Glossary

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10Q An unaudited financial report submitted every quarter to the SEC by public companies, revealing the company's financials and other relevant information.

10K A audited report of a corporation's year-end financial results and operations filed annually with the SEC. The report contains information related to the company's financial situation, legal liabilities and future plans. Shareholders may obtain a free copy of the 10K from the corporation.

1040 The standard IRS form for individual tax returns.

12b-1 Fee A mutual fund expense levied to help reimburse a fund's sponsor for distribution costs and commissions.

30-Day Wash Rule IRS rule prohibiting a taxpayer from realizing a loss on an investment then repurchasing the same investment within 30 days after the sale date.  This rule discourages investors from selling at a loss for the tax benefit.

52-Week Hi/LoThe highest and lowest prices a security was traded in the past year

Accreted Interest The difference between par value of a zero coupon security and its original purchase price. Also known as original issue discount.

Accrued Interest The amount of interest the buyer owes the seller on transactions of fixed income securities, such as most bonds and notes.

Acquisition The act of acquiring control of another corporation, by either stock purchase or exchange. This can be achieved either through hostile or friendly means

After-hours Trading The buying and selling securities when the major markets are closed. After-hours trading was once a privilege of institutional investors, individual investors can now participate. Stocks are traded after hours on ECNs, which match buyers and seller with a computer system in order to execute trades.

Aftermarket Markets in which an investor purchases a security from other investors rather than the issuer, subsequent to the original issuance in the primary market. Also called secondary market.

All-or-None (AON) The type of order instructing the execution of the entire order quantity at the stated price (or better), or none of it. This prevents partially filled orders. The difference between All-or-None and Fill-or-Kill is that the AON order is left open if the entire order quantity cannot be filled, whereas the FOK order will be cancelled.

American Depositary Receipt (ADR) The negotiable certificates held in an U.S. bank representing shares of a foreign stock traded on an U.S. stock exchange

American Stock Exchange (AMEX) A major stocks and options exchange located at 86 Trinity Place, New York.

Annual Report The audited report of a corporation's year-end financial results and operations filed annually with the SEC. The report contains information on the company's financial condition, legal liabilities and future plans. Shareholders may obtain a free copy of the Annual Report from the corporation.

Ask (Asked Price) The lowest round lot price at which a broker will sell a security.

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 a company's stock is trading at $68, then the company's $68 option is at-the-money.

Average Also known as an index, it is the mathematical calculation that indicates the value of a group of securities. Some of the most famous averages include the Dow Jones Industrial Average (DJI), Standard & Poor's (S&P) 500, and the New York Stock Exchange Composite.

Average Volume Average volume is calculated by dividing the total volume for the previous three months by the number of trading days in the period. Compare this number to the daily volume to see if interest in the security has increased or decreased.

Away From the Market On a limit order, a buy order which is lower than the current market price, or a sell order which is higher than the current market price. These orders are held to be executed later, unless they are of the fill-or-kill type.- 

Balance Sheet An accounting statement reflecting the firm's financial condition in terms of assets, liabilities, and net worth (ownership). The sum of the left side (assets) must be equal to that of the right (liabilities + shareholders equity), balancing both sides of the statement.

Bear Market A market in which prices of securities are generally declining. 

Beneficial Owner The owner of a security who is entitled to all the benefits associated with ownership. Clients' securities are often registered in the name of the brokerage firm rather than in the name of the client, but the client remains the real or beneficial owner.

Bid The highest price buyers have declared that they are willing to pay for a security.

Bid/Ask Size The number of shares buyers are 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. This is usually done by institutional investors.

Blue-Chip A term used to describe the common stocks of corporations with the strongest reputation for generating earnings and paying dividends.

Book Value A value computed by subtracting the total liabilities from the value of assets on the balance sheet, then dividing by the number of common shares.

Board of Directors Individuals elected by a corporation's shareholders to oversee the management of the corporation. The members of a Board of Directors are paid in cash and/or stock, and meet several times each year. Some directors serve on the board of more than one company.

Breakout A rise in a security's price above a resistance level (commonly its previous high price) or drop below a support level (commonly the former lowest price.) A breakout is believed to indicate a continued movement in the same direction.

Bull An optimistic investor who believes 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.

Buy-In When the seller of a security fails to deliver security for settlement, the broker will purchase the security that was to be delivered on the open market and charge the seller's account for losses incurred.

Buy/Write An advanced option order that combines the purchase a security and the sale of the corresponding call options.

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.

Buyout The purchase of a controlling interest (or percent of shares) in a company's stock.-

Call An option contract gives the holder of the option the rights (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.

Call Date The date when callable bonds are eligible to be redeemed before maturity.

Call Spread Simultaneously buying and selling a call options contract on the same underlying security but with different expiration dates, different exercise prices, or both.

Callable A securities feature of some bonds or convertible securities that allow the issuer to retire the issue prior to the original maturity date. If the current interest rate falls below the yield paid on the security, it is in the issuer's best interest to call and retire the security, then reissue at the new lower rate. To reflect this risk for the holder of the security, a callable security is usually priced lower than a non-callable security.

