Technical Analysis Terms
All or None (AON) - An order modifier that
instructs a broker to execute the order in its entirety or not at all. The order will not be
partially filled.
American Depository Receipt (ADR)
- Shares of foreign companies trading in U.S. markets are called American
Depository Receipts. U.S. investors may buy shares in a foreign company
through an ADR. The certificate, transfer, and settlement practices for
ADRs are identical to those of U.S. securities.
The AMEX Composite Index
- This index monitors the performance of all stocks that are traded on
the American Stock Exchange.
Annual Report -
Public companies are required to file an annual report with the Securities
and Exchange Commission detailing the preceding year's financial results
and plans for the upcoming year. This report contains financial information
concerning a company's assets, liabilities, earnings, profits and other
year-end statistics.
Ask Price
- The lowest declared price at which a market
maker is willing to sell stock to a buyer. Also known as offer price.
Ask Size - The largest
number of shares a market maker is willing
to trade at the ask price. The largest amount of a security or other asset
which a seller is willing to trade at the ask price.
Asset - Something
of value. For investors, the three main asset classes are stocks, bonds
and cash (with "cash" referring to money-market funds, certificates of
deposit and other short-term debt instruments.)
Asset Allocation
- The division of investment capital across various classes of assets,
such as stocks, bonds, real estate and cash equivalents.
At the Money - A
situation in which an option's strike price and the market price of the
underlying security are identical.
Basis Point
- One one-hundredth of a percentage point.
Bear Market - A bear market is one in which
prices in the overall market are low or declining.
Beta - A statistical
measure of a stock's volatility relative to the overall market. A beta
of less than 1 indicates lower risk than the market; a beta of more than
1 indicates higher risk than the market.
Bid/Ask Spread -
See Spread
Bid Price - The highest declared price at which a market maker
is willing to buy stock from a seller.
Bid Size - The largest
number of shares a market maker is willing
to trade at the bid price.
Big Board - A popular
name for the New York Stock Exchange.
Block Trade - A purchase or sale of a large quantity of stock, generally 10,000 shares
or more.
Blue Chip - A term used to describe the securities of the most stable, profitable and reputable
corporations.
Bond
- A long-term debt security issued by a corporation or government entity that usually carries a fixed rate of interest. A bond issuer agrees to
pay the owner the amount of the face value on a future date and to pay
interest at a specified rate at regular intervals.
Book Entry - The
electronic recording of security ownership.
Book Value
- The theoretical value of a corporation, based on
the assets and liabilities recorded on its balance sheet.
Broker - An individual
or firm that acts as an intermediary between a buyer and seller in exchange
for a commission.
Broker/Dealer -
NASD member firms that act as securities dealers or
brokers, or perform both functions, are known as broker/dealers.
Budget - An itemized
summary of probable expenditures and income for a given period.
Bull Market - A
bull market is one in which prices in the overall market are high or rising.
Buy Back - When
a company repurchases its stock in the open market, or it issues a tender
offer, it is known as a buy back. Companies typically buy back their stock
when they want to reduce the number of shares outstanding, or when they
feel that their stock is undervalued relative to other investments. The
market typically views buy backs favorably, and stocks that have been
repurchased by their issuers frequently rise in price.
Buy To Cover - Transaction
that closes a short sale by repurchasing the
borrowed security for return to the lender.
Buy To Open - The
opening transaction for an option holder.
Buying On Margin
- Purchasing a security with borrowed funds, using
the acquired security as collateral. The initial margin for buying most
stocks in margin accounts is 50% of market
value, as specified by Regulation T.
Buying Power
- The funds available to a brokerage customer for buying
on margin, given the assets and liabilities in the customer's account.
Call Option
- An option contract,
which gives the holder the right, but not
the obligation, to buy a predetermined number of shares of the underlying
security at a specified price during a specified period.
Call/Put Spread
- The buying and selling of call and/or put options on the same underlying
security with different expiration dates, different strike prices or both.
Capital Appreciation
- An increase in the market value of a security.
Capital Gain
- The profit that results when an investor sells a
security at a profit. Capital gains are usually taxable.
Capitalization -
For accounting purposes, capitalization is the value of all sources of
long-term capital for a company, including common stock, preferred stock
and bonds. Market capitalization
is the total market value of a company's issued-and-outstanding common
shares.
