A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Note: The following information is provided without warranty of any kind.
A measure of selection risk (also known as residual risk) of a mutual fund in relation to
the market. A positive alpha is the extra return awarded to the investor for taking a
risk, instead of accepting the market return. For example, an alpha of 0.4 means the fund
outperformed the market-based return estimate by 0.4 %. -0.6 means a fund’s monthly return
was 0.6 % less than would have been predicted from the change in the market alone.
The alpha of a fund is determined as follows:
[ (sum of y) – ((b)(sum of x)) ] / n
where: n =number of observations (36 mos)
b = beta of the fund
x = rate of return for the S&P 500
y = rate of return for the fund
AMERICAN DEPOSITARY RECEIPTS
Certificates issued by a U.S. Depositary Bank, representing foreign shares held by the
bank, usually by a branch or correspondent in the country of issue. One ADR may represent
a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If
the ADR’s are "sponsored," the corporation provides financial information and
other assistance to the bank and may subsidize the administration of the ADR’s.
"Unsponsored" ADR’s do not receive such assistance. ADR’s carry the same
currency, political and economic risks as the underlying foreign share; the prices of the
two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage.
American Depositary Shares (ADS) are a similar form of certification.
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.
Employee of a brokerage or fund management house who studies companies and makes buy and
sell recommendations on their stocks. Most specialize in a specific industry.
Yearly record of a publicly held company’s financial condition. It includes a description
of the firm’s operations, its balance sheet and income statement. SEC rules require that
it be distributed to all shareholders. A more detailed version is called a 10-K.
Profiting from differences in the price of a single security that is traded on more than
Also known as TRading INdex (TRIN):= #advancing issues/#declining issues
Total up volume/total down volume
An advance/decline market indicator. Less than 1.0 indicates bullish demand, while
above 1.0 is bearish. The index often is smoothed with a simple moving average.
The ask price is the price of which a seller is willing to accept for the stock that is being offered.
The ask size is the number of shares in a stock that is being offered.
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.
Using previous data to predict future data.
An arithmetic mean of selected stocks intended to represent the behavior of the market or
some component of it. One good example is the widely quoted Dow Jones Industrial Average,
which adds the current prices of the 30 DJIA’s stocks, and divides the results by a
predetermined number, the divisor.
The average time to maturity of securities held by a mutual fund. Changes in interest
rates have greater impact on funds with longer average life.
Brokerage house clerical operations that support, but do not include, the trading of
stocks and other securities. Includes all written confirmation and settlement of trades,
record keeping and regulatory compliance.
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.
The price an investor pays for a security plus any out-of-pocket expenses. It is used to
determine capital gains or losses for tax purposes when the stock is sold.
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.
An investor who believes a stock or the overall market will decline. A bear market isa
prolonged period of falling stock prices, usually by 20% or more.
A situation in which large traders sell positions with the intention of driving prices
Measure of a stock’s risk in relation to the market. 0.7 means a stock price is likely to
move up or down 70 % of the market change; 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 fund’s risk in relation to the market. 0.7 means the fund’s total return
is likely to move up or down 70 % of the market change; 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
The Bid Price is the price of the stock a buyer is willing to pay for the shares.
The Bid Size is the number of shares of the stock a buyer is willing to buy.
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
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. Can be used by technical analysts as a
buy or sell indication.
An investor who thinks the market will rise.
A market which is on a consistent upward trend.
Purchase of a controlling interest (or percent of shares) of a company’s stock. A
leveraged buyout is done with borrowed money.
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 stock at the given strike price, on or before the expiration date of the
Amount used during a particular period to acquire or improve long term assets such as
property, plant, or equipment.
When a stock is sold for a profit, it’s the difference between the net sales price of
securities and their net cost, or original basis. If a stock is sold below cost, the
difference is a capital loss.
The difference between the net cost of a security and the net sale price, if that security
is sold at a loss.
