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Financial Terms you must know about!
We come across certain financial terms in our daily lives about which sometimes we are clueless. In this post, I cover top financial terms that you would come across and can make sense
5 C’S OF CREDIT:
The five key elements a borrower should have to obtain credit: character (integrity), capacity (sufficient cash flow to service the obligation), capital (net worth), collateral (assets to secure the debt) and conditions (of the borrower and the overall economy).
ABSOLUTE PRIORITY RULE:
The idea that creditors’ claims take precedence over shareholders’ claims in the event of a liquidation or reorganization. Shareholders are compensated only after debtors have been fully paid off.
A statement sent periodically, or at the very least quarterly, showing the status of an account with bank or broker.
AER (Annual Equivalent Rate):
Illustrates what notional rate of interest would be if the interest is paid annually, the quoted rate and the AER are the same.
AMERICAN DEPOSITORY RECEIPT (ADR):
Certificates traded on the US stock exchange or over the counter, representing ownership of a specific number of shares in a foreign stock. An example might be holding shares in Daimler Benz, a German company, but in dollars and New York.
The systematic repayment (e.g. monthly, quarterly or yearly) of a debt or loan, such as a bond or mortgage, over a specific time period.
Professional who works for a bank or a brokerage analyzing and producing reports on countries, companies and various sectors of stock market.
A flat, yearly charge similar to a membership fee.
ANNUAL PERCENTAGE RATE (APR) (Cards):
The yearly percentage rate of the financial charge.
A contract sold by an insurance company designed to provide payments to the holder at specified intervals, usually after retirement.
An increase in the price of value of an asset-one component if total return.
An attempt to profit from momentary price differences that can develop when a commodity or security is traded on two different exchanges.
A person who buys commodities or equities in one market, where the price is lower, and sells simultaneously in another market where the price is higher. Not as easy as it sounds.
The price which someone who owns a security offers to sell it, also known as the asked price.
Any item of positive monetary value owned by an individual or corporation, especially that which could be converted to cash.
The process of risk reduction by diversification, not just between different stocks and shares n one’s home market, but by allocating proportions of asstes between different asset classes or different countries. Or both.
The three major asset classes are cash, bonds and stock.
Automated Teller Machine.
AVERAGE DAILY SHARE VOLUME:
The number of shares traded per day averaged over a period of time, usually one year.
BACS (Bankers Automated Clearing Service):
An electronic payment system allowing us to make direct credit cards to bank or building society account (UK).
The support operations of a brokerage, insurance company etc. “Back Office Problems” usually refers to slow paper work, payments and other such intangible glitches. You will rarely get to speak with back office personnel-perhaps not such a bad thing.
BACK END LOAD:
A fee often charged by mutual fund and the like to investors who sell their shares or units before a specified time. Sometimes a back-end load charge is levied regardless. Read the paperwork to find out for sure.
The combination of banking and insurance business within the same organization.
Wikipedia defines Basel ll best…” a round of deliberations by central bankers from around the world, under the auspices of the Basel committee on Banking Supervision(BCBS) in Basel, Switzerland, aimed at producing uniformity in the way banks and banking regulators approach risk management across national borders. Also called the New Accord-the correct full name is the International Convergence of Capital Measurement and Capital Standards-A revised frame work.
Not a soft toy, but a person who thinks a market will soon be in decline. The opposite of a Bull.
When the overall market loses value over an extended period of time. Impossible to define exactly, though it has often felt that a drop of at least 10 per cent is needed. Anything less is often called a “correction” (althogh”correction”isn’t used when the market moves up 10 per cent)
Also called a coupon bond isn’t registered in anyone’s merely by cutting off and mailing the attached coupons at the correct time. Due to the potential for abuse, electronic transfer systems and other wonderful things, bearer bonds are no longer being issued.
A quantitative measure of the volatility of a given stock, mutual fund or portfolio relative to the overall market, usually the S&P 500. Specifically, the performance the stock, fund or portfolio has experience in the last five years as the S&P moved one per cent up or down. A beta above is more volatile than the overall market, while a beta below one is less volatile.
Bid is the price buyer is willing or has to buy at, while offer or asked is the price the seller will take. The difference, known as the surprise to customer who didn’t read the sales literature and want to liquidate their holdings-how much?