Cash Account
- A brokerage account in which all purchased securities must be paid in full.
Buying on margin,
selling
short and margin loans are not allowed
in cash accounts.
Cash Dividend -
A portion of a company's after-tax earnings that its board of directors
distributes to shareholders in cash, usually on a quarterly basis.
Cash Equivalents
- Short-term investments (such as money market mutual funds and Treasury
bills) that are like cash because of their safety and high liquidity.
Cash Settlement
- In option trading, settlement of a transaction via payment of cash only, without delivery of
an asset. For exercise of a cash-settled call option, the option holder
receives the amount by which the exercise settlement value of the underlying
asset exceeds the exercise price. For a cash-settled put
option, the holder receives the amount by which the exercise price
exceeds the exercise settlement value.
Closing Transaction
- In option trading, a transaction, which offsets an open position. A
buyer of options would sell and a seller of options would buy.
Collateral
- An asset pledged as a guarantee for a loan.
Commission
- The fee charged by a broker to a customer for executing a trade order. The
number of shares traded or the dollar amount of the trade generally determines
commission sizes.
Common Stock
- A class of security. Owners of common stock have proportional ownership
in a corporation. Common stock usually gives holders the right to receive
dividends and vote on company issues.
Confirmation
- Formal notice sent by a broker to an account holder that provides details of
a securities transaction, including price, number of units and commission.
Contract
- In option trading, a contract gives an option holder (purchaser) the right, but
not the obligation, to buy (call option) or sell (put option) a predetermined
number of shares of the underlying security at a specific price and for
a specific period of time. The sellers of both calls and puts must fulfill
their respective contractual obligations if called upon by holders of
those options.
Contract Size
- In option trading, the fixed amount of the underlying asset that can be
bought or sold under the terms of an option contract. The contract size
for U.S. listed stock options is generally 100 shares. There are exceptions,
for example resulting from certain stock splits and corporate reorganizations.
Conversion Ratio
- The number of common shares that an investor receives when converting
a preferred stock or convertible bond. The conversion ratio is set when
the convertible security is first issued.
Convertible Preferred Stock
- Preferred stock that can be converted into a fixed number of common
stock of the same company.
Cost Basis
- The price paid for a security, including commissions, markups and other cost
adjustments.
Coupon Rate
- The stated interest rate on a bond, paid by a corporation or government entity
through out the bond's life.
Covered Call
- In option trading, selling (writing) a call as an opening transaction against
the underlying stock owned by the seller (writer) of the call.
Covered Put
- In option trading, selling (writing) a put as an opening transaction while
owning a put on the same underlying security with an equal or longer expiration
date and an equal or higher strike price.
Credit Agreement
- In a margin account, a credit agreement details the credit arrangement
between the broker and customer.
Credit Balance
- Funds available for use in a margin (or cash) account.
Current Ratio
- A measure of a company's ability to pay its current expenses and obligations
from its current assets. To determine a company's current ratio, divide
its current assets by its current liabilities.
Customer Statement
- A monthly (or quarterly) statement detailing all the positions and activity
in a customer account for the previous month (or quarter).
Day Order
- An order to buy or sell securities which is automatically canceled at
the end of the trading session in which it is placed if it is not executed
or canceled.
Dealer
- An NASD member firm that makes a market in over-the-counter
securities buying shares into and selling securities out of its own inventory.
Also known as a market maker.
Debit Balance
- The balance owed to the brokerage firm by a customer who purchases securities
on margin.
Declaration Date
- The day on which a company's board of directors announces the terms
and amount of a dividend payment, rights offering or stock
split.
Derivative
- A term often used to describe a wide variety of financial instruments that derive
their value, by reference to an underlying asset, reference rate or index.
Diversification
- See Portfolio Diversification.
Dividend
- That portion of a company's after-tax earnings that its board of directors
distributes to shareholders. Dividends are usually distributed quarterly and take the form of
either cash or stock.
Dividend Yield
- A stock's total annual dividend divided by its current market price.
It tells an investor what percentage of the stock's current market price
the dividend represents.
DJIA
- See Dow
Jones Industrial Average.
Dow
- A popular name for the
Dow Jones Industrial Average.
Dow Jones Industrial Average
- Composed of 30 blue-chip stocks, the Dow Jones Industrial Average is the best known and
most widely reported market indicator.
