of securities"
If you see the word "security" in a trading context and are not sure what it means, mentally replace it with "stock" and you will be right almost every time.