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ForensicTrader.com Glossary 10Q - An unaudited financial report submitted on a quarterly basis to the SEC by any public companies whose securities are listed with the SEC. The report contains financial and other relevant information. 10K - An audited report of a corporation's year-end financial results and operations filed annually with the SEC. The report contains detailed information related to the company's financial condition, legal liabilities and plans for the upcoming year. Shareholders may obtain a free copy of this report from the corporation. 52-Week Hi/Lo - The highest and lowest prices at which a security traded in the past year (52 weeks). Accreted Interest - The difference between par value of a zero coupon security and purchase price. Also called original issue discount. Yearly accreted interest is the amount of accreted interest "earned" each year that you hold a zero coupon investment. Accrued Interest - The amount of interest that the buyer owes the seller on transactions involving fixed income securities, such as most bonds and notes. Acquisition - The process of one firm or company buying another firm or company. Adviser - The firm primarily responsible for a fund's day-to-day operation. Agency Security - Any of the bills, notes, and bonds issued by agencies of the federal government. Aggressive Growth Funds - Mutual funds that focus on small-company stocks that have the potential for accelerated earnings. Allocation - The process of deciding which investment (choice or combination of choices) best fits your goals, time horizons, and capital availability. All-or-None (AON) - A type of order instructing the exchange or market maker to execute the entire order quantity at the stated price (or better) or none of it. American Depositary Receipt (ADR) - A negotiable certificate held in an U.S. bank representing a specific number of shares of a foreign stock traded on an U.S. stock exchange. American Depositary Share (ADS) - The share issued under an ADR agreement, which is actually traded. American Stock Exchange (AMEX) - A major stocks and options exchange located at 86 Trinity Place, New York, NY. American-Style Option - An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American-style. Analyst - An employee of a brokerage firm or mutual fund who studies companies and makes buy and sell recommendations on their stocks. Most specialize in a specific industry. Annual Percentage Yield (APY) - The total income an investment earns per year. The APY generally represents the total earnings of a cash account such as a money market fund or savings account, though forms only part of the returns from stocks and bonds, which can also experience capital growth. Annual Report - An audited report of a corporation's year-end financial results and operations filed annually with the SEC. The report contains detailed information related to the company's financial condition, legal liabilities and plans for the upcoming year. Shareholders may obtain a free copy of this report from the corporation. Annual Report- Mutual Fund - A report that gives an overview of a fund's performance and operations; the SEC requires funds to distribute the report to shareholders at least semiannually. Annualized Returns - The return on an investment over a specified number of years. The return is reported as what an investor would have received each year were the investment's cumulative return distributed evenly over each year of the time period under construction. Appreciation Funds - Types of funds that invest in stocks whose value is expected to increase significantly. Arbitrage - Profiting from differences in the price of a single security that is traded on more than one market. Arbitration - A method of settling a dispute by utilizing an impartial individual or individuals. All exchanges and securities associations have adopted a Code of Arbitration through which all disputes between firms, employees and firms, and firms and clearing corporations are settled. Arms Index - Also known as TRading INdex (TRIN) - A market indicator used in technical analysis, calculated as follows: Arms Index = ((# of advancing issues / # of declining issues) / (Total up volume / Total down volume)). A value of less than 1 is considered bullish, greater than 1 bearish. Ask (Asked Price) - The lowest round lot price at which a broker will offer for sale a security on an exchange or over-the-counter market. As-of - A term used to describe any trade processed not on the actual trade date, but "as of" the actual trade date. Asset - 1) Any holding that has monetary value, such as a house, a car or jewelry. Financial assets include stocks, bonds and real estate. 2) Anything owned that could, in theory, be sold or otherwise converted into money (such as homes, cars, boats, jewelry or stocks). The asset value of an object may be more or less than the price paid for it, and not all things purchased are "assets" in the monetary sense. A college education may be a career asset, but since it can't be cashed in; it's not a financial asset. Asset Allocation - The percentage breakdown of how assets are invested in a portfolio. The primary asset categories of a portfolio are cash, bonds and stocks. Asset Allocation Funds - Funds that seek to provide the optimal mix of stocks, bonds and cash at any given time. Assign - Action of the option holder (buyer) requiring the option seller (writer) to complete the terms of the option contract. The writer of a put would be required to buy stock from the holder and the writer of a call would be required to deliver stock to the holder. Assignment - The receipt of an exercise notice by an options writer that requires him to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price. At-the-Money - An option is at-the-money if the strike price of the option is equal to the market price of the underlying security. For example, if XYZ stock is trading at 54, then the XYZ 54 option is at-the-money. Auction Market - A market where buyers and sellers enter simultaneous bids and offers, such as the New York Stock Exchange. Auction (Treasury) - The issuance of new Treasury bills, notes, and bonds at stated intervals by the Federal Reserve. Automated Clearing-House (ACH) - A method of transferring funds. Member banks wire instructions to the automated clearing-house that will then wire to the appropriate receiving bank. Automatic Investment Plan - A fixed sum that is regularly deducted from your paycheck or bank account, then automatically invested in a mutual fund, 401(k) plan or a retirement investment account. Autoregressive - Using previous data to predict future data. Average - Also known as an index, a mathematical computation that indicates the value of a number of securities as a group. The three most popular averages are the Dow Jones Industrial Average (DJI), Standard & Poor's (S&P) 500, and the New York Stock Exchange Composite. The average, which may be market-weighted, share-weighted, or price-weighted, indicates performance. Average Life - The estimate of maturity for a pool of mortgage-backed securities. Average Maturity - The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with a longer average life. Away From the Market - A trade order placed that is either below or above the current trading range. This type of order can be placed under a specialist's care. From this point on, the specialist is in charge of representing the order. Back Office - Brokerage firms' clerical operations that support the trading operations. Responsibilities include settlement of trades, preparation of all written confirmation and, record keeping and regulatory compliance. Balanced Funds - Mutual funds that invest in both stocks and bonds in an attempt to provide investors with growth and income. Balance Sheet - An accounting statement reflecting the firm's financial condition in terms of assets, liabilities, and net worth (ownership). In a balance sheet, Net Worth = Assets + Liabilities. Banker's Acceptance - A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts from face value in the secondary market. These instruments have been a popular investment for money market funds. Bankruptcy - The financial state of being unable to pay debts. Federal bankruptcy laws provide for either the reorganization or liquidation of corporate business and assets to pay some creditors. Basis - The total cost an investor pays to acquire a security or asset. For tax purposes it is used to determine capital gains or losses when the asset is sold. Basis Points - Refers to yield on bonds. Each percentage point of yield in bonds equals 100 basis points. If a bond yield changes from 7.25% to 7.39%, that's a rise of 14 basis points. Basis Price - A method of pricing municipal bonds, Treasury-bills, and certain other debt instruments as an expression of yield to maturity rather than price. Bear - An investor who believes a stock or the overall market will decline. Bear Market - A market in which prices of securities are generally declining. Bearer Stocks/Shares - Securities for which no register of ownership is kept by the company. A bearer certificate has an intrinsic value. Dividends are not received automatically from the company but must be claimed by removing and returning "coupons" attached to the certificate. Bear Raid - A situation in which traders sell short a security with the intention of driving the prices down. Beneficial Owner - The owner of a security who is entitled to all the benefits associated with ownership. Customers' securities are often registered in the name of the brokerage firm or central depository rather than in the name of the customer. Even so, the customer remains the real or beneficial owner. Beta (Stocks) - The measure of a stock's volatility in relation to the market. A beta of 0.7 means a stock price is likely to move up or down 70% of the market change; a beta of 1.3 means the stock is likely to move up or down 30% more than the market. Beta Equation (Stocks) - The beta of a stock is determined as follows: [(n) (sum of (xy))] - [(sum of x) (sum of y)] [(n) (sum of (xx))] - [(sum of x) (sum of x)], where: n = # of observations (24-60 months), x = rate of return for the S&P 500 Index, y = rate of return for the stock. Beta (Mutual Funds) - The measure of a mutual fund's rate of return in relation to the market. A beta of 0.7 means the fund's total return is likely to move up or down 70% of the market change; a beta 1.3 means total return is likely to move up or down 30% more than the market. Beta Equation (Mutual Funds) - The beta of a fund is determined as follows: [(n) (sum of (xy)) ] - [ (sum of x) (sum of y)] [(n) (sum of (xx)) ] - [ (sum of x) (sum of x)], where: n = # of observations (36 months), x = rate of return for the S&P 500 Index, y = rate of return for the fund. Bid - The highest price anyone has declared that they are willing to pay for a security. Bid/Ask Size - The number of shares a buyer is willing to purchase at the quoted bid price and the number of shares offered for sale at the quoted ask price. Block - A large number of shares of a security, usually more than 10,000, traded in a single transaction, usually by institutions. Blow-Off Top - A steep and rapid increase in price followed by a steep and rapid drop in price. This is an indicator seen in charts and used in technical analysis of stock price and market trends. Blue-Chip - A term used to describe the common stocks of corporations with the strongest of reputations for generating earnings and paying dividends. Bond - 1) A debt instrument; a security that represents the debt of a corporation, a municipality of the federal government, or any other entity. A bond is usually long-term in nature (10 to 30 years) and is to be repaid to investors on a specified date. 2) An investment in a government or corporation that is structured very much like a loan, only the payment is to individual bondholders rather than to a lending institution. Most bonds offer a regular, scheduled income, making them attractive to retirees and others living off their investments. Book Entry - An electronic record of ownership of Treasury or other securities. Book Value - A value computed by subtracting the total liabilities from the value of all assets on the balance sheet, then dividing by the number of common shares. This is an accounting term that has no relation to the securities market value. Breadth of the Market - A measurement of the number of issues that advance or decline on a particular trading day. Breakout - A rise in a security's price above a resistance level (commonly its previous high price) or drop below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing move in the same direction. Breakout can be used by technical analysts as a buy or sell indication. Breakpoint - A purchase of shares in an open-end investment company mutual fund that is large enough to entitle the buyer to a lower sales charge. A series of breakpoints is established by the fund, at each of which the charge is reduced. Broker - 1) An individual who buys or sells securities for customers (a stockbroker). 2) On an exchange, one who executes public orders on an agency basis (a floor broker or commission house broker). 3) As a slang term, a firm that executes orders for others (a brokerage firm). Brokerage Firm - A partnership or corporation that is in business to provide security services for its customers. Bull - An investor who acts as though the market or the price of a security will rise. Bull Market - A market in which prices of securities are generally rising. Bullish - A term used to describe rising security prices. Business Day - A day on which the exchanges are open for business. Buy-In - When the seller of a security fails to deliver the security for settlement, the broker will purchase the security that was to be delivered on the open market and charge any loss to the seller's account. Buyout - The purchase of a controlling interest (or percent of shares) of a company's stock. Buy/Write - An advanced option order that combines the purchase of an equity and the sale of call options on the same underlying security. Buyer's Option (Contract) - A settlement that calls for delivery and payment according to the number of days specified by the buyer. Buying Power - In a margin account, the maximum dollar amount of marginable securities that the client can purchase or sell short without having to deposit additional funds. Call (Option) - An option contract that gives the holder of the option the right (but not the obligation) to purchase, and obligates the writer to sell a specified number of shares of the underlying asset at the given strike price on or before the expiration date of the contract. Callability - The feature of a bond whereby the corporation that has issued it can redeem the bond before it matures. Corporations may call their bonds when interest rates drop below their current bond rates. They may then replace high-yielding bonds with lower-yielding bonds. Call provisions must be made clear before a bond is issued. These provisions include the call price, which is the price at which the bond will be sold back to bondholders. The call price is usually above par. The company must also include dates on which it can legally begin to order its bonds redeemed. Call Date - The date that marks when selected issues of Treasury bonds are eligible to be redeemed before maturity. Call Protection - The degree of security that an investor has against a bond being redeemed. Practically, the number of years between today and the call date. Call Spread - The simultaneous buy and sell of a call options contract on the same underlying security but with different expiration dates, different exercise prices, or both. Callable - A securities feature that allows the issuer to retire the issue when desired. Should the issue be called, the issuer usually pays a premium. Callable Bonds - Bonds that can be redeemed by the issuer before maturity. Capital - 1) The total amount of money invested in a firm. 2) Money accumulated and available to be used to produce more money. Capital Expenditures - The amount used during a particular period to acquire long-term assets such as property, plant, or equipment. Capital Gain - A profit resulting from the sale of tangible property. Capital assets which are owned for one year or less produce short-term capital gains; those that occur in periods longer than one year are long-term capital gains. Short-term and long-term capital gains are treated differently for tax purposes. Capital Gains- Mutual Fund - The gain that is triggered when a mutual fund is sold for more than its initial purchase price. This gain is subject to the capital gain tax. Mutual funds do not pay tax on the gains in their portfolios; the law requires that 98% of the fund's capital gains be distributed to shareholders in the fund, who in turn pay the tax on the gain. The maximum federal tax on capital gains is 28%, less than ordinary income rates. Capital Growth - The amount an investment increases in value when either its price rises or its profits are reinvested. Capitalization - The total dollar value of all common stock, preferred stock, and bonds issued by a corporation. Capital Loss - A loss resulting from the sale of tangible property. Losses are categorized as long or short-term. Capital Stock - The common and preferred stock of a company. Captive Agent - An insurance agent who represents only one insurance company. Captive agents can offer the investor personal service, but are unlikely to inform you of a full range of insurance options. Cash - Coins and currency which is readily available. Cash Account - A customer account in which all securities purchased must be paid for in full. Cash Dividend - A dividend paid in cash to a company's shareholders. The amount is normally based on profitability and is taxable as income. Cash and Equivalents - The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and banker's acceptances. Cash Flow - The cash received from investments or generated by a business, within a period of time, less any cash expenditures. Cash Transaction - A settlement on the same day as the trade date. Cash Value - The amount of money allowed to be withdrawn from a whole life insurance policy and still retain coverage. The amount of cash value differs widely among policies. Cashiering Department - Brokerage firm department that is responsible for receiving and delivering securities and money to and from other firms and clients. Certificate - The physical document evidencing ownership of a stock or a bond. Certificate of Deposit (CD) - A negotiable certificate that evidences a time deposit of funds with a bank. Changes in Financial Position - Sources of funds