Downtick
- price on a listed security that is lower than the last previous trade.
Earnings
- A company's officially reported after-tax profits. Public companies
report their earnings quarterly to the Securities and Exchange Commission.
Also known as net earnings or
Net Income.
Earnings Per Share
- A company's profit divided by the number of shares it has outstanding.
Earnings Yield
- The return that a stock's annual earnings per share represents relative
to its current market price.
ECN
- See Electronic
Communication Network.
Electronic Communication Network (ECN)
- Any electronic system that widely disseminates to third parties orders entered by an exchange
market maker or OTC market maker, and permits such orders to be executed in whole
or in part.
EPS
- See Earnings
Per Share.
Equity
- The ownership interest of shareholders in a company. The term "equity" is often used
interchangeably with "stock" or "share." Equity also refers to the excess
of the market value of securities over debit balances in a margin account.
Equity Fund
- A mutual fund that invests primarily in stocks.
Excess Equity
- The amount of equity in a margin account that exceeds Regulation T requirements.
Ex-Dividend Date
- The first date a stock trades without a dividend. Investors who purchase
the stock on this day or later are not entitled to receive its next dividend.
Exercise
- In option trading, to invoke the right to buy or sell an asset under the terms of
an option contract.
Exercise Price
- The predetermined, fixed price at which the owner or holder of a warrant,
option or right can buy or sell the underlying common stock. Also known
as the strike price.
Expiration Date
- In option trading, the date on which an option ceases to exist. The
option holder loses all exercise rights on this date (which is the Saturday
that follows the third Friday of each expiration month) and the option
becomes worthless. Also applies to rights and warrants.
Expiration Month
- In option trading, the month in which an option contract ceases to exist.
Options expire on the third Friday of the expiration month.
Expiration Time
- In option trading, the time on the expiration date that an option, right,
or warrant terminates. Expiration time for U.S. listed stock options is
11:59 P.M. Eastern time.
Fed
- See Federal Reserve System.
Federal Reserve Board
- The seven-member Board of Governors that oversees the U.S. Federal
Reserve System. It is responsible for setting U.S. monetary policy.
Federal Reserve
System - A federal government institution that administers
the nation's credit and monetary policies. Among other things, the Board
of Governors of the Federal Reserve System sets the initial amount of
credit that broker/dealers (as well as other lenders) may extend to customers
to purchase securities.
Fill or Kill (FOK)
- A limit order modifier that instructs a broker to immediately execute
the entire amount of shares to be bought or sold. If the order is not
executed immediately, the order is canceled.
Fixed Income
- See Bond.
Forward P/E
- A ratio that is calculated by dividing a stock's current
market price by its estimated earnings per share for the next four quarters.
See Price/Earnings Ratio.
Forward Stock Split
- An increase in the number of a company's authorized shares that results
in no change in the total value of the shareholders' holdings. A forward
stock split causes shareholders to own more shares at a lower price per
share. Also known as a positive stock split. See Stock
Split.
Fully Disclosed
- An arrangement whereby one broker dealer introduces its customers to
another broker dealer. The second broker dealer, usually a clearing firm,
handles trade execution and settlements, and certain other bookkeeping
functions.
Fundamental Analysis
- A method of valuing a company by looking at the items on its income
statement and balance sheet. The ratios and calculations of fundamental
analysis enable investors to assess the intrinsic, or "fundamental," value
of a company, and to determine whether a stock is an attractive investment
target.
GTC
- See Good Till Canceled.
Good 'Till Canceled (GTC)
- A time notation on a trade order. A Good Till Canceled order remains standing and unexecuted
until it is executed or canceled. In practice, brokerage firms usually limit the duration of
GTC orders to 90 days.
Growth Stock
- Stock of a company characterized by above-average growth in its revenues, earnings
and stock price. Growth stock is typically associated with new, expanding
companies that pay small or no dividends.
Hedge
- A method of protecting against or limiting losses on an existing security
position by establishing an opposite position in the same or an equivalent
security.
House Maintenance Call
- A demand from a brokerage firm for additional funds when the equity
in a customer's margin account falls below the firm's minimum requirement.
House Requirement
- The minimum amount of equity required in a margin account as determined
by the broker dealer. A house requirement can be more stringent than Federal
Reserve requirements.
Hypothecation
- The pledging of securities or other assets as collateral to secure a loan,
such as a debit balance in a margin account.