BILLS AND BONDS:
A bill is a short-term fixed interest loan stock. These are often issued by governments or large corporations. A bond is any longer-term fixed interest loan that guarantees to repay the capital at an agreed future date. Government bonds are known as Gilts.
A good thing depending on your position, this is a securities offering that sells out almost immediately.
Rather than a tasty colored snack, it generally refers to a well-known and /or respected company. Said company probably has a good record of earnings and dividend payments.
An unflattering term used to describe a fraud scheme in which salespeople are hired to call unsuspecting individuals and push investments opportunities. These high-pressure calls are often used to consist only of a large number of telephones in a single room, giving rise to their name.
BOILER ROOM SALES:
The use of high pressure selling techniques to generally promote purchases and sales of securities. Do not buy any financial product over the phone until you are totally happy with what you are buying and know exactly what your legal protection is. You have been warned.
Generally speaking, this is the net asset value of a company (NAV). The NAV is arrived at by subtracting liabilities from assets. Dividing the result by the number of common stock shares gives you the book per share value that can be used as relative gauge of the stock’s real value.
French Term for stock exchange. It is now used more generally for all stock exchanges, in particular European exchanges.
In most financial markets, markets, brokers (middlemen or women) are professional who buy and sell shares on behalf of their clients. Private individuals and institutions are usually not allowed to deal in shares directly. In the gulf, financial advisors are often called brokers because they sell on behalf of financial product providers.
An organization that accepts customer orders but doesn’t immediately execute them. It waits to see if the market acts contrary to the order and then execute the order. The original prevailing price is confirmed to the customer; however so the bucket shop keeps the difference as well as the commission.
Not someone who doesn’t give the truth, but someone who thinks the market is going to go up.
A market that has been going up for a good while
A strategy or buying shares of companies with the intention of keeping them for some time, preferably indefinitely, and, participating in the long term success of being a partial owner of the business underlying the stock. Long term and, very often, the most sensible investing approach.
An option strategy involving the simultaneous purchase and sale of options of the same class and strike price, but different expiry dates.
There right to buy security at a given price within a given time. Calls are bought by investors who expect the price of the stock to rise.
CALL MONEY RATE:
The interest rate that banks charge to brokers to finance margin loans to investors. The broker charges the investor the call money rates plus a service charge.
The total of your deposits into your account, or the original investment in your bond or certificate.
See market capitalization.
CAPITAL GAIN (OR LOSS):
The difference between the price at which you buy an investment and the price at which you sell it. Adding the capital gain (or loss) to the income received from the investment tells you your total return.
A colloquial term for any business that generates a good ongoing flow of cash. These business have well known products and pay dividends reliably.
Any payment made to a corporation’s shareholders in cash from current earnings or accumulated profits.
CASH ON DELIVERY (COD) TRADE:
A general trade to describe a transaction in which a seller is obliged to deliver securities to the purchaser to collect payment.
CASH SPOT MARKET:
Where people buy actual cash commodities, i.e. grain, livestock, etc..
Latin -‘let the buyer beware.’ Think before you leap.
A national bank issuing currency, etc.
CERTIFICATE OF DEPOSIT:
A short to medium-term instrument, usually one month to five years, that is issued by a bank to pay interest at slighter higher than standard deposit accounts.
The part of the U.S Bankruptcy Code describing how a company or debt or can file court protection. In the case of a corporation, reorganization occurs under the existing management.
A loss that is written off a company’s books when a lender determines it will be unable to collect from the debtor.
A name given to technical analysis of stock market information.
As in ‘go fly a kite’ this practice is the illegal issuing of a cheque from an account with insufficient funds.
Excessive buying and selling in a customer’s account to generate commissions. Also attributed to financial advisors who ask clients to freeze one investment contract and take out another one.
The final transaction price for an issue on the stock exchange at the end of the trading day.
CLOSED-END INVESTMENT COMPANY:
A fund that issues a set number of shares and no more. When sold out, the fund traders on the secondary market price determined by investor supply and demand.
Unsolicited phone calls from sales people trying to get more business. In the year 2011 Central Bank of UAE has banned this activity by the banks.
Securities and other property pledged by borrower to secure repayment of loan. Also called security.