internally provided from operations that alter a company's cash flow position: depreciation, deferred taxes, other sources, and capital expenditures. Chicago Board Options Exchange (CBOE) - Listed option trading was originated by this marketplace on April 26, 1973. Chicago Board of Trade (CBT) - A major commodity exchange located 141 East Jackson Boulevard, Chicago IL. Churning - The excessive trading of a client's account in order to increase the broker's revenues from commissions. Class - Options of the same type, calls or puts on the same security. Clearing Corporations - A central reception and distribution center operated for its members who are made up of various brokerage firms. Many offer automated systems that expedite trade comparison, settlement and assignment procedures. Among these are the NSCC (National Securities Clearing Corp.) and OCC (Options Clearing Corporation). Clearing House Comparison (CHC) - A form used to submit trades to the NSCC that have missed the normal entry methods. Such trades enter the system on the third business day of the trade cycle. Cliffing - A strategy for arranging bonds so that they all mature in the same year. Close - The price of the last transaction of a security on a particular trading day. Closed-End Funds - A mutual fund that does not accept new money and which does not issue new shares following the fund's initial public offering. Investors must purchase or sell their closed-end shares on the securities exchanges. Closed-end funds are actively managed by an investment professional. Closing Purchase - A transaction in which the purchaser's intention is to reduce or eliminate a short options positions. (Buy to close). Closing Sale - A transaction in which the seller's intention is to reduce or eliminate his long option position. (Sell to close). Closing Transaction - The transaction executed to close an option contract. The holder would sell to close while the writer would buy to close. Co-Payment - The amount, either a percentage or a fixed fee, which an individual has to pay for a service otherwise covered by their insurance policy. A kind of deductible "co-payment" is the term generally associated with health insurance. Collateral - Assets that are pledged to guarantee a loan, and that may be collected in case of default. Homes and cars are common examples of an asset that can serve as collateral. Collateral Trust Bond - A debt instrument issued by one corporation and backed by the securities of another corporation. Combination - A position long or short different types of options on the same stock with different strike prices and/or expiration dates. Combination Order - In listed options trading, an order to simultaneously buy a call and sell a put or to buy a put and sell a call on the same underlying security. Also called a Combo Order. Commercial Paper - A short-term debt instrument issued by corporations. Its rate of interest is set at issuance and can be realized only if held to maturity. Commission - The fee paid to a brokerage firm to execute a trade or manage an investment portfolio. Commission charges vary based upon the type of brokerage. Full-service brokers offer advice and make recommendations provided by a full staff of analysts who follow specific industries. Discount brokers generally do not offer investment advice and commission charges may be dependent upon the type of security, the number of shares traded, or the dollar value of the security. Commission House Broker - A floor broker who is employed by a brokerage house to execute orders on the exchange floor for the firm and its customers. The Committee on Uniform Security Identification Procedure (CUSIP) - An interindustry security coding service. Each type of security has its own unique CUSIP number. Common Stock - A security issued which represents ownership of a corporation. Common stockholders may vote for the management and receive dividends after all other obligations of the corporation are satisfied. Comparison - The process by which two contra brokerage firms in a trade agree to the terms of the transaction. Comparison can be either through a clearing corporation or on a trade-for-trade basis. Competitive Tender - A method of purchasing new issues of Treasury bills, notes, and bonds in which the investor specifies the yield, and accordingly the price, he or she requires to purchase the security. Compound Interest - Interest earned on or assessed against, both an original investment and the interest already accrued. When interest is compounded, the value of an investment can increase dramatically over long periods of time. By the same token, if an individual fails to keep up with a loan's interest payments, the total amount one has to repay increases in the same way. Comprehensive Insurance - Insurance that pays for any damage to your property that's not your fault. Comprehensive insurance typically covers fire, theft and vandalism. Confidence Indicator - A measure of investors' faith in the economy and the securities market. A low or deteriorating level of confidence is considered by many technical analysts as a bearish sign. Confidence Level - The degree of assurance that a specified failure rate is not exceeded. Confirmation - The written acknowledgement of a securities transactions which provides the investor with important information regarding the transaction such as the settlement date, terms, price and commission. Consent to Loan Agreement - An agreement margin customers must sign to authorize the brokerage firm to lend the customer's securities to itself or other firms. Consideration - The money value of a transaction (number of shares multiplied by the price) before adding commission. Constant-Dollar Investment - Securities such as savings accounts and money market funds that do not fluctuate in price. Contingent Deferred Sales Charge - A pricing structure that imposes a sales charge when investors exit a mutual fund. Contractual Plan - A type of accumulation plan in which an investor in mutual funds makes a firm commitment to invest a given amount of money over a given time. Control Person - A director, officer or other affiliate of the issuer or a stockholder who owns at least 10% of any class of outstanding stock. Control Securities - Securities owned by one of those parties mentioned in Control Person. Convergence - The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is higher because of the time value. But as the contract nears expiration, the futures price and the cash price converge. Convertibility - The degree of existing freedom to exchange a currency without restrictions or controls imposed by the government. Convertible Issue (Bond) - A securities feature that permits the issue holder to convert to another issue, usually common stock. This privilege can be used only once. The preferred stockholder or bondholder can convert from that issue to another, but not back. Convertible Preferred Stock - A preferred stock that may be converted into common stock of the same company at specific prices or rates. Convertible Zero - As it applies to the Treasury sector, a stripped Treasury zero that converts into a current income obligation five years before maturity. Corner a Market - To purchase enough of the available supply of a commodity or stock in order to manipulate its price. Cooling-Off Period - The period, usually 20 days, between the filing of the registration statement on a new issue with the SEC and the effective date of the offering. Co-Partnership Account - An account in which the individuals may act on behalf of the partnership as a whole. Corporation - The most common form of business organization, and one which is chartered by a state and given many legal rights as an entity separate from its owners. Characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern. Corporate Bonds - Debt obligations issued by corporations. Coupon Rate - In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually paid twice a year. Corporate Resolution - A document stating that the corporation's board of directors has authorized a particular individual to act on behalf of the corporation. This document is necessary when the corporation opens a cash or margin account. Coupon - 1) On bearer stocks, the detachable part of the certificate exchangeable for dividends. 2) Denotes the rate of interest on a fixed interest security; a 10% coupon pays interest of 10% a year on the nominal value of the stock. Coupon Yield - Also called nominal yield. A bond's coupon payment divided by par value. Cover - The total net profit a company has available for distribution as dividend, divided by the amount actually paid, gives the number of times that the dividend is covered. Covered Call - A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because he/she has already purchased the deliverable security. Covered Put - A put option position in which the option writer also is short the corresponding stock. This limits the option writer's risk because the assigned security can be used to cover the short stock position. Credit Agreement - Outlines the conditions of the credit arrangement between the broker and the customer concerning a margin account. Credit Balance - The funds available to a client in a cash or margin account. In a short sale, this balance represents the customer's liability. Cumulative Dividends - A feature of preferred stocks whereby owners are still entitled to their dividends (before common stockholders) after a pay period has been skipped due to poor company performance, even if the company improves its finances. The dividend amount that was skipped will be made up cumulatively during the following dividend pay period. Cumulative Preferred Stock - A preferred stock feature that entitles the holder to the later payment of dividends that were not paid when due. The dividends are, in this sense, "cumulative." The dividends accumulate and must be paid (along with present dividends) before common stockholders may receive any dividends. Current Assets - Value of cash, inventories, marketable securities, and accounts payable available for conversion into cash in less than one year. Current Income - Regular income generated by investments (as opposed to capital growth). Current Liabilities - The amount owed for salaries, accounts payable, interests, and other debts due within one year. Current Maturity - The number of years until a bond matures, regardless of its original maturity when issued. Current Portion of Long-Term Debt - A numerical term on an income statement that represents the original long-term bonds and other loans of a company that come due during the next year. Current Ratio - An indicator of short-term debt-paying ability. It is determined by dividing current assets by current liabilities. The higher the ratio, the more liquid the company. Current Yield - The coupon rate of a bond or note divided by the market price of the bond or note. Custodian - The person or institution responsible for managing the property of another. Customer (Account) Statement - Sometimes referred to as month-end statement. This is a statement of the customer's positions and activity. It must be sent out quarterly, but if there is monthly activity in the account, it is sent out monthly. Cyclicals - Stocks that move up or down in sync with the business cycle. Examples include the housing industry and industrial equipment companies. These stocks will experience fluctuation that reflects the seasonal characteristics of a business or industry. Dated Date - The first day that interest starts to accrue on newly issued bonds. Day Order - An order that, if not executed on the day it is entered, expires at the close of that day's trading. Day Trade - The buying and selling of the same security on the same day. Dealer - An individual or entity, such as a securities firm, when it acts as a principal and stands ready to buy and sell for its own account. More generally, an individual or entity which buys and sells products and holds an inventory. Debenture Bond - A debt is issued by a corporation and backed or secured by the good name of the issuing company. Debit Balance - The amount of loan in a margin account. Debt/Equity Ratio - An indicator of financial leverage. Compares assets provided by creditors to assets provided by shareholders. It is determined by dividing long-term debt by common stockholders' equity. Decile Rank - Performance over time, usually rated on a scale of 1 to 10. One indicates that a mutual fund's return was in the top 10% of funds being compared, while 3 means the return was in the top 30%. Declaration Date - The date on which a firm's directors meet and announce the date and amount of the next dividend. Deductible - The amount an individual must pay out of pocket before an insurance company's coverage kicks in. Typically, insurance policies with low deductibles have higher payments, while higher deductibles usually mean lower payments. Deed of Trust - The trust agreement drawn up when a corporation plans to issue bonds or other debt securities. It includes such items as assets, interest payments, maturity dates, etc. Default - An issuer's failure to pay accreted interest when a zero coupon issue matures. Treasury securities are considered default-free. Defensive Stocks - Stocks whose prices stay stable when the market declines and are issued by industries that naturally do well during recessions. Food and utility companies are defensive stocks. Deferred Annuity - An annuity plan in which payments are to be made at some set date in the future. Deferred (Income) Taxes - A non-cash expense that provides a source of free cash flow. An amount allocated during the period to cover tax liabilities that have not yet been paid. Defined Benefit Plan - A company pension plan that guarantees participants a specific retirement income benefit based on some particular formula. The formula is usually based on years of service. Defined Contribution Plan - A Company retirement plan that provides employees the opportunity to set aside before-tax income to save for retirement. These plans include 403(b) plans and 401(k) plans. Defined contribution plans do not guarantee a retirement benefit. The company may match a portion of the employee's contributions, but the ultimate benefit of these plans depends on employee contributions. Delivery Balance Order (DBO) - An order issued by the clearing corporation to any firm that, after the day's trades are netted, has delivery or sale position remaining. The order defines what is to be delivered to whom. Delivery Versus Payment (DVP) - Settlement of security transactions used by institutional customers. Certificates are delivered to a bank designated by the customer, where upon the bank makes payment on delivery. Dependent - Anyone who depends on another individual for their financial livelihood, such as children and relatives without significant incomes of their own. Depository - A central location for keeping securities on deposit. Depository Trust Company (DTC) - A corporation, owned by banks and brokerage firms, that holds securities, arranges for their receipt and delivery, and arranges for the payments in settlement. Depreciation - 1) A non-cash expense that provides a source of free cash flow. 2) The amount allocated during the period to amortize the cost of acquiring long-term assets over the useful life of the assets. Derivative Security - A financial security, such as an option or a future, whose value is derived in part from the value and characteristics of another security, the underlying security. Derivative Zeros - Zero-coupon bonds created by stripping coupon and principal payments from an U.S. Treasury security. Designated Order Turnaround (DOT) - An order routing and execution reporting system of the NYSE (New York Stock Exchange). Detrend - To remove the general drift, tendency or bent of a set of statistical data as related to time. Diagonal Spread - A spread of the same class of options but with different exercise prices and different expiration dates. Difference From S&P - A mutual fund's return minus the change in the Standard & Poor's 500 Index for the same time period. Differential - The fraction of a point added to the purchase price or subtracted from the sale price of odd lot orders. The charge represents compensation to the dealer/specialist for executing the odd lot order. Dilution - Diminution in the proportion of income to which each share is entitled. Director - 1) A corporate board member elected by stockholders. 