Immediate or Cancel (IOC)
- A limit order modifier that instructs a broker
that a customer will accept the immediate execution of as many shares
as possible. Unexecuted shares will be canceled.
Index Fund
- A mutual fund that invests in a group of securities whose performance reflects
the performance of a particular stock market index, such as the Standard
∓ Poor's 500 Index.
Individual Investor
- A person who buys or sells securities for his or her own account. Also known as a retail
investor or retail shareholder
Initial Margin Requirement
- The percentage of a security's market price that must be deposited when
initially buying or selling short securities on margin. Regulation T of
the Federal Reserve Board specifies the initial margin requirement for
stocks. Currently it is 50% of market value, for both buying on margin
and selling short.
Initial Public Offering (IPO)
- The first time that a company issues or sells its common stock to the public.
Inside Ask
- The lowest ask price across all market makers for a given security or other
asset.
Inside Bid
- The highest bid price across all market makers for a given security or other
asset.
Institutional Investor
- A bank, mutual fund, pension fund or other corporate entity that trades securities in
large volumes.
Institutional Networks Corporation (Instinet)
- A computerized service that allows subscribers to display tentative bid and ask quotes. INSTINET
is registered as a stock exchange with the Securities and Exchange Commission.
In the Money
- An option is in the money when the relationship between the market price of the underlying
security and the strike price of the option is such that exercising would yield a profit to the
buyer. In the money options are said to have intrinsic
value.
Intrinsic Value
- The amount by which an option is
in
the money.
Issued And Outstanding
- Authorized shares that have been distributed to investors and that may
trade in the market.
Large-Cap Companies
- Companies with a market capitalization
greater than $5 billion are considered large-cap companies.
Leaps
- Long-term options with durations of up to three years.
Limit Order
- This order tells a broker to buy or sell a stock if and when the stock's price
attains the price that a customer has set. If the stock does not trade
at the specified limit price, the order will not be executed
Limited Liability
- Limited liability is a principal benefit of common stock. Investors in
common stock cannot lose more than 100% of their investment. No matter
how much money a company loses or how many of the company's bills go unpaid,
the company's common shareholders cannot be held personally liable.
Liquidity
- The liquidity of a stock is the ease with which the market can absorb volume buying
or selling, without dramatic fluctuation in price.
Liquidity Ratio
- A measure of the trading volume of a security associated with a one
percent change in its price. The higher the ratio, the more shares that
can be traded with little change in price.
Listed Options
- Options that trade on a national options exchange such as the Chicago
Board of Options Exchange ("CBOE").
Locked-In Trade
- A securities transaction in which all of the terms and conditions of
the trade are accepted by the buyer and seller. Once a transaction is
locked in, last-sale reporting to NASDAQ and reporting to the clearing
corporation are processed electronically.
Long Position
- A position in a security or other instrument that appreciates in value
when the price of the security increases. A long position in a stock means
ownership of the stock. The holder of an option contract is long the contract.
Loan Value
- The amount of money that may be borrowed in a margin account based on total
market value.
Maintenance Margin
- The amount of equity required to support a brokerage client's margin
positions (e.g. shares bought on margin or sold short). If equity falls
below the maintenance margin requirement, the client will receive a margin
call. Maintenance margin requirements are set by brokerages, and self-regulatory
organizations such as the New York Stock Exchange.
Margin
- The amount of equity required opening or maintaining a position in a given security.
Also, the amount of equity needed to maintain all positions in a brokerage
account.
Margin Account
- A brokerage account that allows investors to buy (or sell short) securities by depositing part of their market value and
borrowing the remainder from the brokerage firm.
Margin Agreement
- A contract that an investor signs when opening a margin
account.
Margin Call
- A demand from a brokerage firm to a customer for deposit of cash or marginable
securities to satisfy initial margin or maintenance margin requirements.
Margin Loan
- A loan made by a brokerage against the equity in a margin account. The loan can be used for
any purpose.
Margin Requirement
- As set by the Federal Reserve Board, it is the percentage of the total
purchase of a security that can be borrowed in a margin account.
Market Breadth
- The relationship of advancing versus declining issues on a particular
day or over a period of time.
Market Capitalization
- The total value of a public company, calculated by multiplying the current market price of
its stock by the number of shares outstanding.
Market Close
- A market order to be executed at the close of that day's trading.