A physical substance such as food, grains or metals, which is interchangeable with another product of the same type and which investors buy or sell, usually through futures contracts. The price of the commodity is subject to supply and demand. Risk is the actually the reason exchange trading of the basic agricultural products began. For example, a farmer risk the cost of producing a product ready for market at some time in the future because he doesn’t know what the selling price will be. More generally, a product that trades on a commodity exchange; this would also include foreign currencies, financial instruments and indexes.
Securities representing equity ownership in a corporation, providing voting rights and entitling the holder to a share of the company’s success through dividends and/or capital appreciation. Also called junior equity.
When an investment generates earnings on reinvested earnings.
An investor who thinks and acts in opposition to conventional market wisdom.
A term referring to cash and future prices tending to come together as the futures contract nears expiry.
A bond that is exchangeable for a predetermined number of shares of common stock in the same company.
COOLING OFF PERIOD
A practice where a customer may purchase a financial instrument but be allowed to change their mind within a given time. A very good idea where high pressure selling is often used by unscrupulous salespeople.
CORNERING THE MARKET:
Situation where a party or a group has acquired so much of a stock or commodity that it exerts considerable influence in the price.
The all-encompassing term describing how rights and responsibilities are shared between the various corporate participants, especially the management and shareholders.
A short term drop in stock market prices. The term “correction “comes from the notion that, when this happens, an overpriced individual stock, market segment, or stocks in general are returning back to their “correct” values. Never used when a stock or the stock market returns to a higher level after momentarily visiting a lower level.
Bank that accepts deposits of, and performs services for, another bank (called a respondent bank).In most cases, the two banks are different cities, different countries.
A market crash is a big drop in market value.
An agency that collects and sells information about the creditworthiness of individuals. A credit reporting agency makes no decision about whether a specific person should be extended credit or not; collects information that it considers relevant to person’s credit habits and history, and uses this information to that it considers relevant to persons credit habits and history, and uses this information to assign a credit score to indicate how creditworthy a person is. When a prospective creditor approaches a credit reporting agency to inquire about a particular person, they are sold a credit report that contains all the information relevant to the person and the credit score calculated by the agency (some creditors might have an ongoing subscription to a credit bureau). The prospective creditor then uses that information to decide whether or not to extend the applicant desired credit. Also called a consumer reporting agency. EmCredit has now launched in the UAE and the Central Bank has plans to launch a credit agency soon.
Customer Relationship Management. Those aspects of a business strategy which relate to techniques and methods for attracting and retaining customers.
Hedging a commodity using a different but related futures contract for the cash commodity being hedged and the cash and futures market follow similar price trends.
A term applied to a stock at time when the purchaser will be entitled to a forthcoming dividend.
Any stock that tends to rise in price quickly when the economy turns up and vice versa.
DATE OF RECORD:
The date on which a shareholder must officially own shares in order to be entitled to a dividend.
The act of buying and selling a position during the same day.
DEAD CAT BOUNCE:
A small up move in bear market.
DEATH VALLEY CURVE:
In venture capital, refers to the period before a new company starts generating revenues, when it is difficult for the company to raise money.
A corporate IOU that is not backed by the company’s assets and is subsequently riskier than a bond.
A card that follows customers to access their funds immediately, electronically. Unlike a credit card has no float
A liability that has to repaid.
DEBT EQUITY RATIO:
Long term debt dividend by shareholders’ equity showing a relationship between long term funds provided by creditors and funds provided by shareholders; high ratio may indicate high risk, low ratio may indicate low risk.
Existing in actual fact, although not by official recognition.
Failure to make a payment, of either principal or interest, when due.
A decrease in the value of an asset, such as buildings or equipment.
A financial instrument whose value depends on changes in the value of some security. Derivatives range from simple puts and calls to highly exotic and structured derivatives. Exotic and structured derivatives are thought of as the ‘bogey-man’ of the financial world.
Dubai Financial Market, the place to buy listed securities in Dubai.
Dubai Financial Services Authority is an independent, integrated regulatory authority responsible for the regulation of all financial and ancillary services conducted in or from the Dubai International Financial Centre, including asset management, banking, securities trading, Islamic finance, re-insurance and an international financial exchange. The DFSA has been created using principle-based primary legislation modeled closely on that used in London and New York, and the DFSA regulatory regime operates to standards that meet or exceed those applying in the world’s major financial centers.