Capital Expenditures The expenditure incurred during a particular period to acquire long-term assets such as land, plant, or equipment.

Capital Growth The increase in value of an investment when either its price rises or its profits are reinvested.

Capitalization The total dollar value of all stocks and bonds issued by a corporation

Capital Loss The decrease in the value of an investment or asset. Opposite of capital gain.

Capital Stock The common and preferred stock of a corporation.

CEO Chief Executive Officer

Chief Executive Officer (CEO) The highest ranking executive who manages the day-to-day operations of the corporation, as appointed by the board of directors.ClassOptions of the same type, calls or puts on the same security.

Clearing Corporations A distribution center operated for its member brokerage firms, which works with the exchanges to streamline trade comparison, settlement and assignment procedures.

Common Equity The amount of shareholders' equity attributable to common stock. Common equity usually consists of the common stock at par value, capital surplus and retained earnings.

Common Stock A security issued representing ownership of a corporation. Common stockholders may vote to elect management, participate in corporate decision making, and receive dividends.

Confirmation The acknowledgement of a securities transaction providing the investor with information such as the settlement date, terms, price and commission.

Consent to Loan Agreement An agreement margin clients are required to sign authorizing the brokerage firm to lend the client's securities to itself or other firms.

Consideration The money value of a transaction, calculated as the number of shares multiplied by the price, before adding commission.

Consumer Price Index An inflationary indicator published monthly to reflect the upward price movement of a fixed basket of common goods and services.

Control Person A director, officer or other affiliate of the issuer or a stockholder who owns at least 10% of outstanding stock.

Control Securities Securities owned by a control person.

Convertible Issue A securities feature that gives the issue holder the choice to convert to another issue, usually common stock. This privilege can be used only once.

Convertible Preferred Stock Preferred stock that may be converted into common stock at specific prices or rates.

Cooling-Off Period The period between filing of the registration statement on a new issue with the SEC to the effective date of the offering.

Corporation The most common form of business organization, chartered by a state and given legal rights as a separate entity from its owners. Corporations are characterized by issuing shares of transferable stock, limited liability of its owners, and existence beyond the life of its owners.

Cumulative Preferred Stock A feature of preferred stock that entitles the holder to later payment of dividends when they were not paid when due. The dividends accumulated must be paid before common stockholders may receive any dividends.

Current Income Regular income generated by investments (as opposed to capital growth).

Current LiabilitiesAccounting term describing obligations that must be paid within 12 months. These include accounts payable, short-term debt and interest on long-term debt.

Current Share Price Most recent market price of the shares.

Day Order An order that is open for the duration of the day it was entered, expiring 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, that buys and sells security products and holds an inventory.

Debentures A common kind of corporate bond, often issued by a firm undergoing restructuring. Debentures are backed only by the credit quality or 'good will' of the issuer. With no collateral, these bonds carry a higher risk, and therefore offer a higher rate of return, when compared to bonds backed by asset.

Debt/Equity Ratio A comparison of the assets provided by creditors to the assets provided by shareholders. It is calculated by dividing long-term debt by common stockholders' equity, and serves as an indicator of financial leverage.

Deferred (Income) TaxesAn amount allocated during the period to cover tax liabilities that have not yet been paid.

Depository Trust Company (DTC)A corporation owned by banks and brokerage firms that holds securities, arranges for their receipt and delivery, and arranges for payments in settlement

Derivative Security A financial security such as an option or a future, whose value is derived in part from the value of another security. For example, the price of an options contract is tied closely to the market price of the underlying stock.

Dilution Diminution in the proportion of income each share is entitled to when new shares are issued.

Director A corporate board member elected by stockholders to establish corporate policies, including the selection of the management team, and payments of dividends.

Dividend Yield (Stocks)I indicated yield represents annual dividends divided by current stock price.

Dividends per Share Dividends paid for the past year divided by the number of common shares outstanding. The number of shares outstanding is determined by a weighted-average of shares outstanding over the specified year.

Dow Jones Industrial Average (DJIA) Also known as the Dow, it is the most famous and widely accepted U.S. index of stocks, 

Downgrade A negative change in the ratings for a rated security.

Downtick A listed equity trade whose price is lower than that of the last different sale.

Due Diligence (Meeting)The meeting between corporate officials and underwriters prior to the issuance of the security. During these meetings, contents of the prospectus are thoroughly discussed to ensure accuracy.

EarningsThe net income for a company during the reporting period.

Earnings Before Interest and Taxes (EBIT)A measure of a firm's earnings performance that is not clouded by debt payments or tax regulations. It is calculated as revenues minus the cost of goods sold and selling, and general expenses.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)Also known as operating cash flow. EBITDA is calculated by subtracting cost of sales and operating expenses from revenues. Like the name implies, EBITDA does not take into consideration the interests, taxes, depreciation and amortization costs.

Earnings Growth %A weighted average of the one-year earnings growth rates of the stocks in the fund. This calculation excludes stocks whose earnings changed from a loss to a gain and stocks whose earnings gains exceeded 999.99%.