2) An individual elected by a fund's shareholders to oversee a fund's management and to safeguard shareholders' interest from possible abuses by those managing the fund. Discount - When the market price of a newly issued security is lower than the issue price. Discretionary Account - A client account in which the account executive is permitted to buy and sell securities for the client without the client's prior permission. The opening of such an account requires the special permission of the firm's management. Discretionary Income - The amount of money left after meeting necessary expenses. Disposable Income - Money available after taxes have been deducted. Disposable income is the total amount available for both regular expenses and investment opportunities. Distributions - Payments of fund earnings (dividends) or gains (capital gains). Distributions can be made by check or by investing in additional shares. Funds are required to distribute gains (if any) to shareholders at least once per year. Technical analysts look at a pattern of distribution as a tip-off that the stock will soon fall in price. District Business Conduct Committee (DBCC) - Local enforcement division of the NASD charged with enforcing NASD, MSRB and federal securities laws, rules and regulations. Divergence - When two or more averages or indices fail to show confirming trends. Diversification - The process of dividing investments among a variety of securities having different risk and reward so as to minimize risk. Dividend - A distribution of a portion of a company's earnings to shareholders in cash or additional stock. Dividend Reinvestment - Automatic reinvestment of shareholder dividends into more shares of a company's stock. This is often done without having to pay commissions. Dividend Reinvestment Plan - Automatic reinvestment of shareholder dividends in more shares of a company's stock. Dividend reinvestment plans allow shareholders to accumulate capital over the long-term using dollar cost averaging. Dividend Yield (Funds) - Indicated yield represents return on a share of a mutual fund held over a specified period, usually 12 months. Dividend Yield (Stocks) - Indicated yield represents annual dividends divided by current stock price. Dividends - A portion of a corporation's assets paid to stockholders on a per-share basis. Preferred stock is supposed to pay a regular and prescribed dividend amount. Common stock pays varying amounts when declared. Dividends Per Share - Dividends paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted-average of shares outstanding over the reporting term. Dollar Cost Averaging - An investment method used in mutual funds by which clients invest the same dollar amount periodically. Because mutual funds permit the buying of fractional shares, all of the investor's payment is used in the acquisition of fund shares. Dollar-Denominated - Foreign securities that pay interest and principal in U.S. dollars. Do-Not-Reduce (DNR) - An instruction that informs the order handling personnel not to reduce the price of the order by the amount of dividends, if and when paid by the corporation. Double Taxation - Corporations pay taxes on revenue before paying dividends. The dividends, in the hands of the stockholder, are taxed again as ordinary income, hence "double" taxation. Dow Jones Industrial Average (DJIA) - The best-known and most widely accepted U.S. index of stocks, containing 30 stocks that trade on the New York Stock Exchange. Also known as the Dow, it is a barometer of how shares of the largest U.S. companies are performing. Downgrade - A negative change in ratings for a stock and/ or other rated security. Downstairs Trader - A trader who operates on the floor of an exchange and who "trades" positions against the public market. Downtick - A listed equity trade whose price is lower than that of the last different sale. Due Diligence (Meeting) - The last meeting between corporate officials and underwriters prior to the issuance of the security. At the meeting, the content of the prospectus is discussed and relevant parts of the underwriting are put into place. Earnings - The net income for a company during the period. Earnings Before Interest and Taxes (EBIT) - A financial measure defined as revenues less cost of goods sold and selling, and general and administrative expenses. In other words, operating and non-operating profit before the deduction of interest and income taxes. Earnings Per Share (EPS) - The net income divided by the number of shares of common stock outstanding. Earnings Report - A corporate financial statement that reports and nets out all earnings and expenses to a profit or loss. It is therefore sometimes referred to as the profit and loss (P&L) statement. Earnings Yield - Usually the ratio of earnings per share, after allowing for tax and interest payments on fixed interest debt, to the current share price. The inverse of the price/earnings ratio. It's the total twelve months earnings divided by the number of outstanding shares, divided by the recent price, multiplied by EE Savings Bond - A zero-coupon bond issued directly by the Treasury in par values ranging from $5 to $10,000. Purchased at half of par, EE savings bonds mature in 12 years and are eligible for extended maturity. Effective Date - The first date after the cooling-off period of a new issue on which the security can be offered. Electronic Commerce - Business that is transacted via the Internet, sometimes referred to as "e-commerce". Endorsement - A signature on the back of a stock certificate, check or other negotiable instrument of the person whose name appears on the face of the same. It makes the document negotiable. Equipment Trust Bonds - Debt instruments issued by some corporations that are backed by "rolling stock" (such as airplanes or locomotives and freight cars). Equity - 1) The value of the common stockholders' ownership in a company as listed on the balance sheet. 2) An investment that involves ownership, as opposed to a loan such as a bond or IOU; often used interchangeably with "stock." 3) With regards to a margin account, the investors portion of ownership. Equity-Income Funds - Mutual funds that focus on income and invest in large-company stocks that pay big dividends. If equity-income funds generate capital gains, it is usually a case of stocks, purchased at depressed prices, becoming fully valued. Equity Options - An options contract that gives the holder the right to buy or sell a specified number of shares of stock at a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock. Eurobonds - A long-term loan issued in a currency other than that of the country or market in which it is issued. Interest is paid without the deduction of tax. Eurodollar CDs - Certificates of deposit held in U.S. dollars by European, British, and Eastern depository institutions and available to U.S. investors. European-Style Option - An option contract that can only be exercised on the expiration date. Excess Equity - Equity in a margin account above that which is required by Regulation T. Exchange - The marketplace in which shares, options and futures on stocks, bonds, commodities and indices are traded. Principal U.S. stock exchanges are: New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and the National Association of Securities Dealers (NASD). Ex-Dividend Date - 1) The day on which the price of a security is reduced to reflect a recently declared dividend. 2) The day which marks the first day on which the buyer of a security will no longer be entitled to receive the most recently announced dividend payment. A stock that has gone ex-dividend is marked with an "x" in newspaper listings. Execution - The process of completing a securities trade. Settlement (payment and transfer of ownership) occurs between one and five days after an order is executed, depending upon the security traded. Execution Broker ($2.00 Broker) - A broker who owns memberships on various exchanges and executes trades on the exchanges for other brokers, execution only services, on listed exchanges. The name of the clearing broker is "given up" when each trade is executed to industry clearance facilities, and the trade is reported back to the introducing firm for the customer and street-side processing. The charge for this service used to be $2.00, thus the name "Two-Dollar Broker." Executor - A person appointed by the last will of the deceased to carry out the provisions of the will. Also known as an Administrator or Personal Representative. Exercise - To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security. Exercise Price - The stated price per share at which the underlying asset may be traded between the holder and writer of the options contract. Expense Ratio - The percentage of the assets that were spent to run a mutual fund (as of the last annual statement). This includes expenses such as brokerage commissions, management fees, overhead costs, and 12b-1 fees. Expiration - The day on which an option contract becomes void. Expiration Cycle - An expiration cycle relates to the dates on which options on a particular security expire. A given option will be placed in one of three cycles: the January cycle, the February cycle, or the March cycle. Expiration Date - The last day (in the case of American-style) or the only day (in the case of European-style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the third Friday of the expiration month; however, brokerage firms may set an earlier deadline for notification of an option holder's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday. Expiration Month - The month in which an option or futures contract ceases to exist (expires). Ex-Rights Date - The date after which stocks are traded without subscription rights. Extended Maturity - A provision whereby a bond continues to pay interest beyond its stated maturity. Ex-Warrants Date - The date after which stocks are traded without buyers being entitled to warrants which are to be distributed. Face Value - The debt (or loan) amount that appears on the face of the certificate and that the issuer must pay at maturity. Factor - A decimal between 0 and 1 that represents the amount of mortgages remaining in a pool of mortgage-backed securities. Factor Book - A tabular presentation that shows relevant information about factors, value of remaining mortgages, and interest rates on mortgage-backed securities. Factor Table - A table used to compute the outstanding principal on pass-throughs: Ginnie Maes, Freddie Macs and Fannie Maes. Fannie Mae - Nickname for the Federal National Mortgage Association and the mortgage-backed securities it issues. Farmer Mac - Nickname for the Federal Agricultural Corporation and the securities it issues. Fast Market - A market condition in which a large number of orders for a particular security are received within a short period of time and faster than the brokers-specialists and market makers can handle effectively. These situations are often created by the announcement of unexpected news and may lead to price volatility. Federal Farm Credit System - Established by Congress to provide credit to farms and farm-related enterprises. The FFCS is also an issuer of agency securities. Federal Reserve Board - The governing body of the Federal Reserve System. Board member actions help shape government monetary policy, most notably interest rates, and the U.S. economy. Federal Reserve System - The nation's central monetary authority and the Treasury Department's agent for selling new issues of Treasury bills, notes, and bonds. FHA - Abbreviation for the Federal Housing Administration. The FHA is a government-sponsored agency that insures mortgage loans. FHA Experience - An estimate of the average life of a pool of mortgage-backed securities in relation to experience tables developed by the Federal Housing Administration. Fiduciary - An individual, corporation or association holding assets for another party, often with the legal authority and duty to make decisions regarding financial matters on behalf of and in the best interests of the other party. Fill or Kill (FOK) - An order that requires execution of the entire quantity immediately at the specified price. If not, the order is canceled. Final Dividend - The dividend paid by a company at the end of its financial year, recommended by the directors but authorized by the shareholders at the company's annual general meeting. Financing Corporation - An agency created to assist the S&L industry by retailing securities to the public; also the nickname for its securities. Fiscal Agent - The authority who is responsible for issuing new securities of federal agencies. Fiscal Year - The twelve-month period during which a business or government maintains its financial records. Since this cycle does not have to coincide with the calendar year, it is known as the fiscal year. Fixed Annuity - Guaranteed payments of a known and fixed dollar amount to the annuitant for the period covered under the contract. Flat - 1) A bond trading without accrued interest is said to be trading "flat." 2) A security position that is neither long or short in a portfolio. Floor Broker - An exchange member who, as such, is permitted to conduct business on the exchange floor. Flotation - The occasion on which a company's shares are offered on the market for the first time. Flower Bond - A specially identified series of Treasury bonds accepted at full par in payment of estate taxes. Fourth Market - Trades that occur directly between institutional investors on a system named Instinet. Freddie Mac - Nickname for the Federal Home Mortgage Association and the mortgage-backed securities it issues. Free Cash Flow - Indicator of liquidity. Amount of cash produced or consumed by a company for a specific period. Useful in determining the company's ability to meet obligations, pay dividends and fund business expansion. Free Cash Flow Per Share - Free cash flow divided by the number of common shares outstanding. Free Stock - Loanable securities; that is, securities that can be used for loan or hypothecation. These securities are stock in a margin account that represents the debit balance. Frozen Account - An account in which all purchases must be paid for in cash in advance for a period of 90 days because of failure to make timely or proper payment in the past. FT Index - Refers to the Financial Times Industrial Ordinary Share Index, also known as the "30 Share Index." This started in 1935 at 100 and is based on the prices of 30 leading industrial and commercial shares. They are chosen to be representative of British industry, rather than of the Exchange. Government stocks, banks and insurance companies are not included. The index is calculated hourly during the day with a "closing index" at 4:30 p.m. FT-SE 100 Share Index - Popularly known as "Footsie"; an index of 100 leading UK shares listed on the London Stock Exchange providing a minute-by-minute picture of how share prices are moving. It started on January 3, 1984 with the base number of 1,000. Also forms the basis of a contract in the London Traded Options Market (LTOM) and the London International Financial Futures Exchange (LIFFE). FT-SE Eurotrack 200 Index - Denominated in ECUs, this comprises the stocks of the FT-SE -100 Index plus the constituents of the FT-SE Eurotrack 100 Index. The UK component is weighted to ensure that the 200 Index closely tracks the major benchmark indices. It started on Monday, February 25, 1991 with a base value of 1,000 at close of business on Friday, October 26, 1990. Full Trading Authorization - Owner of the account gives power to another person to buy, sell and make withdrawals from the account. Fully Diluted Earnings Per Share - Earnings per share expressed as if all outstanding convertible securities and warrants have been exercised. Fully Diluted Shares Outstanding - All shares outstanding including common stock, warrants, and convertible securities. Fully Disclosed - All customer accounts of the Introducing Broker are introduced to another Broker/Dealer who clears the customers' trades. This second broker is called a Clearing Broker. The names and addresses of the customer accounts are "fully disclosed" to the Clearing Broker whose name is also disclosed to the customers on the statements and confirmations. The Clearing Broker does all the bookkeeping involved in settling the trades and keeping the customer accounts in proper form. Fully Paid - Applied to new issues, when the total amount payable in relation to the new shares has been paid to the company. Fund Category - A set of mutual funds devoted to a particular kind of investment objective, carrying similar levels of risks and returns. Funds in one category may concentrate on low-risk, low-return government bonds, while those of another might invest exclusively in high-risk, high-return technology stocks. Fund Exchange - Ability to shift a mutual fund investment from one fund to another sponsored by the same mutual fund family. Fund Family - A group of individual mutual funds managed by a single company. Fund Manager - The person who determines how mutual fund assets are invested. Futures - Agreement to buy or sell a predetermined amount of a commodity or financial instrument at a certain price on a stipulated date. Futures Contract - Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon by the buyer and seller. The contracts themselves are often traded on the futures market. A futures contract differs from an option because an option is the right to buy or sell, whereas a futures contract is the promise to actually make a transaction. General Obligation (GO) Bond - A municipal bond whose issuer's ability to pay back principal and interest is based on its full taxing power. Ginnie Mae - Nickname for the Government National Mortgage Association and the mortgage-backed securities it issues. Good Delivery - Securities delivered to the broker from the seller that are properly endorsed and in proper order to be delivered to the buyer. Good 'Til-Canceled (open) Order (GTC) - An order that does not expire at the end of the day it is entered. Instead, it remains in force until it is either executed or canceled. TD AMERITRADE cancels all GTC orders at the end of the next month after the order has been placed. Goodwill - Excess of the purchase price over the fair market value of the net assets acquired under purchase accounting. Government Bond - Debt security issued by the U.S. government. Government National Mortgage Association (GNMA) - A government corporation that provides primary mortgages through bond issuances. Its securities are called Ginnie Maes. Gross Profit - Numerical term on an income statement that is the subtraction of costs of goods sold from revenues. It shows how much the company would have made if it did not have any other expenses or taxes. Growth and Income Funds - Mutual funds that invest in companies whose earnings are expected to grow, but which still pay good dividends. These funds may sacrifice some future profits in order to provide current income. Growth Stock - Stock of a company in a new industry or of a company participating in an emerging industry. Guaranteed Investment Contract (GIC) - Investments that insurance companies provide to pension plans. GICs offer investors a high degree of safety and a specified interest rate, much like a bank certificate of deposit. In essence, a GIC represents money an individual has loaned to an insurance company, for which they receive interest. Guardian - Someone authorized to manage the property of another who is incapable of managing the property themselves on account of their age, lack of understanding or lack of self-control. Hardship Withdrawals - Because employee withdrawals from a 401(k) plan may jeopardize the tax-deferred status of the plan, companies are very strict about allowing employees to withdraw the money. Money may be withdrawn for specified hardship situations, such as the need to pay medical expenses or a dependent's college tuition. Money withdrawn from a 401(k) plan before an employee is age 59 1/2 is subject to a 10% penalty and taxation. Head & Shoulders - In technical analysis, a chart formation in which a stock price reaches a peak preceded and followed by smaller peaks at the resistance point of a stock cycle, or reaches a valley preceded and followed by smaller valleys at the support point of a stock cycle. These formations normally indicate a trend reversal. Head and Shoulders formations get their names from their similar appearance to a human head and shoulders. Hedge - To reduce the risk in one security by taking an offsetting position in a related security. HH Savings Bonds - A savings bond that pays semiannual coupon interest, unlike EE savings bonds. High - The highest closing price of a stock over the past 52 weeks, adjusted for any stock splits. High-Yield Bond - A bond with a speculative credit rating of BB (S&P) or Ba (Moody's) or lower is a high-yield bond. These bonds offer higher yields for investors compared to bonds of financially sound companies. Two agencies, Standard & Poor's and Moody's, provide the ratings systems for companies' credit. Holding Company - A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors. Home Equity - The difference between a property's market value and any outstanding loans for which the property serves as collateral. Home equity can often represent collateral for future loans or can be used to create a retirement fund once the home is sold. House Maintenance Call - Demand to the customer for additional funds from the brokerage firm because the equity in the customer's margin account has fallen below the minimum amount allowed by the firm. House Requirement - The minimum amount of equity brokerage firms require margin clients to maintain in the account. Hypothecation - A brokerage firm's pledging of margin securities at a bank to secure the funds necessary to carry an account's debit balance. Immediate-or-Cancel (IOC) - An instruction on an order that requires execution at the stated price of as many shares as can be filled immediately, and the rest canceled. Income - The portion of investment return that derives from interest or dividend payments. A fund distributes 98% of the income from its investments to shareholders that pay the tax on it. This income is taxed at an individual's ordinary income tax rate. Income Before Taxes - Numerical term on an income statement which is the sum of all sales and profits before the subtraction of taxes. It shows how much profit a company would have made without taxes. Income Bonds - Bonds issued when the ability of the issuing company to pay interest is questioned. They are speculative instruments that pay high rates of interest. (also known as "high risk" or "junk" bonds) Income Funds - 1) Funds that focus on a variety of income-oriented securities. 