Market Maker
- An NASD member firm that disseminates bid and ask prices at which it stands ready to buy
stock into and sell stock from its own inventory at its own risk. Also known as a
dealer.
Market Open
- A market order to be executed at the opening of that day's trading.
Market Order
- An order to buy or sell a security immediately at the best available market
price.
Market Price
- The price at which a security is currently trading on the market.
Micro-Cap
- Companies with a market capitalization of less
than $100 million are described as micro-cap.
Mid-Cap
- Companies with a market capitalization of between
$1 billion and $5 billion are classified as mid-cap.
Minimum Maintenance
- The lowest level to which equity may fall before additional funds must be deposited into a
margin account.
Minus Tick
- An execution price lower than the previous one.
Money Market Fund
- A mutual fund that invests in high-grade and very liquid short-term
securities.
Moving Average
- A moving average is the average price of a security at
a given time. When calculating a moving average, you specify the
time span to calculate the average price (e.g., 25 days).
Naked Call
- A call option written by a party that does not own the underlying asset
in an amount at least equal to the contract size. Also known as an uncovered
call.
Naked Put
- A put option written by a party that has not sold short the underlying asset
in an amount at least equal to the contract size.
NASDAQ Composite Index
- This index monitors all stocks that are traded on the NASDAQ stock market.
National Association of Securities Dealers
- An industry association of broker/dealers in the over-the-counter securities business.
The NASD is a self-regulatory body that oversees the NASDAQ stock market.
Net Earnings
- See Earnings.
Net Income - See
Earnings.
New Issue
- Securities being offered to the public for the first time; subject to the rules of
the Securities and Exchange Commission.
New York Stock Exchange Composite Transactions
- This index monitors all stocks that are traded on the New York Stock Exchange.
Odd Lot
- A quantity of shares less than the standard unit of 100 shares.
Offer
- The price a customer would pay when purchasing a security.
Open Interest
- In option trading, the number of outstanding contracts for a given option
series.
Open Order
- An order that has not been executed or canceled.
Option
- An instrument that gives the owner the right to buy or sell a specified number of shares
of a specified stock at a specified price within a specified period of
time.
Option Agreement
- Agreement customers must sign prior to being allowed to trade options.
Option Contract
- Conveys the right to buy or sell a fixed amount of a designated asset at a specified price
during a given period. An option holder pays a premium to an option writer for this right.
Option contracts that convey the right to buy are known as call options or calls. Options
that convey the right to sell are known as put options or puts.
Option
Holder
- The party that purchases the right to buy or sell conveyed by an option contract by paying
a premium to the option writer. Also known as the buyer of the contract.
Option Premium
- The price that an option holder pays to an option writer for the right
to buy or sell conveyed by an option. For U.S. listed stock options, premiums
are typically quoted on a per-share basis.
Option Seller
- See as Option Writer.
Option Writer
- In options trading, the party that grants the right to buy or sell conveyed by an option contract in return for payment of
a premium by the option holder. Also known as the seller of the contract.
OTC
- See Over
The Counter Securities.
Out of the Money
- An option is out of the money when the relationship between the market
price of the underlying security and the strike price of the option is
such that the holder would not exercise the option because it would result
in a loss.
Outstanding Shares
- Shares issued by a company and held by the public.
Over the Counter Securities
- Securities that are not listed and traded on an organized exchange.
Par Value
- For bookkeeping purposes, the value assigned by a corporation to its
own securities.
Payment Date
- The date on which a dividend is paid to shareholders who purchased the stock
before the ex-dividend date.
Payout ratio
- A measurement that tells investors what percentage of a company's earnings
it is using to pay dividends to shareholders.
P/B Ratio
- See Price/Book Ratio.
PEG
- See
Price/Earnings/Growth Ratio.
Penny Stocks
- Very low-priced stocks that typically do not trade on exchanges.
P/E Ratio
- See Price/Earnings Ratio.
Plus-Tick Rule
- An SEC rule that disallows short sales
when the last trade was a minus tick.
Portfolio
- The combined holding of more than one stock, bond, commodity, real estate
investment or other asset by an individual or institutional investor.
Portfolio Diversification
- Investing in different securities, industries or a mutual fund portfolio containing various securities in order to reduce
the risk associated with investing in too few securities.