A dividend paid in cash to a company’s shareholders. The amount is normally based on
profitability and is taxable as income. A cash distribution may include capital gains and
return of capital in addition to the dividend.
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
Bankers’ Acceptances. Cash equivalents on balance sheets include securities (e.g., notes)
that mature within ninety days.
In investments, it represents earnings before depreciation amortization and non-cash
charges. Sometimes called cash earnoings. Cash Flow from operations (called Funds From
Operations (FFO) by real estate and other investment trusts, is important because it
indicates the ability to pay dividends.
CHANGES IN FINANCIAL POSITION
Sources of funds internally provided from operations which alter a company’s cash flow
position: depreciation, deferred taxes, other sources, and capital expenditures.
Excessive trading of a client’s account in order to increase the broker’s commissions.
A transaction in which the purchaser’s intention is to reduce or eliminate a short
position in a stock, or in a given series of options.
A transaction in which the seller’s intention is to reduce or eliminate his long position
in a stock, or a given series of options.
The fee paid to a broker to execute a trade, based on number of shares, bonds, options
and/or their dollar value. In 1975, deregulation led to the creation of discount brokers,
who charge lower commissions than full service brokers. Full service brokers offer advice
and usually have a full staff of analysts who follow specific industries. Discount brokers
simply execute a client’s order–and usually do not offer an opinion on a stock.
COMMON STOCK/OTHER EQUITY
Value of outstanding common shares at par, plus accumulated retained earnings. Also called
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
The degree of assurance that a specified failure rate is not exceeded.
The written statement that follows any "trade" in the securities markets.
Confirmation is issued immediately after a trade is executed. It spells out settlement
date, terms, commission, etc.
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.
CORNER A MARKET
To purchase enough of the available supply of a commodity or stock in order to manipulate
In bonds, notes or other fixed income securities, the stated percentage rate of nterest,
usually paid twice a year.
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 the stock does not have to be bought at the market price, if
the holder of that option decides to exercise it.
A put option position in which the option riter also is short the corresponding stock or
has deposited, in a cash account, cash or cash equivalents equal to the exercise of the
option. This limits the option writer’s risk because money or stock is already set aside.
In the event that the holder of the put option decides to exercise the option, the
writer’s risk is more limited than it would be on an uncovered or naked put option.
Value of cash, accounts receivable, inventories, marketable securities and other assets
that could be converted to cash in less than 1 year.
Amount owed for salaries, interest, accounts ayable and other debts due within 1 year.
Indicator of short-term debt paying ability. Determined by dividing current assets by
current liabilities. The higher the ratio, the more liquid the company.
For bonds or notes, the coupon rate divided by the market price of the bond.
An order to buy or sell stock that automatically expires if it can’t be executed on the
day it is entered.
Indicator of financial leverage. Compares assets provided by creditors to assets provided
by shareholders. Determined by dividing long term debt by common stockholders’ equity.
Performance over time, rated on a scale of 1-10. 1 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 %.
Objective Rank compares all funds in the same investment strategy category. All Rank
compares all funds.
The date on which a firm’s directors meet and announce the date and amount of the next
A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to cover tax liabilities that have not yet been paid.
A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to amortize the cost of acquiring long term assets over the useful life of the
A financial security, such as an option, or future, whose value is derived in part from
the value and characteristics of another security, the underlying security.
To remove the general drift, tendency or bent of a set of statistical data as related to
DIFFERENCE FROM S&P
A mutual fund’s return minus the change in the Standard & Poors 500 Index for the same
time period. A notation of -5.00 means the fund return was 5 percentage points less than
the gain in the S&P, while 0.00 means that the fund and the S&P had the same
Payments from fund or corporate cash flow. May include dividends from earnings, capital
gains from sale of portfolio holdings and return of capital. Fund distributions can be
made by check or by investing in additional shares. Funds are required to distribute
capital gains (if any) to shareholders at least once per year. Some Corporations offer
Dividend ReinvestmentPlans (DRP).