Earnings Per Share (EPS)The net income divided by the number of shares of common stock outstanding.

Earnings ReportA corporate financial statement released by the company quarterly or annually netting all earnings and expenses to a profit or loss.

Earnings YieldThe ratio of earnings per share to the current share price, after allowing for tax and interest payments on fixed interest debt. It is calculated by taking the total twelve months earnings divided by the number of outstanding shares, divided by the recent price, multiplied by 100.

Effective DateThe first date after the cooling-off period of a new issue on which the security can be offered.

EndorsementA signature on the back of a negotiable instrument such as a stock certificate or check, matching the name that appears on the face, making the document negotiable.

Equity OptionsAn options contract that gives the holder the right to buy or sell a specified number of shares of stock at a specified price before in a specific time period. One option usually equals 100 shares of stock.

Estimated EPS GrowthThe mean estimate of earnings-per-share growth from the Wall Street analysts estimates.

ExchangeThe marketplace where stocks, bonds, options, futures and commodities are traded. Major U.S. stock exchanges are: New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and the National Association of Securities Dealers (NASD)

ExerciseTo utilize the right of the options holder to buy (call option) or sell (put option) the underlying security.Exercise PriceThe stated price per share at which the underlying asset may be traded between the holder and writer of the options contract. Also called strike price.

ExpirationThe day on which an option contract becomes void.

Expiration DateThe last day on which an option may be exercised for American style options. For European options, this is the only date when the option can be exercised.

Expiration MonthThe month when an option or futures contract expires. 

Federal Deposit Insurance Corporation (FDIC)An independent agency of the federal government created by the Banking Act of 1933. It provides deposit insurance guaranteeing the safety of a depositor's accounts in member banks up to $250,000 per depositor, per insured bank, for each account ownership category.

Financial Industry Regulatory Authority (FINRA)(formerly known as National Association of Securities Dealers or NASD)FINRA, a nonprofit, self-regulating association supervised by the Securities and Exchange Commission (SEC), sets standards and establishes rules for the way that its members, including brokerage firms active in the over-the-counter (OTC) market and investment banks, operate.  FINRA is responsible for licensing of individuals and brokerage firms.

FINRA also has the authority to discipline members who violate those standards. Among FINRA's other responsibilities are reviewing and approving sales and marketing literature that its members use to promote their products. The goal is to protect investors from misleading information on the risks and rewards of investing

Fiscal YearThe twelve-month period during which businesses or the government maintain financial records. This cycle does not necessarily coincide with the calendar year, therefore it is known as the fiscal year.

Friendly Takeover A takeover supported by the target company's management and board membe

Fully Diluted Earnings per Share Earnings per share expressed as though all outstanding convertible securities and warrants have been exercised.

Fully Diluted Shares Outstanding All shares outstanding, including common stock, warrants, and convertible securities.

Futures An agreement to buy or sell a set amount of a commodity or financial instrument at a certain price on a predetermined date.

Good 'Til-Canceled (GTC) An order that remains open until it is either executed or canceled.

Gross Profit The net sales before tax minus cost of sales.

Growth Stock Stock of a company in an emerging young industry.

Holding Company A corporation that owns enough voting stock in another firm influence the election of its board of directors, gaining control of the management and operations.

Hostile Takeover A takeover against the will of the target company's management and board members.

Hypothecation A pledging of assets as collateral necessary to secure a debit balance in a margin account.

Initial Investment The amount required to make the first investment in a mutual fund.

Initial Public Offering (IPO) A company's first sale of stock to the public, usually by a young company to capitalize for further expansion and growth.

Inside Information Relevant information about a company that has not yet been made public. It is illegal to execute make trades based on this information.

InsiderA person with nonpublic information on a corporation. Directors and officers who have access to nonpublic information before the public are usually considered insiders.

Insider TradingThe illegal purchase or sale of shares by someone who possesses inside information about the company. For example, an executive who purchases shares with knowledge of a new invention soon to be announced by his company would be performing illegal insider trading.

Institutional Investor Entities with large amounts of funds to invest, such as investment companies, mutual funds, brokerages, insurance companies, and endowment funds. Institutional Investors account for the majority of overall market volume

In-the-MoneyAn option is in-the-money when holder would profit from exercising the contract. For example, a call option is in-the-money if the exercise price is less than the market price of the underlying security, and a put option is in-the-money if the strike price is greater than the market price of the underlying security.

Investment Act of 1940 The primary set of laws governing the mutual fund industry.

Investment Advisor The individual or firm responsible for managing a portfolio or mutual fund.

Large-Cap Stocks Stocks issued by companies that are valued at over $5 billion.

Last The price at which the security last traded.Level-sold in the secondary market.ouslys offer shares and stands ready to buy any shares redeemed by the shareholders

Option A contract that gives the buyer the right to buy (call) or sell (put) a predetermined quantity of an underlying security during a specific period of time at a predetermined price.

Ordinary Shares The most common form of shares, also known as common stock.