Preferred Stock
- A security that usually pays a fixed dividend and that gives the holder
a claim on corporate earnings and assets that is superior to that of holders
of common stock.
Price/Book Ratio (P/B)
- A measurement that tells investors how big the difference is between a stock's market price and its "real" value.
The price/book ratio is calculated by dividing a stock's current market
price by the per-share book value of its issuing
company.
Price/Earnings/Growth Ratio (PEG)
- A measurement that compares a stock's current market price to its estimated earnings growth
rate. The PEG is calculated by dividing a stock's forward P/E by its estimated EPS for the next year.
Price/Earnings Ratio or (P/E)
- A ratio investors use to measure the relationship between a stock's price and its earnings. The P/E ratio is calculated
by dividing a stock's current market price by its earnings per share (EPS)
for the past four quarters (trailing P/E),
or by its estimated EPS for the next four quarters (forward
P/E). Also known as a stock's multiple.
Price/Sales Ratio (PSR)
- A measurement that investors use to value stocks. The PSR is calculated
by dividing a company's current market
capitalization by its total sales for the last four quarters.
Prime Rate
- The current prevailing interest rate that banks charge corporate borrowers.
Profit Taking
- When an investor sells a security to realize a capital gain.
Put
- A bondholder's right to redeem a bond before maturity; a contract that grants the right
to sell at a specified price a specified number of shares by a certain
date.
Put Option
- An option contract that gives the holder the right
to sell an asset at a specified price during a specified.
Quarterly Report
- Public companies are required to file a report with the Securities
and Exchange Commission each quarter that details the preceding quarter's
financial results. Its regulatory version is called Form 10Q.
Quote
- The bid or ask price on a security at any given time.
Range
- The high and low prices for a security over any period of time such
as day, month, 52-week, etc.
Real-Time Trade Reporting
- A requirement that Market Makers report each trade in a NASDAQ security
to NASDAQ within 90 seconds of execution.
Restricted Account
- A margin account in which the debit balance is greater than the loan
value.
Retail Investor
- Contrast with Individual Investor.
Retention Requirement
- The amount retained in a restricted margin account prior to any cash/security
withdrawals.
Return On Equity (ROE)
- A measurement that investors use to compare a company's earnings to its book value. A
stock's ROE is calculated by dividing its earnings per share (EPS) from the past four quarters
by its average per-share book value during the same period.
Reverse Stock Split
- A decrease in the number of a company's authorized shares that results
in no change in the total value of the shareholders' holdings. A reverse
stock split causes shareholders to own fewer shares at a higher price
per share. Also known as a negative stock split. See Stock
Split.
Resistance levels
- Resistance levels occur when the consensus is that the price will not
move higher. It is the point where sellers outnumber buyers
ROE
- See Return
On Equity.
Round Lot
- 100 shares of a stock is a round-lot. This is the standard unit employed in stock
trading.
Russell 3000
- This index monitors the performance of the 3,000 largest U.S. companies (based
on market capitalization). In addition, the Russell 2000 monitors the
largest two-thirds of these 3,000 companies, while the Russell 1000 monitors
the largest third of these 3,000 companies.
SEC
- See Securities and Exchange Commission.
Secondary Market
- A collective term for the markets in which stocks are traded after they
are issued to the public.
Secondary Offering
- A registered offering of a large block of a security that has been previously
issued to the public.
Securities and Exchange Commission (SEC)
- The federal agency created by the Securities Exchange
Act of 1934 as a regulatory authority for the securities industry.
Security
- An instrument representing ownership or debt, such as a share of stock or a bond.
Sell Out
- The liquidation of securities by a brokerage firm in a customer's margin account that has
not satisfied a margin or maintenance call.
Selling Short
- The practice of borrowing a security on margin and selling it in anticipation of a price
decrease. Eventually the security must be returned to the lender via a buy to cover the
transaction. A short sale requires margin to ensure that the security can be repurchased even
if its price increases.
Settlement
- The conclusion of an executed transaction. The seller delivers the sold asset,
and the buyer pays for it. See also Settlement
Date, Cash Settlement.
Settlement Date
- The date by which an executed transaction must be concluded, with the buyer paying and the
seller delivering. For stocks, settlement usually occurs three business days after execution
of the trade(T+3). For stock options and mutual funds, settlement usual occurs the next business
day (T+1).