DIVIDEND REINVESTMENT PLANS (DRP)
Plans offered by many corporations for the reivestment of dividends, sometimes at a
discount from market price, on the dividend payment date. Many DRP’s also allow the
investment of additional cash from the shareholder. The DRP is usually administered by the
company without charges to the holder.
When two or more averages or indices fail to show confirming trends.
Distribution of a portion of a company’s earnings, cash flow or capital to shareholders,
in cash or additional stock.
DIVIDEND YIELD (STOCKS)
Indicated Yield represents annual dividends divided by current stock price.
DIVIDEND YIELD (FUNDS)
Indicated Yield represents return on a share of a mutual fund held over the past 12
months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at
current rates), but ot redemption charges.
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.
DIVIDEND REINVESTMENT PLAN
Automatic reinvestment of shareholder dividends in more shares of a company’s stock, often
without commissions. Some plans provide for the purchase of additional shares at a
deiscount to market price. Dividend reinvestment plans allow shareholders to accumulate
stock over the long term using dollar cost averaging.
A classic negative change in ratings for a stock, and or other rated security.
Net income for the company during the period.
EARNINGS PER SHARE (EPS)
Also referred to as Primary Earnings Per Share. Net income for the past 12 months divided
by the number of common shares outstanding, as reported by a company. The company often
uses a weighted average of shares outstanding over reporting term.
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 number of outstanding shares, divided by the
recent price, multiplied by 100. The end result is shown in percentage.
The value of the common stockholders’ equity in a company as listed on the balance sheet.
Securities that give 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.
An option contract that can only be exercised on the expiration date.
The marketplace in which shares, options and futures on stocks, bonds, commodities and
indices are traded. Principal US stock exchanges are: New York Stock Exchange (NYSE),
American Stock Exchange (AMEX) and the National Association of Securities Dealers (NASDAQ)
The first day of trading when the seller, rather than the buyer, of a stock will be
entitled to the most recently announced dividend payment. This date set by the NYSE (and
generally followed on other US exchanges) is currently two business days before the record
date. A stock that has gone ex-dividend is marked with an x in newspaper listings on that
The process of completing an order to buy or sell securities. Once a trade is executed, it
is reported by a Confirmation Report; settlement (payment and transfer of ownership)
occurs in the U.S. between 1 (mutual funds) and 5 (stocks) days after an order is
executed. Settlement times for exchange listed stocks are in the process of being reduced
to three days in the U.S.
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.
The percentage of the assets that were spent to run a mutual fund (as of the last annual
statement). This includes expenses such as management and advisory fees, overhead costs
and 12b-1 (distribution and advertising ) fees. The expense ratio does not include
brokerage costs for trading the portfolio, although these are reported as a percentage of
assets to the SEC by the funds in a Statement of Additional Information (SAI). the SAI is
available to shareholders on request. Neither the expense ratio or the SAI includes the
transaction costs of spreads, normally incurred in unlisted securities and foreign stocks.
These two costs can add significantly to the reported expenses of a fund. The expense
ratio is often termed an Operating Expense Ratio (OER).
An expiration cycle relates to the dates on which options on a particular security expire.
A given option will be placed in 1 of 3 cycles, the January cycle, the February cycle, or
the March cycle. At any point in time, an option will have contracts with 4 expiration
dates outstanding, 2 in near-term months and 2 in far-term months.
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 3d 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.
The management company that runs and/or sells shares of the fund. Fund families often
offer several funds with different investment objectives.
FUNDS FROM OPERATIONS (FFO)
Used by real estate and other investment trusts to define the cash flow from trust
operations. It is earnings with depreciation and amortization added back. A similar term
increasingly used is Funds Available for Distribution (FAD), which is FFO less capital
investments in trust property and the amortization of mortgages.
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
GOOD ‘TIL CANCELED
Sometimes simply called "GTC", it means an order to buy or sell stock that is
good until you cancel it. Brokerages usually set a limit of 30-60 days, at which the GTC
expires if not restated.