Dubai Gold and Commodities Exchange. A fully automated, online commodities exchange, DGCX is the first international commodities derivatives market place in the time zone between Europe and the Far East.
Dubai International Finance Centre is an onshore hub for global finance. It bridges the time gap between the financial centres of Hong Kong and London and services. DIFC is intended to turn Dubai into a hub for institutional finance and regional gateway for capital and investment into the Middle East.
Nothing to do with salsa. This is a slight drop in securities during an upward trend. Some might say this is the time to buy.
A cute-rate firm that executes orders but doesn’t provide research etc.
A brokerage account that gives the broker authority to act without client permission.
Spreading investments among different stocks, asset classes and even countries to lessen the possibility of loss the ‘swings and roundabouts’ theory. An investor seeking diversification for a securities portfolio would purchase securities of firms that are not similarly affected by the same variables. For example, an investor would probably not want to combine large investment position in airlines, trucking and automobile manufacturing because each industry is significantly affected by oil prices and interest rates.
Distribution of earnings to shareholders prorated by the class of security and paid in the form of money, stock, scrip, or rarely, company products or property. The amount is decided by the board of directors. Mutual Fund Dividends are paid out of income from the fund investments.
Dubai Multi Commodities Centre was created in 2002 to establish in Dubai. Rated ‘A’ by Standard & Poor’s, it provides the market infrastructure that brings together a wide range of commodities activities, serving the needs of participants in the gold, diamonds and commodities markets.
Dubai Mercantile Exchange. The regions first energy futures exchange, trading Middle East based energy future contracts with physical or financial settlement. A joint venture between the New York Mercantile Exchange and a subsidiary of Dubai Holding. DME s due to launch officially in June 2007.
DOLLAR COST AVERAGING:
A programme of investing a set amount on a regular basis, regardless of the price of shares at the time. Over time, this method should result in buying more shares at lower prices.
DOW JONES INDUSTRIAL AVERAGE (DJIA):
The oldest and most famed index of the US stock market, the Dow tracks the price movements of the 30 companies that, in the opinion of editors of the Wall Street Journal, most represent the American economy.
A lowered credit rating by an agency such as Moody’s.
The work performed by a financial company to understand an investment thoroughly before recommending it to a client. In addition to, it can mean a company policing their staff, making sure incorrect products are not sold to trusting clients.
Also known as descending price auction uses a bidding process to find an optimal market price for a stock, the lowest price at which an issuing company can sell all the available shares. An alternative to the traditional negotiated pricing process used by underwriters to set IPO prices. Recently employed by Google and used for US treasury auctions. Named after the famous auctions of Dutch tulip bulbs in the 17th century and based on a pricing system devised by Nobel prize winning economist William Vickrey.
Errors and omissions are excepted. This acronym often appears on invoices and statements,etc. It is supposed to absolve the issuing company of liability if there is a mistake on the document.
EARNING PER SHARE:
Total earnings divided by the number of shares outstanding. Companies often use a weighted average of shares outstanding over the reporting term. PS can be calculated for the previous year(‘trailing EPS”), for the current year (“Current EPS”) or for the coming year(“forward EPS”).Last year’s EPS would therefore be actual, while the current and the next year’s EPS would be estimates.
The return that a stock’s annual earnings per share represents relative to the stock’s current market price.
Earnings before interest, taxes, depreciation and amortization.
ECONOMY OF SCALE:
A reduction in the ratio of expenses to assets as the size of a mutual fund, for example, increases.
EDGAR( Electronic Data Gathering, Analysis and Retrieval):
An electronic system implemented by the SEC that is used by companies to transmit all documents required to be file with the SEC in relation to corporate offerings and ongoing disclosure obligations. EDGAR became fully operational mid-1995
EFFICIENT MARKET HYPOTHESIS:
A theory stating that market prices reflect the knowledge and expectations of all investors. Simply put, it means making the right investment is based purely on chance. Is the market efficient at the moment, we wonder-answers on a postcard..
Electronic Fund Transfer. Any transfer of funds that is initiated by electronic means,such as an electronic terminal, telephone, computer or ATM.
These are freely traded stocks and shares in publicly owned companies that do not carry a fixed rate of interest. Instead, they entitle their holders to a share in the growth of the company through an annual dividend payment.