Short Sale
- A position that is opened when an investor sells short.
Short Interest
- The total number of shares of a security that have been sold short by
customers and securities firms that have not been repurchased to settle
short positions in the market.
Short Position
- A position in a security or other instrument that appreciates in value when the price of
the security decreases. A short sale initiates a short position in a stock. The writer
of an option contract is short the contract.
Size
- The number of shares available for trading on each side of a quote. Add two zeros
to each number to determine number of shares. Ex: 7x5 equals 700x500 shares.
Small-Cap
- Companies with a market capitalization of $1
billion or less are called small-cap.
Spread
- The difference between the bid price at which a market
maker will buy a security, and the ask price at which a market maker
will sell a security. The spread narrows or widens according to the supply
and demand for the security being traded.
Standard & Poor's 500 Index
- This index (S&P 500) monitors 500 large-cap U.S. stocks, including
400 industrial companies, 20 transportation companies, 40 utilities and
40 financial companies.
Statement
- A monthly (or quarterly) statement detailing all the positions and activity in the
account for the previous month (or quarter).
Stock
- A security that represents ownership in a company.
Stock Dividend
- A portion of a company's after-tax earnings that its board of directors
distributes to shareholders in stock, usually on a quarterly basis.
Stock Option
- An option contract which has an equity security as its underlying asset. U.S. listed stock
options have standardized terms, including those governing contract size (usually
100 shares), expiration date, and exercise price.
Stock Split
- An increase or decrease in the number of a company's authorized shares that results in no
change in the total value of the shareholders' holdings. The price per share is adjusted in
direct proportion to the increase or decrease in the number of shares.
Stock Symbol
- A unique four- or five-letter symbol assigned to a NASDAQ security that is used for
identifying it on stock tickers, in newspapers, on on-line services, and in automated information
retrieval systems. If a fifth letter appears, it identifies the issue
as other than a single issue of common or capital stock.
Stop Limit Order
- A stop limit order combines the features of a stop order and a limit order. That is, after the security
trades at or through the stop price, the order becomes a limit order.
Unlike a stop order, your order may or may not be executed on a stop limit
order.
Stop Order
- A stop order is placed at a price higher than the current market price on a buy,
or a lower price than the current market price on a sell. Once the security
reaches or passes the stop price, the order becomes a market order and
is filled at the current market price. The desired stop price must be
indicated on the order when choosing a stop order.
Support Levels
- Support levels occur when the consensus is that the price will not move
lower. It is the point where buyers outnumber sellers.
T+1
- See Settlement Date.
T+3
- See Settlement
Date.
Technical Analysis
- A method of securities analysis that uses charts of a stock's past price and volume movements
to predict its future price movements.
Ticker
- An electronic display that continuously shows the stock symbol, volume, current trading
price and price fluctuation compared to its last trading price.
Trading Halt
- The suspension of trading in a NASDAQ security while material news from the
issuer is being disseminated. A trading halt generally lasts 30 minutes
and gives all investors equal opportunity to evaluate news and make buy,
sell, or hold decisions on that basis.
Trailing P/E
- A ratio that is calculated by dividing a stock's current market price by its earnings per
share for the past four quarters. See price/earnings ratio.
Treasury Stock
- Outstanding stock that has been repurchased by the company that issued it.
Trend
- A trend represents a consistent change in prices (i.e., a change in investor expectations).
An upward trend has higher high and higher lows. A downward trend has
lower high and lower lows.
Underlying Security
- The security on which option contracts are traded and from which option
prices are derived.
Underwriter
- A brokerage firm that assumes the risk of bringing a new securities issue
to market. The underwriter assists the issuer of a new security in setting
the offering price and in marketing the securities to the public.
Up tick
- A stock trade higher in price than the previous one. A transaction executed at
a price higher than the preceding transaction in that security.
Value-Line
- This index, developed by the best-known independent investment information
service, tracks the performance of 1,700 U.S. stocks.
Volatility
- The degree of price fluctuation for a given asset, rate, or index. Usually
expressed as a variance or standard deviation over a given period of time.
Volume
- The amount of trading activity, expressed in shares or dollars, experienced by a
single security or the entire market within a specified period.
Wilshire 5000
- This broad index monitors more than 7,000 U.S. stocks.
Yield
- The percentage or rate of return that an investor makes on capital invested
in a security or in a portfolio of securities.