Compound annual growth rate for the number of full fiscal years shown. If there is a
negative or zero value for the first or last year, the growth is NM (not meaningful).
HEAD & SHOULDERS
In technical analysis, a chart formation in which a stock price reaches a peak and
declines, rises above its former peak and again declines and rises again but not to the
second peak and then again declines. The first and third peaks are shoulders, while the
second peak is the formation’s head. Technical analysts generally consider a head and
shoulders formation to be a very bearish indication.
A strategy designed to reduce investment risk using "call" options,
"put" options, "short" selling, or futures contracts. A hedge can help
lock in existing profits. Its purpose is to reduce the potential volatility of a
portfolio, by reducing the risk of loss.
The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock
A corporation that owns enough voting stock in another firm to control management and
operations by influencing or electing its board of directors.
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. Usually represent by
the letter e in stock tables
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.
The category describing a company’s primary business activity. This usually is determined
by the largest portion of revenue.
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 large gains. IPO’s by investment companies
(closed end funds) usually contain underwriting fees which represent a load to buyers.
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, however received.
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, an xyz
"call" option with a 52 strike price is in-the-money when xyz trades at 52 1/8
or higher. An xyz "put" option with a 52 strike price is in-the-money when xyz
is trading at 51 7/8 or lower.
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 FIFO, 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.
The ratio of annual sales to inventory. Low turnover is an unhealthy sign, indicating
excess stocks and/or poor sales.
A closed-end fund regulated by the Investment Company Act of 1940. These funds have a
fixed number of shares which are traded on the secondary markets similarly to corporate
stocks. The market price may exceed the net asset value per share, in which case it is
considered at a "premium." When the market price falls below the NAV/share, it
is at a "discount." Many closed end funds are of a specialized nature, with the
portfolio representing a particular industry, country, etc. These funds are usually listed
on US and foreign exchanges.
Special accounts where you can save and invest, and the taxes are deferred until money is
withdrawn. These plans are subject to frequent changes in law with respect to the
deductibility of contributions. Withdrawals of tax deferred contributuons are taxed as
income, including the capital gains from such accounts.
After a stock split, the number of shares distributed for each share held and the date of
An order to buy a stock at or below a specified price or to sell a stock at or above a
specified price. For instance, you could tell a broker "Buy me 100 shares of xyz Corp
at $8 or less" or to "sell 100 shares of xyz at $10 or better."
A mutual fund with shares sold at a price including a sales charge–typically 4 % to 8% of
the net amount indicated. Some "no-load" funds have distribution fees permitted
by article 12b1 of the Investment Company Act; these are typically 0.25%. A "true
no-load" fund has neither a sales charge not 12b1 fee. A load implies that the fund
purchaser receives some investment advice or other service worthy of the charge.
Occurs when an individual owns securities. An owner of 1000 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 where the net
result is 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, usually on a "cost" basis and
thus does not necessarily reflect the market value of the assets.
LONG TERM DEBT
Value of obligations of over 1 year that require that interest be paid.
LONG TERM DEBT/CAPITALIZATION
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.
LONG TERM LIABILITIES
Amount owed for leases, bond repayment and other items due after 1 year.
The lowest (intraday) price of a stock over a certain period of time.
MANAGEMENT/CLOSELY HELD SHARES
Percentage of shares held by persons closely related to a company, as defined by the
Securities and Exchange Commission. Part of these percentages often is included in
Institutional Holdings–making the combined total of these percentages over 100. There is
overlap as institutions sometimes acquire enough stock to be considered by the SEC to be
closely allied to the company.
MARGIN ACCOUNT (STOCKS)
A leverageable account in which stocks can be purchased for a combination of cash and a
loan. The loan in the margin account is collateralized by the stock and, if the value of
the stock drops sufficiently, the owner will be asked to either put in more cash, or sell
a portion of the stock. Margin rules are federally regulated, but margin requirements and
interest may vary among broker/dealers.
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 intra- day price changes.