2) Mutual funds that invest in stocks and bonds earning high regular dividends. Income Stock - Common stock that typically pays a high dividend on a regular basis. Income Stream - A strategy of arranging bonds so that they produce a consistent series of payments. Indenture - The terms of a corporate bond. Also known as deed of trust, it appears on the face of the bond certificate. Independent Agent - An insurance agent who represents a number of different insurance companies. These agents can typically offer a wide range of plans and prices, because they work with more companies. Index Fund - A mutual fund whose portfolio matches that of a broad-based index such as Standard and Poor's 500 Index, and whose performance therefore mirrors the market as a whole. Indicated Dividend - Total amount of dividends that would be paid on a share of stock over the next 12 months if each dividend were the same amount as the most recent dividend. Indicated Yield - The yield based on the most recent quarterly rate times four. To determine the yield, divide the annual dividend by the price of the stock. The resulting number is represented as a percentage. Individual Retirement Account (IRA) - A tax-deferred retirement account for individuals. Individuals who have earned income may hold certain types of investment in an IRA account but may not contribute more than $2,000 a year to their IRA. IRA contribution may be tax deductible if an individual is single and earns less than $25,000 or if he/she is are married filing jointly and has a combined income of $40,000. Industrial Revenue (ID Revenue, ID Revs, or Industrial Rev) Bond - A form of municipal bond whose issuer's ability to pay interest and principal is based on revenue earned from an industrial complex. Industry - A category describing a company's primary business activity. This usually is determined by the largest portion of revenue. Inflation - The rate at which the general level of prices for goods and services is rising. Inflation Risk - The risk that rising inflation will diminish the rate of real return an investor will realize over time. Initial Public Offering (IPO) - A company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the possibility of gains. IPOs by investment companies (closed-end funds) usually contain underwriting fees that represent a load to buyers. Inside Information - Relevant information about a company that has not yet been made public. It is illegal for holders of this information to make trades based on it. Insider - A person with nonpublic information on a corporation. Directors, officers and stockholders owning more than 10% of any one class of stock are usually considered insiders. Insider Dealing - The purchase or sale of shares by someone who possesses "inside" information about the company; i.e., information on the company's performance and prospects which has not yet been made available to the market as a whole and which, if available, might affect the share price. Interest - The cost of borrowing money expressed as a percentage rate over a specified amount of time. Also, a share or title in property. Interest Expense - In a corporate setting, interest expense is the money the company or corporation pays out in interest on loans. Interest Rate - The amount charged by a lender for borrowing money, not including fees. Interest rates are generally fixed at a certain level for the entire length of a loan, though they can also vary over time. Interest Rate Risk - The prospect that Treasury and agency securities will decline in price if economy-wide interest rates rise. Interim Dividend - A dividend declared part way through a company's financial year, authorized solely by the directors. Intermediate-Term Bonds - Bonds with maturities of four to 10 years. International Funds - 1) Mutual Funds that invest primarily in foreign companies. 2) Mutual funds that invest money outside the United States. Some international funds invest in one area of the world, while others are truly global, investing in companies in many different countries. International funds can be volatile and are generally recommended for long-term investing only. In-the-Money - A term used to describe options that the holder would profit from exercising. A "call" option is in-the-money if the strike price is less than the market price of the underlying security. A "put" option is in-the-money if the strike price is greater than the market price of the underlying security. For example, a XYZ "call" option with a 52 strike price is in-the-money when XYZ trades at 52 1/8 or higher. A XYZ "put" option with a 52 strike price is in-the-money when XYZ is trading at 51 7/8 or lower. Inventory/Inventories - For companies, raw materials, items available for sale or in the process of being made ready for sale. They can be individually valued by several different means, including cost or current market value, and collectively by first-in-first-out (FIFO), last-in-first-out (LIFO) or other techniques. The lower value of alternatives is usually used to preclude overstating earnings and assets. For security firms, securities bought and held by a broker or dealer for resale. Investment Act of 1940 - The primary set of laws that govern the mutual fund industry. Investment Advisor - The individual or firm that is responsible for managing a portfolio or mutual fund. Investment Horizon (time horizon) - The length of time an individual plans to hold an investment. The longer the investment horizon, the more risk an investor can afford to take, and the higher returns you can earn. Investment Trust - A company whose sole business consists of buying, selling and holding shares. IRA (Individual Retirement Account) - A tax-deferred retirement account for individuals. Individuals who have earned income may hold certain types of investment in an IRA account but may not contribute more than $2,000 a year to their IRA. IRA contribution may be tax deductible if an individual is single and earns less than $25,000 or if he/she is are married filing jointly and has a combined income of $40,000. IRA/Keogh Accounts - Special savings and investment accounts where taxes are deferred until money is withdrawn. Issue - 1) The process by which a new security is brought to market. 2) Any security. Issue Date - The month and day that a security is initially issued. Issued Stock - Stock sold to the public. Joint Account - An account with two or more individuals acting as co-owners. Joint Tenants With Rights of Survivorship (JTWROS) - A joint account that allows the remaining tenant(s) to retain the deceased tenant's interest in the account. Junk bond - A bond with a speculative credit rating of BB or lower is a junk bond. Such bonds offer investors higher yields than bonds of financially sound companies. Two agencies, Standard & Poors and Moody's Investor Services, provide the rating systems for companies' credit. Keogh Plan - Tax-deferred retirement plan for a self-employed person which allows them to set aside up to $30,000 or 25% of their income per year. Key reversal day - In an uptrend, this one-day pattern occurs when prices open in new highs, and then close below the previous day's opening price. In a downtrend, prices open lower and then close higher. The wider the price range on the key reversal day and the heavier the volume, the greater the odds that a reversal is taking place. Large-Cap Stocks - Stocks issued by companies that are valued at over $5 billion. Last - The price at which the security last traded. Last Split - After a stock split, the number of shares distributed for each share held and the date of the distribution. Legal Transfer - A type of transfer that requires legal documentation in addition to the normal forms. It is usually in the name of a deceased person, a trust, or other third party. Letter of Renunciation - This applies to a rights issue and is the form attached to an Allotment Letter, which is completed should the original holder wish to pass his entitlement to someone else or to renounce his/her rights absolutely. Level-Load Funds - Funds that charge a relatively high 12b-1 fee over the life of the fund. This annual fee frequently amounts to 0.75% or 1.00% of a fund's assets. These funds charge no other sales fee. Liability - 1) An obligation, to pay a debt owed or to fulfill a legal duty or responsibility. 2) Any claim against a corporation, including accounts payable, salaries payable and bonds. Limit - In relation to dealing instructions, a restriction set on an order to buy or sell, specifying the minimum selling or maximum buying price. Limit Order - An order which sets the highest price the customer is willing to pay for a buy order, or the lowest price the customer is willing to accept for a sell order. Buy orders may be executed at or below the limit price, but never higher. Sell orders may be executed at or above the limit price, but never lower. Limited Tax Bond - A municipal bond whose ability to pay back principal and interest is based on a special tax. Limited Trading Authorization - An account in which the customer gives the power to buy and sell in his account to another person. Liquidation - 1) Closing out a position. 2) An action taken by the margin department when a client hasn't paid for a purchase. Liquidity - 1) The degree of ease with which an investor can convert an asset into cash. 2) The characteristic of a market that enables investors to buy and sell securities easily. Liquidity Risk - The risk that arises from the difficulty in selling an asset. It can be viewed as the difference between the ''true value'' of the asset and the likely price minus commissions. Listed Options - An option that trades on a national option exchange. Listed Securities - Securities that trade on a national exchange. Listed Stock - Stock that has qualified for trading on an exchange. Load - A special sales charge (above normal transaction fees) assessed upon initial investment in or redemption of a mutual fund. Loads may vary between 1% and 8% percent of the initial investment. Load Fund - A mutual fund with shares sold at a price including a sales charge, typically 4% to 9.3% of the net amount indicated. These funds are usually purchased through a financial advisor or some other salesperson. Loan Consent Agreement - An agreement whereby the customer gives the brokerage firm permission to lend his securities. Loan Market Value - The value of securities in a customer's account. Loan Stock - A stock bearing a fixed rate of interest. Unlike a debenture, loan stocks may be unsecured. Loan Value - The amount of money, expressed as a percentage of market value, that the customer may borrow from the firm. Long Position - Occurs when an individual owns securities. An owner of 100 shares of stock is said to be "long the stock." Long Position (Options) - An options position where a person has executed one or more options trades, with the net result that they are an "owner" or holder of options (i.e., the number of contracts bought exceeds the number of contracts sold). Long-Term Assets - Value of property, equipment and other capital assets minus the depreciation. This is an entry in the bookkeeping records of a company and does not necessarily reflect the market value of the assets. Long-Term Bond - Bonds that mature in more than ten years. Long-Term Debt - An obligation having a maturity of more than one year from the date it was issued. Long-Term Debt/Capitalization - An indicator of financial leverage. Shows long-term debt as a proportion of the capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and common stockholders' equity. In strategic investing, industry value represents the sum of long-term debt for all companies within the same industry divided by the sum of the capitalization for those companies. Long-Term Liabilities - Amount owed for leases, bond repayment and other items due after one year. Low - The lowest closing price of a stock over a certain period of time. Make a Market - Refers to brokerage firms that submit a quote to buy and sell a particular security for their own accounts and at their own risk. Management/Closely Held Shares - Percentage of shares held by persons closely related to a company, as defined by the Securities and Exchange Commission. Management Company - The group of individuals responsible for managing a mutual fund's portfolio. Management Fees - The component of a fund's expense ratio that refers to the percentage of a fund's net assets paid to the fund's advisor; the firm primarily responsible for a fund's day-to-day operation. Margin - 1) Purchasing Treasury and agency securities with money borrowed from a bank or brokerage. 2) The amount of equity contributed by the investor to purchase and hold marginable securities in a margin account. (special note here on the two definitions) Margin Account (Stocks) - A leveraged account where a brokerage firm lends the account owner a portion of the purchase price for certain securities. The loan in the margin account is collateralized by the stock, and if the value of the stock drops, the owner will be asked to either put in more cash or sell a portion of the stock. Margin Call - A demand upon a customer to deposit money or securities with the broker when the value of the securities purchased on margin falls. Margin Department - The department of a brokerage firm that computes the balance their clients need to keep in order to avoid maintenance and margin calls. Margin Requirement - The percentage of investment that may be financed using borrowed capital. Margin Requirement (Options) - The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intraday price changes. Mark-to-Market - Process by which security position values are brought up to their current value. The customer may request the excess equity, or the firm may call for the deposit of additional funds. Either request is a "mark" to the market. Market Capitalization - Also known as market cap. The total dollar value of all outstanding shares. Computed as shares x current market price. It is a measure of corporate size. Market Cycle - The period between the two latest highs or lows of the S&P 500, showing net performance of a fund through both an up and a down market. market cycle is complete when the S&P is 15% below the highest point or 15% above the lowest point (ending a down market). The dates of the last market cycle are 12/04/87 to 10/11/90 (low to low). Market Data System - An electronic process, invisible to an investor, where the details of a filled order are transmitted to all interested parties through the ticker tape. These details will include the stock name, the number of shares traded, and the price of the trade. Market Maker - Another term for dealer or specialist. In the interest of maintaining orderly trading, a market maker stands ready to trade against the public and therefore to make a market in an issue. Market Not Held - A market order in which the floor trader has the discretion to execute the order when he/she feels it is best. Market Order - An order to be executed at the best available market price when received by the exchange or market maker. The order instructs the immediate execution of the trade without regard to price. Market Risk - Risk experienced from daily fluctuations in the price of a security. Market-Weighted Index - An index using calculations that equal the price of each stock, multiplied by the number of shares held by the public. The companies with the most shares make the greatest impact. Standard & Poor's (S&P) 500 Index would be an example. Marketable Securities - A security that may be resold, usually in the secondary market. Marry a Put - Form of hedging done by buying the stock and buying a put on the same day. Matching - In some 401(k) plans, an employer provides a contribution that fully or partially matches the contribution of employees. Maturity - The date on which a loan, bond or other debt instrument becomes due and payable, Member - An individual who owns a seat on an exchange or is admitted to membership in the NASD. Member Firm - A partnership or corporation whose partners or officers are members of a security exchange or self-regulatory organization. Merger - The combining of two or more entities into one, through a purchase acquisition or a pooling of interests. Differs from a consolidation in that no new entity is created from a merger. Mid-Cap Stocks - Stocks of medium-sized companies. They offer growth potential with the stability of a larger company. Minimum Maintenance - Established by the exchanges' margin rules, the level to which the equity in an account may fall before the client must deposit additional equity. It is expressed as a percentage relationship between debit balance and equity or between market value and equity. Minimum Purchases - For mutual funds, the amount required to open a new account or to deposit into an existing account. Some funds are closed to new investors, but allow deposits to existing accounts. Mini-Refunding - Auctions of Treasury securities occurring in March, June, September, and December. Minority Interest - An outside ownership interest in a subsidiary that is consolidated with the parent for financial reporting purposes. Minus Tick - An execution price below the previous transaction. Money Market Fund - A type of mutual fund that specializes in securities of the money market, such as T-bills and commercial paper. Money Market Funds - Funds that invest in high-quality, short-term debt instruments with maturities of 13 months or less. According to SEC rules, the average maturity for a money market fund may not exceed 90 days. Money Market Instruments - Short-term debt instruments (such as U.S. Treasury bills, commercial paper, and banker's acceptances) that reflect current interest rates and that, because of their short life, do not respond to interest rate changes as longer-term instruments do. Mortgage-Backed Securities - A collection of mortgages bundled into a single security and retailed to private or institutional investors as a single security. Mortgage Bond - A debt instrument issued by a corporation and secured by real estate owned by the corporation (such as factories or office buildings). Moving Average - Used in charts and technical analysis, the average of security or commodity prices constructed in a period as short as a few days or as long as several years and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted. Muni - Short for municipal bond. Municipal Bond - A long-term debt instrument issued by a state or local government. It usually carries a fixed rate of interest, which is paid semiannually. Municipal Bond Funds - Funds that invest in bonds issued by state and local governments. Municipal Note - A short-term debt instrument of a state or local government. Most popular are revenue, bond, and tax anticipation notes. Municipal Securities Rule-Making Board (MSRB) - Establishes rules and regulations to be followed in trading, dealings and customer relationships concerned in municipal securities. Mutual Fund - An investment company that continuously offers new shares to investors of its actively managed portfolio. The mutual fund portfolio is invested in accordance to the objectives stated in the mutual fund's prospectus. Naked Call - Occurs when an investor sells a call options contract without owning the underlying security and is not selling to close out a position. National Association of Securities Dealers (NASD) - A self-regulating authority whose members, including OTC broker/dealers, establish standard business practices in addition to legal and ethical conduct. National Association of Securities Dealers Automated Quotation System (NASDAQ) - A communication network used to store and access quotations for qualified over-the-counter securities. National Securities Clearing Corporation (NSCC) - A major clearing corporation offering many services to the brokerage community, including comparison of NYSE, AMEX, and over-the-counter transactions. Negotiable - A feature of a security that enables the owner to transfer ownership or title. Net Asset Value (NAV) - The dollar value of a mutual fund's underlying assets minus the funds liabilities divided by the fund's number of shares outstanding. In an open-end fund quote, the NAV is the bid side; the offer side is the NAV plus any sales charge. Net Income - A company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes, and other expenses. New Issue - A company coming to the market for the first time or issuing additional shares. New Shares - Shares newly issued by a company; these shares can usually be transferred on renounceable documents. New York Stock Exchange (NYSE) - Located at 11 Wall Street, New York, New York, a market for buying and selling securities. Nil Paid - A new issue of shares, usually as the result of a rights issue on which no payment has yet been made. Noise - Price and volume fluctuations that can confuse interpretation of market direction. No-Load - A mutual fund that does not require the payment of special sales commissions above regular transaction fees. No-loads are cheaper than loads and have consistently performed just as well, making them the preferred choice. No-Load Fund - An open-end fund that can be purchased directly from a fund company or from a brokerage firm at a price equal to the fund's net asset value. mutual fund that does not charge a load to purchase or redeem shares. Nominal Yield - The interest rate stated on the face of the bond. Nominee Name - Name in which a security is registered and held in trust on behalf of the beneficial owner. Noncallable - A note or bond that cannot be called prior to maturity. Many Treasury and most agency securities are noncallable. Noncompetitive Tender - A method of purchasing Treasury bills, notes, and bonds directly from the Federal Reserve at the average price during an auction of new securities. Noncumulative Preferred Stock - A type of preferred stock that does not pay back dividends to its holders. Not Held (NH) - An order that gives discretion to the Floor Broker as to time and price. The Floor Broker is "Not Held" responsible for capturing the best price. Note - The general name for a Treasury or agency security with an initial maturity of fewer than 10 years. Notes Payable - Numerical term on an income statement that generally represents short-term debt such as lines of credit or commercial paper. Objective (Mutual Funds) - A fund's investment strategy category as stated in the prospectus. Odd Lot - A quantity of securities that is smaller than the standard unit of trading, which is usually 100 shares. Offer - The lowest price at which the market maker will sell shares of a security to investors. Offer for Sale - A method of bringing a company to the market. The public can apply for shares directly at a fixed price. A prospectus containing details of the sale must be printed in a national newspaper. Offer Price - 1) The price at which the market maker will sell shares to investors. 2) The purchase price of a load fund. It is calculated by adding the fund's sales commission to its net asset value. Open-End Fund - A mutual fund that makes a continuous offering of its shares and which stands ready to buy its shares upon redemption by the shareholders. Open-end funds are actively managed by an investment professional in accordance with the funds' investment objectives. Open-End Management Company - A management company that is constantly issuing new shares. Opening Purchase - A transaction in which the purchaser's intention is to create or increase a long option position. Opening Sale - A transaction in which the seller's intention is to create or increase a short position in a given series of options. Opening Transaction - Refers to a customer either buying or selling an option contract to open a new position. Open Interest - The number of outstanding option contracts in the exchange market in a particular class or series. Open Outcry System - Method of public auction by making verbal bids and offers in the trading pits or rings of a given exchange. Option - A contract that entitles the buyer to buy (call) or sell (put) a predetermined quantity of an underlying security for a specific period of time at a pre-established price. Option Adjustments - Changes made in the terms of an option contract on ex-dividend date when the underlying stock pays a cash or stock dividend or when there is a stock split, etc. Option Agreement - The agreement the customer must sign to trade options in which the customer agrees to abide by the rules of the listed option exchanges. Option Class - The group of options, put or call, with the same underlying security. Option-Income Fund - Funds introduced in the early 1980s that sold call options against the Treasury bonds in their portfolios. The premiums collected from the options sales, short-term capital gains, were reported as income, creating unusually high yields for funds invested primarily in Treasury bonds. The Securities and Exchange Commission eventually ruled that option-enhanced yields were misleading and prohibited advertising that hyped the funds' yields. Meanwhile, however, the net asset value of the option-income funds eroded severely as a result of interest rate gyrations in 1987 and 1988, which were greatly intensified by the call options on the funds' bonds. Option Series - The groups of options having the same strike price, expiration date, and unit of trading on the same underlying stock. Options Clearing Corporation (OCC) - A clearing corporation owned jointly by the exchanges dealing in listed options. OCC is the central or main Clearing Corporation for listed options. Options traded on any SEC-regulated exchange can be settled through OCC. Order Book Official (OBO) - An employee of certain exchanges who executes limit orders on behalf of the membership. Order Department - The department within a brokerage firm that is responsible for sending the customers' orders to the proper market for execution. Ordinary Shares - The most common form of share. Holders receive dividends that vary in amount in accordance with the profitability of the company and recommendations of the directors. The holders are the owners of the company. Also known as Common Stock. Original Issue Discount (OID) - The discount from par value at which a bond is sold at the time of issue. Original Issue Zeros - Zero-coupon securities originally issued by a corporation, government, or governmental subdivision as zeros. A zero-coupon security not created by severing interest and principal payments from a pre-existing bond. OTC Bulletin Board - An electronic service that provides selected quotes on over-the-counter stocks. OTC Options - Options created by OTC firms. Other Current Assets - Value of non-cash assets, including prepaid expenses and accounts receivable, due within one year. Out-of-the-Money - A call option is out-of-the-money if the strike price is greater than the market price of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of the underlying security. Overbought\Oversold Indicator - An indicator that attempts to define when prices have moved too far and too fast in either direction and thus are vulnerable to reaction. Over-the-Counter Market (OTC) - Comprised of a network of telephone and telecommunication systems over which unlisted securities and other issues trade. Pacific Clearing Corporation (PCC) - The clearing corporation of the Pacific Stock Exchange. Pacific Stock Exchange (PSE) - This exchange operates in San Francisco and Los Angeles. Par - Face value, the nominal value of a security. Par Value - A value that a corporation assigns to its security for bookkeeping purposes. Participating Preferred - Preferred stock whose holders may "participate" with the common shareholders in any dividends paid over and above those normally paid to common and preferred stockholders. Pass-Through Security - Instrument representing an interest in a pool of mortgages. Pass-throughs pay interest and principal on a monthly basis. Payee - A person or business who receives a payment. For instance, a landlord who receives a rent check or a stockholder who earns a dividend. Payment Date - Date on which a declared stock dividend or a bond interest payment is scheduled to be made. PE (Price/Earnings Ratio) - The current share price divided by the last published earnings per share, where earnings per share is net profit divided by the number of ordinary shares. Penny Stocks - Extremely low-priced securities that trade over the counter. Pension Fund - A fund established for the payment of retirement benefits. Personal Equity Plans (PEPS) - These allow investment in a number of shares and carry various tax benefits, including the receipt of dividends without paying income tax on the income and sales free from capital gains tax on the profit. Phantom Interest - The yearly-accreted interest that a zero-coupon security is presumed to pay each year it is held, even though payment of interest isn't made until the zero matures. Philadelphia Stock Exchange (PHLX) - An equities and options exchange located in Philadelphia. Phone Switching - In mutual funds, the ability to transfer shares among funds in the same family by telephone request. There may be a charge associated with these transfers. PIN - A personal identification number, like the number used at your ATM to access an account. PINs are designed to give the individual access into an account, and keep everyone else out. Pink Sheets - Daily publication providing dealer names and quotes on penny stocks. It is actually printed on pink paper. Pit - The area on a trading floor, where futures and options are bought and sold. Usually octagonal in shape, these platforms with steps descending on the inside permit buyers and sellers to see each other. Often there are multiple pits on a trading floor each dedicated to a specific contract. Pivot - Price level established as being significant by market's failure to penetrate or as being significant when a sudden increase in volume accompanies the move through the price level. Point - A price movement of one full increment. For example, a stock rises one point when its price goes from 23 to 24. Point and Figure Chart - A price-only chart that takes into account only whole integer changes in price; e.g., a two-point change. Point and figure charting disregards the element of time and is solely used to record changes in price. Portfolio - 1) An individual's or institution's combined investment holdings, including cash, stocks, bonds, mutual funds and real estate. 2) A group of investments held by a single person or entity. Portfolios may include any number or type of investment, from real estate holdings to high-tech stocks. Portfolio Turnover - The percentage of a fund's portfolio that is sold in any given year. Position Limits - The maximum number of option contracts that may be held on the same side of the market for a particular security. The number may vary depending on the security. Preemptive Right - A right, sometimes required by the issuer's corporate charter, by which current owners must be given the opportunity to maintain their percentage ownership if additional shares of the same class are issued. Additional shares of the soon-to-be issued security are offered to current owners in proportion to their holders before the issue can be offered to others. Usually one right is issued for each outstanding share. The rights are used to subscribe to the additional shares at a predetermined cash amount. Preference Shares - These are normally fixed-income shares whose holders have the right to receive dividends before ordinary shareholders but after debenture and loan stockholders have received their interest. Preferred Stock - Stock that represents ownership in the issuing corporation and that has prior claim on dividends. In the case of bankruptcy, preferred stock has a claim on assets ahead of common stockholders. The expected dividend is part of the issue's description. Premium - 1) The price of an option contract, determined on the exchange, which the buyer of the option pays to the option writer for the rights to the option contract. 2) If the market price of a new security is higher than the issue price, the difference is the premium. If it is lower, the difference is called the Discount. Premium Bond - A note or bond selling at a price above par. Price/Book Ratio - Compares a stock's market value to the value of total assets less total liabilities (book). Determined by dividing current price by common stockholders' equity per share (book value), adjusted for stock splits. Also called market-to-book. Price/Earnings Ratio (PE) - Shows the "multiple" of earnings at which a stock sells. Determined by dividing current price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for the past 12 months by the number of common shares outstanding. P/E Ratio Equation - Assume XYZ Co. sells for $17.50 per share and has earned $1.75 per share this year. The XYZ stock price of $17.50 is equal to 10 times the per share earned amount of $1.75, therefore XYZ stock sells for 10 times earnings. Price/Sales Ratio - Determined by dividing a stock's current price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for the past 12 months by number of shares outstanding. Price Spread - A spread in which the two options have the same expiration date but have different exercise or strike prices. Price-Weighted Index - An index using calculations of stock prices added together to compute a figure that indicates the general state of the market. The Dow Jones Index would be an example. Primary Dealer - Any of 40 firms recognized by the Treasury Department as eligible to bid on Treasury and agency securities when they are initially issued and to make a market for secondary buyers. Primary Market - 1) The initial offering of certain debt issues. 2) The main exchanges for equity trading. Principal - 1) A brokerage firm when it acts as a dealer, trades a security for its own accounts, and marks up a purchase price or marks down a sale price when reporting the execution. 