Far more than just the writing of a will, the preparation of a plan to carry out an individual’s
The period between the declaration of a dividend by a company or a mutual fund and the actual payment of a dividend.
The date on or after which a security begins trading without the dividend (cash or stock) included in the contract price.
A synonym for a transaction or trade between a buyer and seller.
The date when a sale or purchase of an option, for example, takes place according to the contract.
The proportion of assets of a mutual fund required to pay annual operating expenses and management fees. If a fund charges an annual fee of 50c per US $ 100 of net assets, the expense ratio will be 0.5 percent. The expense ratio is independent of any sales fees.
The redemption value of a bond appearing on the face of the certificate. Also sometimes referred to as the par value or the principal value.
A firm engaged in the business of financing accounts receivable, an activity known as factoring.
FAMILY OF FUND:
A group of mutual funds created by the same company, with portfolios made of different securities or having different investments objectives. These are usually managed by different investment managers. Shareholders in one of the funds can usually switch their money into any of the family’s other funds, sometimes at no charge. Family of funds with no sales charges are called no load families. Those with sales charges are called load families.
The acronym for the Federal National Mortgage association, which buys mortgage on the secondary market, repackages them and then sells off pieces to investors. The effect is to infuse the mortgage markets with fresh money.
The central bank of United States. The “Fed” oversees money supply, interest rates and credit and governed by a seven-member board.
An individual, corporation, or association charged with managing or investing another’s assets.
First in, first out, usually regarding the sale of stock. Unless otherwise specified, the specific shares sold in an account will be the first shares that were bought.
FILL-OR-KILL (FOK) ORDER:
An order that requires the immediate purchase or sale of a specified amount of stock, though not necessarily at the same price. If the entire order cannot be filled immediately, it is automatically, it is automatically cancelled (killed).
FINANCE CHARGE (Cards):
The amount (interest) you pay to use credit.
FINANCIAL INTERMEDIARIES/IFAs (Independent Financial Advisers):
Provide advice on investments and financial products.
An assessment of an investor’s assets, liabilities investment objectives and willingness to bear risk. Everyone should carry this out themselves or have it done for them by a professional at least once a year.
FIXED RATE (Cards):
Fixed annual percentage rate of the finance charge.
A new issue of shares available to the public when a private company comes to the market and sells a percentage of its shares. A placing is offered on a selective basis; an intermediary offer is a placing with financial intermediaries who then sell the shares to the public, or an offer for sale is made to the public and to investing institutions.
That thing you are supposed to stand on. Apparently, they have them everywhere, including the securities trading area of an exchange.
A person is the member of exchange and works on the exchange floor executing the orders of public customers who do not have physical access to the area. Nothing to do with being the middleman in selling floors at all.
A term referring to the trading of securities between institutional investors without the use of broker/dealers.
The nickname for the Federal Home Loan Mortgage corporation; it operates similarly to Fannie Mae.
As used in credit activities within the securities industry, the illegal practice of purchasing and selling an issue without showing ability and intent to pay for the transaction.
A sales charge taken at the beginning of an investment.
FT-SE 100 INDEX:
Known as the Footsie, this index monitors the top 100 publicly quoted companies, by market value, on the UK stock market. It is weighted to take account of the largest and smallest sized companies within the hundred. There is also the FT-SE Mid 250, the FT-Se 350 and so on.
FULL SERVICE BROKER:
A brokerage firm that maintains a research department and other services designed to supply its individual and institutional customers with investment advice.
FULLY DILUTED EARNINGS PER SHARE:
A calculation of the earnings per share using all of the common shares currently outstanding, plus any additional shares could result from the conversion or exercise of any outstanding convertible stock, convertible bonds, rights or warrants.
Study of the balance sheet, earnings, history management, product lines and other elements of a company in an attempt to discern reasonable expectations for the price of its stock.
Interchangeable. The term is often used to apply to financial instruments which are identical in specification. For example options and futures contracts are highly fungible, since they are highly standardized arrangements On the other hand; forwards and swaps are not, since they are customized arrangements. On the other hand, forwards and swaps are not, since they are customized arrangements. Instruments that are highly fungible tend to be very liquid, and so transaction costs tend to be low.