The total dollar value of all outstanding shares. Computed as shares times current market
price. It is a measure of corporate size.
The period between the 2 latest highs or lows of the S&P 500, showing net performance
of a fund through both an up and a down market. A 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).
An order to buy or sell a stock at the going price.
For mutual funds, the amount required to open a new account (Minimum Initial Purchase) or
to deposit into an existing account (Minimum Additional Purchase). These minima may be
lowered for buyers participating in an automatic purchase plan
MONEY MARKET FUND
A mutual fund that invests only in short term securities, such as bankers’ acceptances,
commercial paper, repurchase agreements and government bills. The net asset value per
share is maintained at $1.00. Such funds are not federally insured, although the portfolio
may consist of guaranteed securities and/or the fund may have private insurance
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.
An open end investment company that pools investors’ money to invest in a variety of
stocks, bonds, or other securities. A mutual fund issues and redeems shares to meet
demand, and the redemption value per share is the net asset value per share, less in some
cases a redemption fee which represents a rear-end load. A closed end fund, often
incorrectly called a mutual fund, is instead an investment trust. Both are investment
companies regulated by the Investment Company Act of 1940.
NET ASSET VALUE (NAV)
The value of a fund’s investments. For a mutual fund, the net asset value per share
usually represents the fund’s market price, subject to a possible sales or redemption
charge. For a closed end fund, the market price may vary significantly from the net asset
The company’s total earnings, reflecting revenues adjusted for costs of doing business,
depreciation, interest, taxes and other expenses
Price and volume fluctuations that can confuse interpretation of market direction.
NO LOAD MUTUAL FUND An open-end investment company, shares of which are sold without a
sales charge. There can be other distribution charges, however, such as Article 12b-1
fees. A true "no load" fund will have neither a sales charge nor a distribution
Abbreviation for Not Meaningful.
OBJECTIVE (MUTUAL FUNDS)
The fund’s investment strategy category as stated in the prospectus. There are more than
20 standardized categories.
A transaction in which the purchaser’s intention is to create or increase a long position
in a given series of options.
A transaction in which the seller’s intention is to create or increase a short position in
a given series of options.
The number of outstanding option contracts in the exchange market or in a particular class
Gives the buyer the right, but not the obligation, to buy or sell stock at a set price on
or before a given date. Investors, not companies, issue options. Investors who purchase
call options bet the stock will be worth more than the price set by the option (the strike
price), plus the price they paid for the option itself. Buyers of put options bet the
stock’s price will go down below the price set by the option.
OTHER CURRENT ASSETS
Value of non-cash assets, including prepaid expenses and accounts receivable, due within 1
OTHER LONG TERM LIABILITIES
value of leases, future employee benefits, deferred taxes and other obligations not
requiring interest payments that must be paid over a period of more than 1 year.
Amount of funds generated during the period from operations by sources other than
depreciation or deferred taxes. Part of Free Cash Flow calculation.
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.
An indicator that attempts to define when prices have moved too far and too fast in either
direction and thus are vulnerable to reaction.
Date on which a declared stock dividend or a bond interest payment is scheduled to be
In mutual funds, the ability to transfer shares between funds in the same family by
telephone request. There may be a charge associated with these transfers. Phone switching
is also possible among different fund families if the funds are held in street name by a
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 AND FIGURE CHART
A price-only chart that takes into account only whole integer changes in price, i.e., a
2-point change. Point and figure charting disregards the element of time and is solely
used to record changes in price.
A security that shows ownership in a corporation and gives the holder a claim, prior to
the claim of common stockholders, on earnings and also generally on assets in the event of
liquidation. Most preferred stock pays a fixed dividend, stated in a dollar amount or as a
percentage of par value. This stock does not usually carry voting rights.
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.
Price of a share of common stock on the date shown. Highs and lows are based on the
highest and lowest intraday trading price.
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.
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 past 12 months by the
number of common shares outstanding. Higher "multiple" means investors have
higher expectations for future growth, and have bid up the stock’s price.