2) The total amount of money borrowed from a lender. Private Company - A company that does not offer an ownership interest to the general public. Private Placement - An issue that is offered to a single or a few investors as opposed to being publicly offered. Privatization - Conversion of a state-run company to a public-limited company, often accompanied by a sale of its shares to the public. Probate Price - The price used to assess the value of shares for inheritance tax purposes. Calculated on the "quarter up" principle. That is, instead of taking the Mid-Price in the Official List, the difference between the two prices (bid and offer) given under "quotation" is divided by four, and the result is added to the lower of the two prices. Profit Margin - An indicator of profitability. Determined by dividing net income by revenue for a specific period. The result is usually shown as a percentage. Profitability Margins - Numerical term found on an income statement calculated by dividing numbers such as Cash Flow, Operating Income, Gross Income or Net Income by the Revenues of the Company. Program Trading - Trades based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically. Proprietary Software - Software for which a company has exclusive rights. Some companies will only allow the investor to transact business with them through the use of their proprietary software, while others simply offer its use for one's convenience. Prospectus - A document that explains the terms of a new security offering, the officers, the outside public accounting firms, the legal opinion, and description of the core business. It must be made available to any customer who purchases new corporate and certain municipal issues. Proxy - Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholder meeting. Includes information on closely held shares. Shareholders can and often do give management their proxy and the right to vote their shares. Proxy Fight - An attempt by a dissident group to take over the management of a corporation. The group sends proxies electing them to the board; the current management sends proxies favoring them. The shareholders cast their votes by selecting one proxy or the other. Public Limited Company (PLC) - A public company limited by shares and having a share capital, and which may offer shares for purchase by the general public. Only PLCs may qualify for listing or trading on the USM on the London Stock Exchange Public Market - The listed exchanges through which zero-coupon investments can be purchased and sold. Public Offering Date - The first day the new issue is offered to the public, on or shortly after the effective date. Purchase Price - The amount paid to purchase a Treasury or agency obligation. Put (Option) - An option contract that gives the holder the right to sell (or "put"), and places upon the writer the obligation to purchase a specified number of shares of the underlying stock at the given strike price on or before the expiration date of the contract. Quarterly Refunding - Auctions of Treasury notes and bonds occurring in May, August, November, and February. Quarterly Report - A report submitted on a quarterly basis fulfilling an SEC requirement stating that all public companies must report relevant information about themselves on a timely basis to all interested parties. Also known as a Form 10Q. Quick Ratio - An indicator of a company's financial strength (or weakness). Calculated by taking current assets less inventories, divided by current liabilities. Also called Acid Test. Quote - The highest bid and lowest offer on a given security at a particular time. Range - The difference between the high and low trading price during a given period. Rate of Return - The percentage gain or loss for a mutual fund in a specific time period. This number assumes that all distributions are reinvested at the current rate of return. Annualized return is a compounded yearly rate. Rating - The alphabetical designation attesting to the investment quality of a bond. Treasury and agency securities that are AAA-rated are said to be "investment grade." Real-Time Quote - A real-time stock or bond quote is one that states a security's most recent offer to sell or bid (buy). A delayed quote shows the same bid and ask prices 15 or 20 minutes after a trade takes place. Receiver's Certificate - A certificate issued when a company is in financial trouble. Its purpose is to provide the company with funds to complete processing cycles so that more money can be obtained through its liquidation. Record Date - A date established by a corporation's board of directors, for administrative purposes only, that marks when a shareholder must own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov. 1 payable Dec. 1 to holders of record Nov 15. Redemption - 1) The withdrawal of assets from a mutual fund. 2) The retiring of a debt instrument by repaying principal balance to the investors. Redemption Charge - The maximum commission charged by a mutual fund when redeeming shares. For example, a 2% redemption charge (also called a "back-end load") on the sale of shares valued at $1000 will result in payment of $980 (or 98% of the value) to the investor. This charge may decrease as shares are held for longer time periods. Redemption Date - The date on which a security (usually a fixed interest stock) is due to be repaid by the issuer at its full face value. The year is included in the title of the security; the actual redemption date is that on which the last interest is due to be paid. Redemption Notice - A notice that a corporation or a municipality is calling or redeeming a certain issue of bonds. Red Herring - The preliminary prospectus. The name comes from the advisory that is printed on the face of the prospectus in red ink. Refunding - The retiring of a debt instrument by issuing a new debt instrument. Registered Certificates of Accrual on Treasury Securities (RATS) - Another trade name for derivative zeros backed by U.S. Treasury obligations. Reg T Excess - In a margin account, the amount by which the loan value exceeds the debit balance. Registered Bond - A bond on which the owner's name appears on the certificate. Registered Form - The recording of a security's ownership on the issuer's central ledger. Anyone delivering the security must prove that he or she is, in fact, the person to whom the securities are registered. Registered to Principal Only - A feature of a bond whose ownership is recorded on a central ledger and whose interest payments are made only when coupons are detached and cashed in. Payments are not automatically sent to the owner. Registered Trader - A member of an exchange who is responsible for adding "liquidity" to the marketplace by purchasing or selling assigned securities from his or her inventory. Also known as competitive market makers or option principal members. Registrar - A commercial bank or trust company that controls the issuance of securities. Registration Statement - A document filed with the Securities and Exchange Commission (SEC) explaining an impending issue and pertinent data about the issuer. Based on the information provided, the SEC either permits or prevents the issue from being offered. Regular Way - Settlement on the third business day following the trade date. Regular Way Contract - The first contract sheet received from NSCC that contains compared, uncompared, and advisory data. Regular Way Delivery - A type of settlement calling for delivery on the third business day after trade dates for stocks, corporate bonds, and municipals. For government bonds and options, delivery is the first business day after trade. Regulation A - A SEC regulation governing the issuance of new securities. Regulation T (Reg T) - A SEC regulation that governs the lending of money by brokerage firms to its customers. Regulatory News Service (RNS) - A service operated by the Exchange, in its role as competent authority for listing, which ensures that price-sensitive information from listed and USM companies is collected and then disseminated to all RNS subscribers at the same time. Reinvestment Opportunity - Ability to reinvest interest and principal paid by income securities. Reinvestment Rate - Rate of interest earned by reinvesting interest payments rather than consuming them as current income. Reinvestment Risk - The prospect that securities will not be able to pay higher rates of interest when general interest rates rise or retain previous levels of interest when general interest rates fall. Relative Strength - A stock's price movement over the past year as compared to a market index (the S&P 500). A value below 1.0 means the stock shows relative weakness in price movement (underperformed the market); a value above 1.0 means the stock shows relative strength over the one-year period. Equation for Relative Strength: [current stock price/year-ago stock price] [current S&P 500/year-ago S&P 500]. Repurchase Agreement (Repo) - An agreement used to finance certain government and money market inventory positions. The brokerage firm sells securities to the financing organization with the agreement that the firm will repurchase them in the short-term future. Residual Value - The estimated value of a car at the end of a lease. When an individual leases a car, you generally pay the difference between the original value and the residual value. Resistance - A numerical indicator that identifies where market participants believe momentum will peak and are willing to sell or cover a trade to manage risk. Restricted Account - As defined by Regulation T, a margin account in which the debit balance exceeds the loan value. Restricted Securities - Unregistered securities acquired in a transaction that does not involve a public offering. Retained Earnings - Accounting earnings that are retained by the firm for reinvestment in its operations; earnings that are not paid out as dividends. Retention Requirement - The amount that must be retained in a restricted margin account if anything is to be withdrawn. Retractment - A price movement in the opposite direction of the previous trend. Return - The money that an investment earns over a certain period of time. Lower-risk investments generally earn low or moderate returns. Higher returns require investors to take more risk. Return On Assets (ROA) - An indicator of profitability. Determined by dividing net income for the past 12 months by total assets. The result is usually expressed as a percentage. Return On Equity (ROE) - An indicator of profitability. Determined by dividing net income for the past 12 months by common stockholder equity (adjusted for stock splits). The result is shown as a percentage. Investors use ROE as a measure of how a company is using its money. ROE may be decomposed into return on assets (ROA) multiplied by financial leverage (total assets/total equity). Revenue Anticipation Note (RAN) - A short-term debt instrument that is issued by municipalities and that is to be paid off by future (anticipated) revenue. Revenue Bond - A municipal bond whose issuer's ability to pay interest and principal is based on revenue earned from a specific project. Revenues - How much a company made from selling its products and/or services. Reverse Stock Split - A proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. A firm generally institutes a reverse split in order to boost its stock's market price because it thinks the price is too low to attract investors. Right - A certificate showing a stockholder has the privilege of purchasing new securities in proportion to the number of shares already owned before the general public. Rights Arbitrage - The simultaneous purchase and sale of different securities in anticipation of a merger or tender offer. Rights Issue - An invitation to existing shareholders to purchase additional shares in the company. Rights Offering - Offering of common stock to existing shareholders who hold rights that entitle them to buy newly issued shares at a discount from the price at which shares will later be offered to the public. Risk - The inherent possibility that an investment will lose value. In general, the more risk an investor is willing to take, the more money he/she can make from an investment, especially over the long-term. Road Show - The process preceding the initial public offering of a stock where bankers and company managers travel to present their company to possible investors with the purpose of gauging interest in the upcoming stock in order to set the opening price. Rollover - This refers to transferring your money from a 401(k) account to another tax-deferred vehicle, like an IRA. Be advised that this action does have tax implications. Roth IRA - An individual retirement fund. Contributions are not tax deductible, but withdrawals are tax exempt if an individual has been in the plan at least five years and is at least 59-1/2. Income limits and additional rules apply. Round Lot - A standard trading unit. In common stocks, 100 shares make up a round lot. A round lot of bonds in the over-the-counter market is five bonds. Rule 144 - Rule that governs the sale of control and restricted securities. Rules of Fair Practice - NASD rules which govern the dealings of member firms with the public. Russell 2000 Index - Measures the performance of 2,000 small-cap stocks. Sales Charge - The maximum commission charged by a mutual fund when purchasing shares. A 4% sales charge (also called load) on a $1000 purchase will buy $960 worth of fund shares. Sallie Mae - Nickname for the Student Loan Marketing Association and the securities it issues. Same-Day Substitution - The buying of one security and the selling of another security, usually of equal value, on the same day. Secondary Market - The market in which securities are traded after the initial (or primary) offering, gauged by the number of issues traded. The over-the-counter market is the largest secondary market. Secondary Offerings - When a company sells more stock to the market, after its initial public offering, to raise additional capital to finance its operations. Sector/Specialty Stock Funds - Funds that invest in a particular industry or area of the market, such as financial, technology or precious metal stocks. Sector Funds - Mutual funds that invest in specific industries, such as entertainment, energy or finance. Sector funds are generally higher-risk investments because of their lack of diversity. Securities - A general term used to describe any kind of investment product, though it can also refer specifically to stocks and bonds. Security - Property pledged as collateral for a loan. Securities and Exchange Commission (SEC) - The federal agency responsible for the enforcement of laws governing the securities industry. The Securities and Futures Authority (SFA) (previously known as The Securities Association) - The self-regulating organization responsible for regulating the conduct of brokers and dealers in securities, options and futures, including most member firms of the Exchange. Securities Industry Automated Corporation (SIAC) - The computer facility and trade processing company for the NYSE, AMEX, NSCC, and PCC. Securities Investor Protection Corporation (SIPC) - Non-profit organization consisting of members of the securities industry who support it on an assessment basis. If a member should fail, that member's customers are protected up to a maximum of $500,000, including up to $100,000 in cash. Segregation - The isolation of securities that the firm may not use for hypothecation or loan. The securities, which must be "locked up" by the firm, represent fully paid-for securities or the portion of a margin account in excess of loanable securities. Self-Regulating Organization (SRO) - An organization recognized by the SIB and responsible for monitoring the conduct of business by, and capital adequacy of, investment firms. Sell/Write - An advanced option order that combines the short selling of an equity and the selling of a put option on the same underlying stock. Seller's Option - A settlement that calls for delivery and payment according to the number of days specified by the seller. Sell-Out - Occurs when a contract brokerage firm's client incurs a margin or maintenance call and does not settle the balance by settlement date. The firm then sells the securities at the best price available and the buyer is held liable for the price and costs. Selling Short - An investment strategy where the investor sells a stock they do not own with the intention of buying it back later at a lower price. Serial Bonds - An issue of bonds that matures over a period of years. Serial Maturity - A type of bond maturity in which part of the issue matures at different times until the whole issue has matured. Series - All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price. Settled Inventory - The portion of a trader's position that the firm has paid for and maintains. This is the portion that must be financed. Settlement - When payment is made and the securities are delivered for a securities transaction. Settlement Date - The date on which security transactions are settled. Settlement is generally made one to five business days after a trade is executed. For stocks, settlement is generally three business days after the trade. Options and mutual funds normally settle one day after the trade date. Settlement Date Inventory - The total of all positions in a security on settlement date, including fault, transfer, fails and elsewhere. Shareholder - A person or entity that owns a share or shares in a corporation. Shareholder Services Fee - A fee that the fund pays the fund's sponsor to provide for the sponsor's administrative services. Share Repurchase - Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders. Short Account - Account in which the customer has sold short securities. Before a customer may sell short, a margin account must be opened. Short Exempt - A phrase used to describe a short sale that is exempt from the short sale rules. For example, buying a convertible preferred, submitting conversion instructions, and selling the common stock before the stock is received. Short Position - 1) A position in a customer's account in which the customer either owes the firm securities or has some other obligation to meet. 2) Any position on the firm's security records having a credit balance. Short Position (Options) - A position wherein a person's interest in a particular series of options is as a net writer (i.e., the number of contracts sold exceeds the number of contracts bought). Short Position (Stocks) - Occurs when a person sells stocks he does not yet own. Shares must be borrowed before the sale to make "good delivery" to the buyer. Eventually the shares must be bought to close out the transaction. This technique is used when an investor believes the stock price is going down. Short Sale - The sale of securities that are not owned or which are not intended for delivery. The short seller "borrows" the stock to make delivery with the intent to buy it back at a later date at a lower price. Short-Term Bond - A bond that matures within five years. Short-Term Bond Funds - Funds that invest in bonds with average maturities of three years or less. Short-Term Government Bond - A government bond that matures between one and five years. Size - The number of shares available in a quote. For example, if the quote and size on a stock is 9-3/8 to 9-1/2 3x5, it means that the bid is 9-3/8, the offer is 9-1/2, 300 shares are bid, and 500 shares are offered. Slippage - The difference between estimated transaction costs and actual transaction costs. The difference is usually composed of a price difference and commission costs. SIC - Abbreviation for Standard Industrial Classification. Each four-digit code represents a unique business activity. Small-Cap Stocks - Stocks issued by companies that are valued at less than $1 billion. Small- cap stocks can offer high-growth opportunities, but often pay small dividends or none at all. Small Company Funds - Funds that invest in companies that generally have an average of $500 million or less in market capitalization. Specialist - A member of certain SEC-regulated exchanges who must make a market in assigned securities. Specialists also act as two-dollar brokers in executing orders entrusted to them. Spin Off - Giving a stock dividend in another CUSIP, usually a subsidiary. Split Fund - A mutual fund or unit trust that contains Treasury securities and other types of investments. Sponsor - The organizer and, generally, the initial shareholder in a fund. Spread - The difference between the bid and offer sides of a quote. Spread Order - An advanced option order that combines the purchase and sale of two puts or two calls on the same underlying security. Statement of Additional Information - A document containing information not considered important enough to all investors to be included in a fund's prospectus. It can be obtained by a direct request to the fund company. Statement of Cash Flows - A financial statement showing a firm's cash receipts and cash payments during a specified period. Statement of Shareholders' Equity - A balance sheet line item referring to the mathematical calculations used to determine the Shareholders' Equity. Stock - 1) A share in the ownership of a company. A company's stocks can be issued privately or may traded publicly through a stock exchange. Stockholders are entitled to a portion of the company's earnings and assets. 