FUTURES OF CONTRACT:
This is the standardized stock exchange contract committing the person to buy or sell a specific commodity (share or index) as the representation of a basket of shares on a specified future date.
An over-the-counter market where buyers and sellers conduct foreign exchange transactions. Also called foreign exchange market.
General Agreement on Tariffs and Trade. Treaty organization affiliated with the UN whose purpose is to facilitate international trade. GATT was superseded by the WTO Not to be confused with a plant known for its mildly hallucinogenic qualities.
Gross Domestic Product. The amount of goods and services produced by country in one calendar year.
GILT EDGED BONDS:
British government loans that carry a fixed interest.
The nick name for the government National Mortgage Association, which buys up mortgages in the secondary market and sells them to investors via securities known as pass-through certificate.
GLOBAL DEPOSITORY RECEIPT (GDR):
A negotiable certificate held in the bank of one country representing a specific number of shares of a stock traded on an exchange of another country. Also called European Depositary Receipt.
A mutual fund or closed-end fund that invests in the negotiable securities of corporations located in the US and abroad. Also called a world fund.
Moving a company’s shares from public to private ownership, either through an outside private investor or by the repurchase of shares. A company usually decides to go private when its shares are selling way below the book value.
A private company is “going public” when it first offers its share to the investing public
GOLDEN HAND CUFFS:
A contract between a broker and brokerage house offering lucrative commissions, bonuses and other benefits, as long as the broker stays with the firm.
A term used to describe the US economy of the mid 1990’s as “not too hot, not too cold, but just right”. Some economists consider this optimal, and in such situations, a government will usually decide not to undertake any policy measures to improve macroeconomic performance.
GOOD-TILL-CANCELLED (GTC OR OPEN) ORDER:
An order to buy or sell stock that is good until you executes or cancels it. Brokerages usually set a limit of 30-60 days, at which the GTC order expires if not restated. (Different From a day order)
GRACE PERIOD (Cards):
A time period, usually about 25 days during which you can pay your credit card bill without paying finance charge.
A bear market in which selling investors are faced with large losses, while prospective investors keep their money in cash until the market gets better.
In an underwriting agreement, a clause that allows the syndicate to purchase additional shares at the same price as the original offering. This lessens the risk for the syndicate.
For investors, it means before deductions. For teenagers, something else entirely.
Selecting a company in which to invest based on expectations of strong growth in earnings.
A portfolio manager who invests in extremely risky stocks in hopes of high returns. Cowboys, to some.
The amount taken off the value of securities for the purpose of computing a broker/dealers net capital. The range of percentages taken off-the “haircuts”-range from zero percentages for US government obligations to 100 per cent for fail contracts.
HAMMERING THE MARKET:
The intensive sale of stocks to drive the prices down.
The dollars that a brokerage firm pays for analysis, research or other client-related services.
HEAD AND SHOULDERS:
A technical analysis bar chart of a stock price movement marked by by a ‘shoulder -line ‘, a ‘neck-line and a ‘head-line’ resembling an upper torso. As a price moves towards the shoulder line, analysts consider the trend bearish (‘head & shoulders top). The reverse pattern, the head at the bottom (‘head and shoulders bottom) is considered bullish.
A market for a stock that contains many more sellers than buyers. This market is characterized by falling prices.
Any combination of a long and/or short position taken in securities, options or commodities, in which one position tends to, reduce the risk of others.
A more attractive, less emotionally charged synonym for a junk bond.
The illegal act of swapping securities with a customer at price levels above that prevailing for those same issues under competitive conditions.
HIT THE BID:
Term applied to the situation in which a seller accepts the buyer’s highest bid. For example, if the ask price is 34 1/4 and the bids is 34, the seller” hits the bid by accepting 34.
Any large gain by an investor in a short period, commonly the result of takeover bids.
A security that is expected to trade in the after-market at a premium over the public offering price.
1) A security whose price rises quickly on the first day of sale
2) Stolen stock
Notification of the customer by the brokerage house that equity in margin accounts is below the maintenance level.
IMMEDIATE OR CANCEL (IOC):
An order that requires to immediate execution at a specified price of all or part of a specified amount of stock. The unexecuted portion has to be cancelled by the broker.
A rise in the price of goods and services.
IN THE BLACK:
Profitable. Opposite of in the red. A good place to be.