P/E RATIO EQUATION
Assume XYZ Co sells for $25.50 per share and has earned $2.55 per share this year
$25.50 = 10 times $2.55
XYZ stock sells for 10 times earnings.
Determined by dividing 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 past 12
months by number of shares outstanding.
The first buyer of a newly issued security buys that security in the primary market. All
subsequent trading of those securities is done in the secondary market.
Indicator of profitability. Determined by dividing net income by revenue for the same
12-month period. Result is shown as a percentage.
Trades based on signals from computer programs, usually entered directly from the trader’s
computer to the market’s computer system and executed automatically.
Formal written document to sell securities that describes the plan for a proposed business
enterprise, or the facts concerning an existing one, that an investor needs to make an
informed decision. Prospectuses are used by Mutual Funds to describe the fund objectives,
risks and other essential information.
Document intended to provide shareholders with information necessary to vote in an
informed manner on matters to be brought up at a stockholders’ meeting. Includes
information on closely held shares. Shareholders can and often do give management their
proxy, representing the right and responsibility to vote their shares as specified in the
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
Indicator of a company’s financial strength (or weakness). Calculated by taking current
assets less inventories, divided by current liabilities. Also called Acid Test.
The difference between the high and low price during a given period.
The percentage gain or loss for a mutual fund in a specific time period. This number
assumes that all distributions are reinvested.
Date by which a shareholder must officially 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. Once a trade is executed an investor becomes the "owner of
record" on settlement, which currently takes 5 business days for securities, and one
business day for mutual funds. Stocks trade ex-dividend the fourth day before the record
date, since the seller will still be the owner of record and is thus entitled to the
The 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 or be eliminated as shares are held for longer time periods.
A stock’s price movement over the past year as compared to a market index (the S&P
500). 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 1-year period. Equation for Relative Strength: [current stock price/year-ago
stock price] [current S&P 500/year-ago S&P 500]
A price movement in the opposite direction of the previous trend.
RETURN ON ASSETS (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months by
total assets. Result is shown as a percentage.
RETURN ON EQUITY (ROE)
Indicator of profitability. Determined by dividing net income for the past 12 months by
common stockholders’ equity (adjusted for stock splits). Result is shown as a percentage.
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 to boost its
stock’s market price and attract investors.
Issuance of "rights" to current shareholders allowing them to purchase
additional shares, usually at a discount to market price. Shareholders who do not exercise
these rights are usually diluted by the offering. Rights are often transferrable, allowing
the holder to sell them on the open market to others who may wish to exercise them. Rights
offerings are particularly common to closed end funds, which cannot otherwise issue
additional common stock.
The fee charged by a mutual fund when purchasing shares, usually payable as a commission
to amarketing agent, such as a financial advisor, who is thus compensated for his
assistance to a purchaser. It epresents the difference, if any, between the share purchase
price and the share net asset value.
The Securities and Exchange Commission, the primary federal regulatory agency of the
A market that provides for the purchase or sale of previously owned securities. Most
trading is done in the secondary market. The New York Stock Exchange, as well as all other
stock exchanges, the bond markets, etc., are secondary markets.
If an investor thinks the price of a stock is going down, the investor could borrow the
stock from a broker and sell it. Eventually, s/he must buy the stock back on the open
market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per
share. Then, on Aug 1, you purchase 1000 shares of XYZ at $7 per share. You’ve made $1000
(less commissions and other fees) by selling short.
Options: All option contracts of the same class that also have the same unit of trade,
expiration date, and exercise price.Stocks: shares which have common characteristics, such
as rights to ownership and voting, dividends, par value, etc. In the case of many foreign
shares, one series may be owned only by citizens of the country in which the stock is
The date on which payment is made to settle a trade. For stocks traded on US exchanges,
settlement is currently 5 business days after the trade, but this will be reduced to 3
days in 1995. For mutual funds, settlement usually occurs in the U.S. the day following
the trade. In some regional markets, foreign shares may require months to settle.