2) An investment product that represents part ownership in a corporation. Stock Ahead - Refers to a limit order that has not been executed because of other orders at the same limit that were entered earlier. Stock Dividend - Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stockholders' Equity (Shareholders' Equity) - A numerical term on an income statement that represents the amount of money invested in the company by shareholders. Stock Power - A form that may be endorsed in lieu of endorsing the back of the stock certificate. Stock Record - A ledger on which all security movements and positions are recorded. The record is usually in two formats: One shows movements of the security the previous day, and the other shows the current security positions. Stock Splits - The exchange of existing shares of stock for more newly issued shares from the same corporation. Since the number of shares outstanding increases, the price per share goes down. Splits do not increase or decrease the capitalization of the company, they just redistribute it over more shares. The effect is the adjustment to the trading price. Stop Limit Order - This order is similar to a stop order, but it becomes a limit order instead of a market order when the price is reached or passed. Buy stop limit orders are entered above the current market; sell stops are entered below it. Stop Order - A memorandum order that becomes a market order when the price is reached or passed. Buy stops are entered above the current market price; sell stops are entered below it. Straddle - Simultaneous long or short positions of both put and call option contracts that have the same underlying security and same series designation. Strangle - An option strategy that refers to writing a call and a put with different strike prices on the same underlying security. Street Name - A form of registration in which securities are registered in the name of a brokerage firm, bank, or depository; it is acceptable as good delivery. Strike (Exercise) Price - The stated price per share for which the underlying asset may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract. Subject Quote - A quote given to indicate the current market status but is not to be taken as a firm ask or bid. Subordinated Debenture - A debenture whose claim to interest and principal of the corporation comes after those of regular debentures and other debt securities. Subscription Right - A stockholder's right to maintain his proportionate ownership in the company by being given the opportunity to buy newly issued stock before the general public. Supplemental Contract - A contract issued by the clearing corporation that includes the total of the regular way contract, adjustments made through advisories, and ads by seller processing. Support - A numerical indicator that identifies where market participants are willing to purchase or cover a trade and manage risk. Symbol - A designated letter abbreviation for a publicly traded company. These symbols are usually between one and four letters. Mutual fund abbreviations are five letters. Takeover - The acquisition of control over a corporation by another company which normally ousts the current management. The takeover can occur by means of a proxy fight or the acquisition of a controlling quantity of common stock. TALISMAN - The Exchange's computerized settlement system. Target Fund - A mutual fund containing bonds that mature in a single year, giving the entire fund a terminal maturity in that year. Tax Anticipation Bill - A short-term security similar to a T-bill that is accepted at par in payment of corporate federal taxes. Tax Anticipation Note - A municipal note issued in anticipation of revenues from a future tax. Tax-Exempt Bonds - Municipal securities whose interest is free from federal income tax. T-Bills (Treasury Bills) - Obligations issued by the Department of the Treasury maturing in 13, 26, or 52 weeks. Tenants In Common - A joint account in which the death of one of the owners would cause his/her share of the account to be retained by his/her estate. Tender Offer - The offer made by one company or individual for shares of another company. The offer may be in the form of cash or securities. Term (loan) - The amount of time in which a loan must be repaid in full. Repaying the loan early may incur special fees, while failing to pay the loan on time almost always incurs penalties. Term Life Insurance - Life insurance that provides coverage for a specified period of time. Termination Fee - The penalty paid to end a car lease before the agreed-upon date. Most car leases include termination fees, but they vary in size. Term Maturity - Bonds of an issue that mature on the same date. Term Structure of Interest Rates - A graph representing the yield to maturity of Treasury securities at identified years of maturity. Ticker - A digital trading screen display showing information on the current option premiums, futures prices, and prices of the underlying assets as selected by the trader. Tick Indicator - A market indicator based on the number of stocks whose last trade was an uptick or a downtick. Used as an indicator of market sentiment or psychology to try to predict the market's trend. Time Horizon (Investment Horizon) - The expected length of time an investor allows in order to meet financial goals. Time Value - The portion of the premium that is based on the amount of time remaining until the expiration date of the option contract. The underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value. Total Debt-to-Equity Ratio - A capitalization ratio comparing current liabilities plus long-term debt to shareholders' equity. Total Return - 1) The combined return of a fund, including distributed and undistributed income and capital gains, over a specific time period, usually one, three, five or ten years. Total return also reflects all of a fund's fees and expenses, including 12b-1 fees. 2) All the money an investment earns over a period of time, including both dividends and capital growth. It's a concept that's especially important to long-term investors. Total Revenue - Total sales and other revenue for a specific period. Trade - A verbal (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs one to five business days later. Trade Confirmation - Written verification and information concerning a transaction that is sent to the customer on or before the first business day following the trade date. Trade Date - The date on which a trade occurs. Trades generally settle (are paid for) one to five business days after a trade date. Traded Options - Transferable options with the right to buy and sell a standardized amount of a security at a fixed price within a specified period. Trading Authorization - Written permission for one to trade in another's account. Trading Area - A specific area of the trading floor of an exchange used to trade a specific option or security. Trading Range - The difference between the high and low prices traded during a period of time. With commodities, the high/low price limit established by the exchange for a specific commodity for any one day's trading. Transfer - The process by which securities are reregistered to new owners. The old securities are canceled and new ones issued to the new registrants. Transfer Agent - 1) An entity that maintains the shareholder records and performs administrative and record keeping duties for a publicly traded corporation or mutual fund. 2) A commercial bank that retains the names and addresses of registered securities owners and that re-registers traded securities to the name of the new owners. Treasury Bills - Obligations issued by the Department of the Treasury maturing in 13, 26, or 52 weeks. Treasury Bond - A long-term (10 to 30 years), fixed interest government debt security. Treasury Direct - The program through which investors may purchase new issues of Treasury bills, notes, and bonds directly from the Federal Reserve. Treasury Note - A medium-term (1 to 10 years), fixed interest government debt security. Trust Indenture - Written agreement between a corporation and its debt issue holders stating interest rates, maturity dates, collateral, etc. Turnover Ratio - A measure of a mutual fund manager's trading activity during the previous year. This is expressed as a percentage of the average total assets of the fund. A turnover ratio of 25% means that the value of trades represented one-fourth of the assets of the fund. Two-Dollar Broker - An exchange member who executes orders from other member firms and charges a fee for each execution. Type - The classification of an option contract as either a put or a call. Uncovered Call - A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price. Uncovered Put - A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited. Underlying - The security on which options are being bought or sold. Underlying Security - The security subject to purchase or sale upon exercise of an option contract. For example, IBM stock is the underlying security to IBM options. Underwriter (Investment Banker) - In a municipal underwriting, a brokerage firm or bank that acts as a conduit by taking the new issue from the municipality and reselling it. In a corporate offering, the underwriter must be a brokerage firm. Underwriting - The process by which investment bankers bring new issues to the market. Underwriting Manager - 1) In a negotiated underwriting, the investment banker whose client is the corporation wanting to bring out a new issue. 2) In a competitive underwriting, the lead firm in a group that is competing with other groups for a new issue. Uniform Gift to Minors Accounts (UGMA) - A method of securities ownership whereby parents or other relatives may contribute cash or securities to children. Portions of returns generated by the securities are taxed at the children's tax bracket instead of the parents' presumably higher bracket. Uniform Practice Code - Part of the NASD rules that govern the dealing of firms with each other. Unit - At issuance, a "package" of securities, such as a bond and warrant that become separable at a later date. Unit Investment Trust (UIT) - Pools of money collected from individuals and invested in stocks, bonds or other property to produce an income stream. Investors receive shares representing their contribution to the pool. The assets held in a UIT are not traded; they remain fixed until they mature or the trust is liquidated. Unit Trust - Similar to a mutual fund. A portfolio of securities, including mortgage-backed securities, offered by a brokerage or mutual fund. Unlisted Securities Market (USM) - The Exchange's market for medium-sized companies that do not qualify for or do not wish to have a full listing. Unlisted Security - 1) A security that has not been admitted to the Stock Exchange's Daily Official List. Usually the issuer will be an unlisted company, but not always; it is not uncommon for a company to apply for its ordinary shares to be listed but not its loan stocks, or vice versa. 2) A security traded on the USM. Unwind - An advanced option order that is used with the intention of closing an existing buy/write or sell/write position. Uptick - A listed equity trade at a price that is higher than that of the last sale. Up-Tick Rule - An SEC rule that states that in most circumstances no short sale may be made when the last trade on the security was a minus tick. U.S. Treasury Bill (T-bill) - The shortest-term instrument issued by the federal government. The maturities of these discounted issues do not exceed one year at issuance, with three-month (90-day) or six-month (180-day) paper being very common. U.S. Treasury Bond (T-bond) - The longest-term debt of the federal government, issued in coupon form for periods of 10 to 30 years. Vesting - While an investor maintains ownership of their own contributions to a 401(k) plan, the contributions that their employer makes to their account becomes their own over time. This time lag, which often varies from six months to several years, is called the vesting period. Volatility - A relative measure of a security's price movement during a given time period. It is measured mathematically by the annual standard deviation of daily stock price changes. Volume - The number of shares of a stock traded during expressed in hundreds. For example, if the volume shows 3,400 on a quote, 340,000 shares of stock were traded. Voting Trust - The deposit of shares with a trustee to gain long-term corporate control. Warrant - A security that allows the owner to purchase shares of the issuing corporation's stock at a set price on a future date. Wash-Sale Rule - The Wash-Sale Rule prevents taxpayers (non-dealers) from selling securities at a loss and reacquiring "substantially identical" securities within a 30-day period before or after a loss. The Internal Revenue Service has taken the position that the Wash-Sale Rule will disallow a loss on the sale of the security. Wasting Asset - An asset that has a limited life and tends to decrease in value over time. Weighted-Average Maturity - The arithmetic mean of maturities of securities held by a mutual fund. White Knight - A company that rescues another in financial difficulty, especially one that saves a company from an unwelcome takeover bid. Withdrawal Plan - The ability to establish automatic, periodic mutual fund redemptions and have proceeds mailed directly to the investor. Workout Quote - Subject quote in which the trader estimates the price at which he thinks the security can be bought or sold if given time to find a market. World Bond Funds - Funds that invest in the bonds of U.S. and foreign governments. World Stock Funds - Funds that invest in the stocks of U.S. and foreign companies. Writer - The seller of an option contract. W-Type Bottom - A double-bottom where the price or indicator chart has the appearance of a W. Yellow Sheets - Wholesale quote sheets for corporate bonds used by dealers. Yield - The percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note. Yield Curve - A graph linking the term structure of interest rates and showing the general pattern of yields to maturity on Treasury obligations. Yield Elbow - The point on the yield curve that indicates the year at which the economy's highest interest rates occur. Yield to Call - The percentage rate of a bond or note, if one were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time, to the call and the market price. Yield to Maturity - The percentage rate of return paid on a bond, note or other fixed income security if an investor buys and holds it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate. Zero-Coupon CD - A certificate of deposit that pays interest only upon maturity. Zero-Minus Tick - A stock trade at a price that is equal to the preceding trade but lower than the last different price. Zero-Plus Tick - The term given to a sale made at the same price as the trade that preceded it providing that the previous trade was above the price of the sale it preceded.