IN THE MONEY:
In option trading, a phase that describes an option that has intrinsic value. Specifically, an option is in the money when the relationship between the market price of the underlying security and the strike of the option is such that exercising would yield a profit to the holder (buyer).
IN THE RED:
Losing money. Opposite of in the black. A bad place to be.
IN THE TANK:
Colloquial expression for a security or group of securities that is quickly losing value.
A summary of all of the income and expenses of a business for a period of time, also called a profit-and -loss statement.
The shares of companies that make regular and substantial dividend payments to investors.
In options, any strategy in which the investor receives more options premium than he or she pays.
A composite measure of the movement of the overall market or of a particular industry that consists of a large number of stocks and is usually weighted by other factors, such as capitalization.
A selected list of publicly quoted shares, which represent all others of that type.
A mutual fund that invests in a group of securities whose performance of a particular stock market index, such as the standard & Poor’s 500 Index or the New York Stock Exchange Composite Index.
Options on stock indexes.
A unit of measurement used by the securities market analyst to help forecast market direction, volume of trading, direction of interest rates or buying and selling by corporations.
INDIVIDUAL RETIREMENT ACCOUNT(IRA):
A tax-sheltered account which permits investment earnings to accumulate untaxed until withdrawn. The contribution limit is US$ 2,000 per year usually apply for withdrawals before the age 59. Taxpayers whose income is below certain levels can deduct all or part of their IRA contributions, making it a double tax shelter for them.
INITIAL MARGIN REQUIREMENT:
The minimum equity requirement(in 1993,US$ 200) a customer must furnish his brokerage firm, as established by New York Stock Exchange rules, at the time a margin account is opened.
INITIAL PUBLIC OFFERING:
The first time that a company issues or sells stock to the public, sometimes known as “going public”.
The favorable, wholesale market price for a security available only to market maker and other members of the NASD.
An officer, director or principal stockholder of a publicly owned corporation and members of their immediate families. This category may also include people who obtain nonpublic information about a company and use it for personal gain.
A large organization engaged in investing securities, such as a bank, insurance company, mutual fund or pension fund
Meaning “within the day” this term is most often used to describe daily high and low prices of a security or commodity.
The amount by which an option is in the money. Also that portion of an option’s premium reflecting the profit that exists from the difference between the market price of the underlying security and the strike price of an option.
A broker/dealer organization that provides a service to an industry through counsel, market making and underwriting securities.
Defining an investment objective and establishing systematic approach to achieve it.
INRODUCTORY RATE: (Cards):
A temporary, lower APR that usually lasts for about six months before converting to the normal fixed or variable.
The date that the security started publicly trading.
Individual Retirement Account. A tax- deferred retirement account for an individuals to set aside money each year, with earnings tax-deferred until withdrawals begin at age 59 1/2 or later (or earlier, with 1 percent penalty). The exact amount depends on the year and your age.
ISA’s (Individual Savings Account):
Tax- free savings accounts launched in April 1999 to replace PEPs and TESSA’s, allowing investment in stocks and shares, cash deposits and and life assurance up to certain limits each tax year.
- Any of company’s class of securities
- The act of distributing securities.
ISSUED AND OUTSTANDING:
Authorized shares that have been distributed to investor and that may trade in the market.
ISSUED- AND-OUTSTANDING STOCKS:
That portion of authorized stock distributed among investors by a corporation.
A corporation, trust or governmental agency engaged in the distribution of securities.
An account jointly including two or more people.
Joint Stock Company. a company that has some features of a corporation and some features of a partnership. The company sells fully transferable stock, but all shareholders have unlimited liability.
Low quality, high risk, long term debt security rated by Moody’s, Ba by S&P or lower. To avoid the negative associations of the word “junk”, the investment community uses synonyms such as high -yield bond, on-investment-grade bond.
Slang for Australian stocks.
A value representing the expected change in the price of an option in response to a one per cent change in the volatility of the underlying stock. Also sports clothing manufacturer favored by chavs.
Named for economist John Maynard Keynes. Economic theory that advocates government intervention or demand-side management of the economy to achieve full employment and stable prices.
A kick back is a payment to someone who has influence in a deal or transaction. In return for their help in arranging deal, this person is paid a commission, the pleasant term, or a kickback, the not so pleasant term. It’s not always illegal, but often carries that inference.