Certificates or book entries representing ownership in a corporation or similar entity
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 POSITION (OPTIONS)
A position wherein a person’s interest in a particular series of options is as a net
writer (ie, the number of contracts sold exceeds the number of contracts bought).
SHORT POSITION (STOCKS)
Occurs when a person sells stocks s/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. Technique is used when an investor believes the stock
price is going down.
Selling a security that the seller does not own but is committed to repurchasing
eventually. It is used to capitalize on an expected decline in the security’s price.
The difference between estimated transaction costs and actual transaction costs. The
difference is usually composed of revisions to price difference or spread and commission
Abbreviation for Standard Industrial Classification. Each 4-digit code represents a unique
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. Stock dividends are often used to conserve cash needed to operate the
business. Unlike a cash dividend, stock dividends are not taxed until sold.
STOP (-LOSS) ORDER
An order to sell a stock when the price falls to a specified level.
The stated price per share for which underlying stock 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
Annual report required by the SEC each year. Provides a comprehensive overview of a
company’s state of business. Must be filed within 90 days after fiscal year end. A 10Q
report is filed quarterly.
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
The portion of the premium that is based on the amount of time remaining until the
expiration date of the option contract, and that 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 sales and other revenue for the period shown. Known as "turnover" in the
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 1-5 business days later.
The date on which a trade occurs. Trades generally settle (are paid for) 1-5 business days
after a trade date. With stocks, settlement is generally 5 business days after the trade.
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.
Mutual Funds: A measure of trading activity during the previous year, 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. Finance: The number
of times a given asset, such as inventory, is replaced during the accounting period,
usually a year. Corporate: The ratio of annual sales to net worth, representing the extent
to which a company can growth without outside capital. Markets: The volume of shares
traded as a percent of total shares listed during a specified period, usually a day or a
year. Great Britain: Total revenue
The percent of a mutual fund’s assets used to defray marketing and distribution expenses.
The amount of the fee is stated in the fund’s prospectus. The SEC has recently proposed
that 12b1 fees in excess of 0.25% be classed as a load. A true "no load" fund
has neither a sales charge nor 12b1 fee.
TYPE The classification of an option contract as either a put or a 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.
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.
Options: the security subject to being purchased or sold upon exercise of an option
contract. For example, IBM stock is the underlying security to IBM options. Depositary
receipts: The class, series and number of the foreign shares represented by the
A measure of risk based on standard deviation in fund performance over 3 years. Scale is
1-9; higher rating indicates higher risk.
Std Deviation Rating Std Deviation Rating
up to 7.99 1 20.00-22.99 6
8.00-10.99 2 23.00-25.99 7
11.00-13.99 3 26.00-28.99 8
14.00-16.99 4 29.00 and up 9
Stock that has fallen out of favor with investors; tends to have a low P/E.
WANTED FOR CASH
A statement displayed on market tickers which indicates that a bidder will pay cash for
same day settlement of a block of a specified security.
A security entitling the holder to buy a proportionate amount of stock at some specified
future date at a specified price, usually one higher than current market. This
"warrant" is then traded as a security, the price of which reflects the value of
the underlying stock. Warrants are usually issued as a "sweetener" bundled with
another class of security to enhance the marketability of the latter,
An asset which has a limited life and thus, decreases in value (depreciates) over time.
Also applied to consumed assets, such as gas, and termed "depletion."
A list of securities selected for special surveillance by a brokerage, exchange or
regulatory organization; firms on the list are often takeover targets, companies planning
to issue new securities or stocks showing unusual activity.
The ability to establish automatic periodic mutual fund redemptions and have proceeds
mailed directly to the investor.
The seller of an option contract.
A double bottom where the price or indicator chart has the appearance of a W.
The percentage rate of return paid on a stock in the form of dividends, or the rate of
interest paid on a bond or note.
YIELD TO CALL
The percentage rate of a bond or note, if your 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 you
buy and hold 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.