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Rječnik pojmova ADR American Depository Receipt – Certifikat koji izdaje američka depozitna banka, a koji predstavlja strane dionice koje banka ima u svom portfelju, obično kod podružnice ili korespondentske banke u zemlji izdanja dionice. Arbitraža Kupovanje neke robe na jednom tržištu da bi je se prodalo na drugom. Mnoge vrijednosnice kotiraju na više tržišta i na tim tržištima imaju različite cijene. Arbitraža predstavlja nerizičnu zaradu. Ask Cijena po kojoj je vlasnik voljan prodati neku vrijednosnicu. Alokacija imovine Raspodjela sredstava među različitim vrstama imovine (dionice, obveznice, depoziti, nekretnine…) Asset/liability management Način upravljanja sredstvima financijske institucije da bi se postigla njihova dva temeljna cilja – da bi se ostvario očekivani povrat na uložena sredstva i da bi imovina ostala veća od obveza. Aktivno upravljanje portfeljem Strategija korištenja dostupnih informacija i tehnika analize da bi se odabrali instrumenti sa što većim potencijalnim rastom vrijednosti. Suprotna strategija je pasivno upravljanje portfeljem. Back office Engleski izraz koji označava organizacijsku jedinicu unutar banke i ostalih financijskih institucija koja nije izravno uključena u prodaju ili trgovanje, a brine se za knjigovodstvenu evidenciju, prijeboj i namiru transakcija. Bid Cijena po kojoj je netko voljan kupiti neku vrijednosnicu. Bik Investitor koji smatra da će tržište porasti. Bikovo tržište Tržište na kojem cijene vrijednosnica rastu. Blagajnički zapisi Kratkoročni utrživi vrijednosni papiri s rokom dospijeća do jedne godine. Izdaju ga ministarstva financija, državne agencije ili centralne banke. U Hrvatskoj blagajničke zapise emitira Hrvatska narodna banka. Smatraju se nerizičnim instrumentom, a sigurnost i niži prinos glavne su mu karakteristike. Prodaju se uz diskont na 91, 182 i 364 dana. Broker Pojedinac koji za proviziju izvršava naloge klijenata. Broker je u pravilu specijaliziran za određenu vrstu vrijednosnica i mora biti registriran kod burze. Bruto domaći proizvod (BDP) Tržišna vrijednost svih dobara i usluga proizvedenih unutar jedne godine, isključujući prihode stranih tvrtki i stranaca koji rade u zemlji. Burza (stock exchange) Organizirana tržišta na kojima se trguje različitim kategorijama imovine (dionice, obveznice, različite robe...) po unaprijed definiranim i strogo utvrđenim pravilima uvrštenja i trgovanja uvrštenim kategorijama. Caveat emptor, caveat subscriptor Latinska izreka – neka paze i kupac i prodavač. Upozorenje se odnosi na posebno rizična tržišta bez adekvatnog nadzora. Crni petak Veliki pad cijena na tržištu. Originalni crni petak je bio 24 rujna 1869. godine kada je došlo do pada cijena na tržištu zlata. Crni ponedjeljak 19. listopad 1987. godine – dan kada je Dow Jones Industrial Average (DJIA) – najpoznatiji indeks New York Stock Exchange pao 22,6%. To je bio najveći pojedinačni pad do tada. CROBEX Službeni indeks cijena dionica kojima se trguje na Zagrebačkoj burzi vrijednosnica. Uključuje redovne dionice 10 poduzeća kojima se trgovalo barem 75% raspoloživih dana trgovanja u prethodnih šest mjeseci, koje su uvrštene barem šest mjeseci na burzi te čija je kapitalizacija 250 milijuna kuna. Uveden je 1997. godine. Datum objave – Announcement Date Dan kada će se objaviti vijest o nekoj tvrtci. Koristi se u analizama kretanja cijena vrijednosnica. Dealer Pojedinac koji trguje vrijednosnicama za svoj račun. Deflacija Pad cijena roba i usluga, suprotan pojam inflaciji. Depozitna banka (Custody) Banka skrbnik investicijskog fonda koja vodi račune novca i vrijednosnica investicijskog fonda. Depozitna banka vrši plaćanja i namire vrijednosnica. Za svoju uslugu zaračunava naknadu investicijskim fondovima. Derivativni instrumenti Ugovori kao što su opcije i futuresi. Predstavljaju klađenje na smjer u kojem će se kretati cijena baze. Baza može biti dionica, indeks ili neka druga roba. Imaju veću financijsku polugu od klasičnih financijskih instrumenata. Devizno tržište (fx - foreign exchange market) Dio ukupnog tržišta, na kojemu se prema određenim pravilima trguje devizama, odnosno razmjenjuju se nacionalne valute po deviznom tečaju formiranom na osnovi njihove ponude i potražnje. Granice fluktuiranja odnosnih tečajeva određene su intervencijama centralnih banaka. Dividenda Dobit dioničkog društva isplaćena dioničarima. Općenito, bilo koji iznos poslovnog rezultata ili kapitalnog dobitka od emisije dionica iznad nominalne vrijednosti koji se dijeli ili distribuira među vlasnike dionica. Dionice (stocks, shares) Vrijednosni papiri koji vlasniku daju pravo upravljanja i pravo na proporcionalno sudjelovanje u dobiti dioničkog društva. Dionice su dugoročni tržišni vrijednosni papiri bez unaprijed utvrđenog dospijeća kojima se trguje na tržištima kapitala. Dijele se na obične (redovne) i preferencijalne (povlaštene). Dionički fond (equity fund) Vrsta investicijskog fonda koji sredstva ulaže u dionice različitih kompanija. Zbog volatilne prirode dionica, ulaganje u fond nosi povećan rizik, ali je mogućnost ostvarenja povećanog prinosa realna. Diverzifikacija portfelja/ulaganja (diversification) Distribucija uloženog kapitala u više vrijednosnih papira. Što je kapital uložen u više vrijednosnih papira, rizik se smanjuje. Dospijeće (maturity) Dan kada kredit, rata kredita, zajmovni vrijednosni papir ili kakva druga obveza dospijevaju i trebaju biti isplaćeni. Kod obveznica dospijećem je emitent dužan zakonitom držaocu isplatiti nominalnu svotu na koju obveznica glasi. Dumping Nuđenje velike količine neke robe (mogu biti i vrijednosnice) za cijenu koja je znatno niža od tržišne cijene. Ekspanzija Rast ekonomske aktivnosti u nekoj regiji, obično označen kao rast BDP-a kroz dva uzastopna kvartala. Održava se na tržištu vrijednosnica kao rast cijena. Suprotan pojam je recesija s kojom čini poslovni ciklus. Fond fondova Investicijski fond koji ulaže u druge investicijske fondove. Fond menadžer (Fund manager) Financijski stručnjak, osoba čiji je posao ulaganje imovine fonda, kako bi ostvario ciljani prinos uz što nižu razinu rizika. Front office Engleski izraz koji označava brokere/dilere i pomoćno osoblje izravno uključeno u stvaranje poslovanja i ostvarivanja profita za svoju tvrtku. Fundamentalna analiza Analiza vrijednosnica kroz analizu poslovanja tvrtke koja ih je izdala. Analiza se usredotočuje na računovodstvene izvještaje tvrtke i na očekivanja o njenom budućem poslovanju. Fundamentalna analiza ne promatra samo tvrtku i njeno poslovanje u danom trenutku, nego gleda i makroekonomsko okruženje (kamatne stope, tečaj, BDP). Da bi se odredila realna vrijednost neke tvrtke, uspoređuje ju se sa sličnim tvrtkama. GDR - General Depository Receipt Certifikat koji izdaje bilo koja depozitna banka, predstavlja strane dionice koje banka ima u svom portfelju, obično kod podružnice ili korespondentske banke u zemlji izdanja dionice. HANFA Hrvatska agencija za nadzor financijskih usluga (HANFA) - regulatorna i nadzorna institucija, provodi zakonske mjere, izdaje i oduzima dozvole, odobrenja i suglasnosti, donosi propise i provodi druge mjere iz djelokruga i nadležnosti Agencije. Obavlja nadzor nad poslovanjem društava za osiguranje, mirovinskih osiguravajućih društava, zastupnika i posrednika u osiguranju i pravnih osoba koje se bave poslovima leasinga i factoringa. Obavlja nadzor nad poslovanjem burzi i uređenih javnih tržišta, ovlaštenih društava i izdavatelja vrijednosnih papira, brokerskih društava, brokera, investicijskih savjetnika, institucionalnih ulagača, Središnje depozitarne agencije, društava za upravljanje investicijskim fondovima, privatizacijskih investicijskih fondova, mirovinskih fondova, Fonda hrvatskih branitelja iz Domovinskog rata i članova njihovih obitelji, Umirovljeničkog fonda, Središnjeg registra osiguranika, a uz navedeno HANFA prikuplja, obrađuje i analizira nadzorna i financijska izvješća subjekata nadzora. Index Statistička veličina koja mjeri promjene u ekonomiji ili na financijskom tržištu. Često je izražen kao postotna promjena unutar nekog razdoblja. Indeksi mjere padove i rast na tržištima dionica, obveznica i drugih roba. Indeksi su najčešće sastavljeni od dionica najkvalitetnijih tvrtki. Indeksni fond Investicijski fond koji kopira sastav nekog indeksa doslovno ili samo ulaže u nekoliko dionica zastupljenih u indeksu. To je pasivna strategija ulaganja. Inflacija Stopa po kojoj rastu cijene dobara i usluga. Suprotan pojam je deflacija. Insolventnost Ukupne obveze neke tvrtke su veće od ukupnih potraživanja. Računovodstveni pojam. Investicijski fond (investment fund) Investicijski fond se osniva na temelju odobrenja Komisije za vrijednosne papire isključivo radi javnog prikupljanja novčanih i imovinskih sredstava javnom prodajom, odnosno izdavanjem udjela u fondu ili dionica, čija se sredstva, uz primjereno uvažavanje načela sigurnosti, profitabilnosti, likvidnosti i razdiobe rizika, ulažu u prenosive vrijednosne papire i/ili nekretnine te depozite u financijskim institucijama. Izlazna naknada (redemption fee) Dio ukupne vrijednosti novčanih sredstava koji se povlači iz otvorenog investicijskog fonda. Plaća se društvu za upravljanje fondovima prilikom prodaje udjela. Komercijalni papiri (commercial papers) Kratkoročni dužnički vrijednosni papiri koje izdaju poduzeća radi pribavljanja kratkoročnih sredstava. Obično ih izdaju velike korporacije dobrog kreditnog rejtinga. Investitoru/kupcu nose prihod/kamatu u obliku diskonta. Konverzija vrijednosnih papira (conversion) Postupak zamjene vrijednosnih papira za druge vrste vrijednosnih papira ili za iste vrijednosne papire drugih emisija, odnosno serija. Korekcija Naziv za pad cijena na tržištu. Krivulja prinosa (yield curve) Grafički prikaz odnosa vremena dospijeća jedne vrste financijskog instrumenta i prinosa tog instrumenta. Odnos ovih veličina označava se i pojmom - vremenska struktura kamatnih stopa. Najčešći oblici su normalna (pozitivna), inverzna (negativna) i ravna. Kupon (coupon) Periodične isplate kamate na vrijednosnicu imaocu instrumenta. Kupon se izražava kao anualizirana postotna vrijednost nominalnog iznosa instrumenta duga. Kuponski način naplate kamata je uobičajen, popularan i najčešće je polugodišnji i godišnji. Karakterističan je za emisije obveznica u materijalnom obliku i glasi na donosioca, pri čemu kupon može naplatiti svatko tko ga posjeduje. Kupi i drži strategija Pasivna strategija ulaganja. Investitor odabere neku vrijednosnicu i drži je u portfelju do kraja horizonta ulaganja. Kupovna cijena (bid) Cijena po kojoj market makeri kupuju financijske instrumente. Market useri po bidu prodaju financijske instrumente market makerima. Laisse-faire Ekonomska doktrina koja kaže da se država ne bi trebala miješati u ekonomiju, jer će tržište samo sebe regulirati. London Interbank Offered Rate (LIBOR) Kamatna stopa koje velike banke u Londonu obračunavaju jedne drugima za kredite. Kamatne stope u ostatku svijeta su bazirane na LIBOR-u. Kontrast je LIBID – kamatna stopa po kojoj se te banke žele zadužiti. Likvidnost Mogućnost da se neka imovina brzo pretvori u novac, tj. da se može brzo prodati bez značajnog gubitka vrijednosti. Makroekonomija Proučava gospodarstvo neke države ili regije kao cjelinu. Market maker Banka, broker ili druga financijska institucija koja je uvijek spremna kupiti po kupovnoj cijeni (bid) i prodati po prodajnoj cijeni (ask). Medvjed Investitor koji vjeruje da je tržište u padu. Medvjeđe tržište Tržište na kojem kroz duži period padaju cijene vrijednosnica, obično oko 20 %. Middle office Engleski izraz koji označava organizacijsku jedinicu unutar financijske institucije koja je odgovorna za upravljanje izloženosti rizicima i limitima. Mikroekonomija Proučava poslovanje tvrtki i njihovu međusobnu interakciju. Proučava gospodarstvo na mikrorazini. Mješoviti fond (balanced fund) Vrsta otvorenih investicijskih fondova koji ulažu u razne vrste financijske imovine na temelju omjera propisanih prospektom i statutom fonda. Najčešći su podjednaki omjeri ulaganja u obveznice i dionice. Takav fond privlači investitore koji žele mogućnost višeg prinosa kojeg nude dionice i stabilnost koju pružaju obveznice. NAV (Net Asset Value) Neto vrijednost imovine, odnosno "stvarna" vrijednost investicijskog fonda. Računa se kao ukupna vrijednost svih vrijednosnih papira u portfelju fonda (umnožak broja vrijednosnica i njihove aktualne tržišne cijene) uvećana za vrijednost ostale imovine (novac na računima, depoziti, odobreni krediti) i umanjena za obveze fonda. Novčani fond (money market fund) Vrsta investicijskog fonda koji sredstva ulaže u instrumente novčanog tržišta koji nose minimalan rizik (depoziti, trezorski zapisi, blagajnički zapisi i dr.). Novčano tržište (money market) Podrazumijeva tržište novca i tržište kratkoročnih dužničkih instrumenata. Temeljni zadatak ovog tržišta je trajna i svakodnevna opskrba banaka novcem kao prometnim i platežnim sredstvom kako bi one postigle likvidnost kojom se omogućuju tekuća plaćanja njihovih komitenata. Obveznice (bonds) Dugoročni dužnički vrijednosni papiri s rokom dospijeća preko jedne godine. Kupac obveznice posuđuje iznos na koji obveznica glasi njezinu izdavatelju, a izdavatelj obveznice jamči da će tijekom utvrđenog vremenskog razdoblja imatelju obveznice godišnje plaćati utvrđeni iznos kamata, te o dospijeću obveznice isplatiti iznos na koji ona glasi. Za razliku od klasičnog kredita, dužnički financijski instrument može biti kupljen ili prodan na sekundarnom tržištu. Obveznički fond (bond fund) Vrsta investicijskog fonda koji sredstva ulaže u obveznice različitih izdavatelja. Prinosi fondova su stabilni uz smanjen rizik zbog sigurnosti obveznica. Otvoreni investicijski fond (open-end investment fund) Otvoreni fond je zasebna imovina, bez pravne osobnosti, što ga uz odobrenje Komisije za vrijednosne papire osniva društvo za upravljanje fondovima, kojemu je predmet poslovanja isključivo prikupljanje novčanih sredstava izdavanjem i javnom prodajom dokumenata o udjelu. Obveza fonda je da u svakom trenutku bezuvjetno otkupi izdane udjele. Otvoreni investicijski fond s javnom ponudom Otvoreni investicijski fond s javnom ponudom jest zasebna imovina, bez pravne osobnosti, koju uz odobrenje Agencije osniva Društvo s ciljem prikupljanja novčanih sredstava javnom ponudom udjela u fondu, čija se sredstva ulažu u skladu s odredbama Zakona i čiji imatelji imaju pravo, pored prava na razmjerni udio u dobiti fonda, u svako doba zahtijevati isplatu udjela i na taj način istupiti iz fonda. Sredstva otvorenog investicijskog fonda s javnom ponudom prikupljena izdavanjem i javnom prodajom udjela u fondu te imovina stečena ulaganjem uplaćenih novčanih sredstava, uključujući prihode i prava proizašla iz imovine fonda, čine otvoreni investicijski fond s javnom ponudom, odnosno zasebnu imovinu u zajedničkom vlasništvu svih imatelja. Otvoreni investicijski fondovi, dakle, nisu u vlasništvu Društva, već u vlasništvu imatelja, proporcionalno veličini njihovih udjela u fondu, dok Društvo samo donosi odluke o tome na koji način će se ulagati imovina fonda. Poslovni ciklus (konjukturni ciklus) Ciklus kroz koji prolazi gospodarstvo, izmjena recesija i ekspanzija. Portfelj (portfolio) Skup financijskih sredstava koje neki pojedinac ili poduzeće posjeduje. Može se sastojati od novca (gotovina, depoziti i dr.) i od vrijednosnih papira (dionice, obveznice i dr.). Diverzifikacija portfelja je ulaganje novca u razne vrijednosne papire radi disperzije rizika uspješnosti pojedinih investicija. Povrat na imovinu (Return on assets - ROA) Indikator profitabilnosti. Dobije se dijeljenjem ukupnog neto prinosa ostvarenog u zadnjih godinu dana s ukupnom imovinom. Rezultat se prikazuje kao postotak. Povrat na investirana sredstva (Return on investment - ROI) Indikator profitabilnosti. Dobije se dijeljenjem ukupnog neto prinosa s računovodstvenom vrijednosti ulaganja. Prinos do dospijeća (yield to maturity) Prihod od obveznica na anualiziranom nivou, ali nakon što se u obzir uzme cijena obveznice na tržištu kapitala. To je diskontna stopa koja izjednačava neto sadašnju vrijednost svih budućih novčanih tokova od obveznice s njenom trenutnom cijenom. Prospekt fonda (fund prospectus) Dokument o poslovanju fonda odobren od strane Komisije za vrijednosne papire koji detaljno propisuje uvjete poslovanja fonda. Dokument se izdaje prilikom osnivanja investicijskih fondova i u njemu su sadržani svi bitni podaci za predstavljanje fonda potencijalnim investitorima (strategija ulaganja, investicijski limiti, ulazne naknade i dr.). Recesija Pad ekonomske aktivnosti u nekoj regiji, obično označen kao pad BDP-a kroz dva uzastopna kvartala. Održava se na tržištu vrijednosnica kao pad cijena. Suprotan pojam je ekspanzija s kojom čini poslovni ciklus. Rejting (rating) Klasifikacija kredibiliteta izdavatelja dužničkog vrijednosnog papira. Izdaju ga specijalizirane kompanije koje se bave procjenom sposobnosti podmirivanja obveza od strane izdavatelja. Klasifikacija se izražava kombinacijom brojki i slova. AAA rejting je oznaka najviše kvalitete vrijednosnih papira, izdavatelja vrijednosnih papira ili financijske institucije. Najpoznatije svjetske agencije za procjenu kredibiliteta su Moody's i Standar & Poor's. Rizik (risk) Odstupanje stvarnog od očekivanog povrata na ulaganje. Rizik promjene cijena vrijednosnih papira Tržišni rizik (market risk) - imovina fonda koja je uložena u vrijednosne papire kojima se trguje na financijskim tržištima izložena je dnevnim promjenama cijena što utječe na rast ili pad vrijednosti imovine. Rizik promjene tečaja Valutni rizik (foreign currency risk) - imovina fonda može biti uložena u vrijednosne papire denominirane u različitim valutama (kuna, američki dolar, japanski jen i dr.), čime se taj dio imovine izlaže riziku promjene tečaja pojedine valute u odnosu na obračunsku valutu u kojoj se mjeri prinos na ulaganje u fondu. Rizik uzrokovan inflacijom Rizik da će se potencijalni prinos izgubiti zbog pada vrijednosti novca. Sistemski rizik Kada je tržište sastavljeno od niza velikih kompanija koje su međusobno povezane. Kada jedna od tih kompanija ima problema, ti problemi će se raširiti i na ostale kompanije. Sistemski rizik je posebno jako izražen u financijskoj industriji. SDA, Središnja Depozitarna Agencija (Central Depository Agency) Središnji depozitorij u kojemu se vrijednosni papiri čuvaju u obliku elektronskih zapisa koji omogućava obavljanje poslova prijeboja i namire. Statut fonda Dokument koji uređuje pravne odnose društva s vlasnicima dokumenata o udjelu u otvorenom investicijskom fondu Stečena kamata (accrued interest) Kamata koju prilikom trgovanja obveznicama kupac plaća prodavatelju. Obračunava se od zadnjeg datuma isplate kupona. Cijena obveznice koja uključuje stečenu kamatu naziva se "dirty price", dok se cijena bez stečene kamate naziva "clean price". Strukturirani proizvod (assets backed security) Strukturirani financijski proizvod osiguran nekom imovinom, primjerice dužnički vrijednosni papir izdan na osnovu bankarskog kredita čiji povrat je osiguran nekom imovinom. Tehnička analiza Analiza vrijednosnica koja pokušava predvidjeti kretanje cijene neke vrijednosnice s obzirom na njeno kretanje u prošlosti. Trezorski zapis (treasury bill - T bill) Kratkoročni utrživi vrijednosni papir s rokom dospijeća do jedne godine. Izdaju ga državni trezori (ministarstva financija), a mogu ga izdavati i jedinice lokalne uprave. Smatra se nerizičnim vrijednosnim papirom radi umjerenog prihoda i sigurnosti. Prodaje se na dražbi uz diskont (popust), tako da mu je cijena pri prodaji niža od nominalne, a pri dospijeću se isplaćuje nominalna cijena. Uobičajeno se izdaju na 91 dan, 182 dana ili 364 dana. Tržište kapitala (capital market) Tržište na kojemu se kupuje i prodaje kapital, odnosno mjesto na kojemu se susreću potražnja i ponuda kapitala. Na njemu se susreću interesi štediša s jedne strane i investitora s druge strane. Trguje se dugoročnim vrijednosnim papirima (dionice i obveznice). Burze su najčešća mjesta na kojima se trguje instrumentima tržišta kapitala. Tečaj Cijena jedne valute izražena u drugoj valuti. Tečaj je cijena na deviznom tržištu. Teorija balona (bubble theory) Na tržištu ponekad dođe do velikog rasta cijena iznad stvarnih vrijednosti vrijednosnica, a kada "balon pukne" dolazi do naglog pada cijena. Udjel Imovina investicijskog fonda je podijeljena na udjele. Podjela služi kako bi se mogao pratiti prinos za svakog pojedinog ulagača. Ulazna naknada (entry fee) Jednokratni trošak prilikom kupnje udjela investicijskih fondova, uglavnom izražen kao postotak od uloženog iznosa. Vremenski horizont (time horizont) Period u kojem je investitor spreman držati uloženu imovinu do prodaje. Zakon jedne cijene Ekonomsko pravilo koje kaže da bilo koja vrijednosnica mora imati samo jednu cijenu bez obzira na koliko tržišta se njome trgovalo. Zakon jedne cijene održava arbitraža. Ako je na jednom tržištu cijena neke vrijednosnice niža, a na drugom viša, netko će uočiti tu priliku i početi kupovati na jednom i prodavati na drugom tržištu te tako održati zakon jedne cijene. Zatvoreni investicijski fond (close-end investment fund) Zatvoreni fond je dioničko društvo što ga uz odobrenje Komisije za vrijednosne papire osniva i njime upravlja društvo za upravljanje fondovima, kojemu je predmet poslovanja isključivo prikupljanje novčanih sredstava i imovinskih stvari javnom ponudom svojih neograničeno prenosivih dionica i ulaganje tih sredstava. Društvo za upravljanje fondom nema obvezu otkupa dionica na zahtjev dioničara, već se njima trguje na nekom tržištu vrijednosnih papira.