The opinion that an economic system should be driven by free market forces, not government intervention.
A value representing the expected percentage change in the price of an option in response to a one per cent change in the volatility of the underlying stock.(See Kappa)
A large company whose outstanding common shares have a total market value of US$5 billion or more.[Note: The dollar amount cited is generally accepted and subject to change over time.]
LAST TRADING DAY:
The final day during which trading may take place in a particular option contract or futures contract, after which it must be settled by delivery of the underlying commodity or security, or by agreement for settlement with cash.
The commercial or investment bank that has primary responsibility for organizing a given credit or bond issuance. This bank will find other lending organizations or underwriters to create the syndicate, negotiate terms with the issuer and assess market conditions. Also called syndicate manager, managing underwriter or lead underwriter.
First pointed out by Akerlof in 1970. Refers to the inability of one trader to assess the quality of the other, making it likely that poor-quality traders would dominate. Also referred to as adverse selection.
The purchase (or sale) of a large amount of a security using a small amount of an investor’s money. The rest of money is borrowed from the brokerage firm.
LEVERAGE BUYOUT (LBO):
The use of borrowed money to finance the purchase of a firm. Often, an LBO is financed by raising money through the issuance and sale of junk Bonds.
London Inter-Bank Offer Rate. The interest rate that the banks charge each other for loans (usually in Eurodollars). This rate is applicable to the short term international interbank market and applies to very large loans borrowed from one day to five years. This market allows bank with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once a day by a small group of large London banks, but the rate changes throughout the day. In the UAE, EIBOR is the Emirates Interbank Offer Rate.
An order to buy stock (buy limit) at a specified price or higher.
A business arrangement put together and managed by a general partner (which may be a company or an individual) and financed by the investments of limited parkers, so called because their liability is limited to the amount of money they invest in the venture.
A market in which it is easy for an investor to buy and sell securities.Such a market typically contains a large number of investors. Willing to buy and sell.
The voluntary or involuntary closing out of securities positions.
The ability of the market in particular security to absorb a reasonable amount of trading at reasonable price changes. Liquidity is one of the most important characteristics of a good market.
The stock of a company traded on a securities exchange and for which a listing application and registration statement have been filed with the SEC and the exchange itself.
The sales charge that an investor may pay when buying mutual fund shares or redeeming shares within a short period after the purchase.
A mutual fund that charges its purchasers a front-end sales charge or a back-end load.
A highly competitive market in which the bids and prices are temporarily the same-that is, they are “locked”.
LONG MARKET VALUE:
The market value of securities owned by a customer (long in his or account)
Phrase denoting ownership of a security, which includes the right to transfer ownership and to participate in the rise and fall of its market value.
LONG DATED RIGHTS:
A dilutive, anti-take -over device in which rights are automatically distributed to existing stockholders during a hostile take-over.
A broker/dealer’s notice to a customer to deposit additional equity in his or her account to meet either New York Stock Exchange or the broker/dealer’s own minimum requirements.
MAJOR MARKET INDEX:
An index prepared by the American Stock Exchange and upon which futures contracts are traded.
One of the three types of investment companies defined under the Investment Company Act of 1940. This investment company manages by objectives and, depending on its structure, is described as either an open-end management company(a mutual fund) or a closed-end management company (a closed-end fund).
MD&A( Management’s discussion and Analysis):
A key area looked at by analysts; an interpretive section of the prospectus an of the annual report, frequently called the Financial Review.
A percentage of a mutual fund’s total assets that the fund’s portfolio manager charges for his or her services. It is typically the largest expense of a mutual fund.
Making securities prices rise or fall artificially through aggressive buying or selling by one investor or in connection with others.
An account in which an investor buys (or sells short) securities by depositing part of their market value and borrowing the reminder from the brokerage firm.
A loan from a broker to client that essentially functions as a margin account. The fund may be used for any purpose, with the loan secured against securities owned by the client.
A security that can be bought or sold in a margin account. These include all stocks registered (listed) on exchanges, all NASDAQ National Market Issues and any over-the -counter stock that appears on the Federal Reserve Board’s OTC margin list.
MARK- TO- MARKET:
When an investment or a liability is revalued to the current market price.
An order to buy or sell a stock at the market’s current best displayed price.
The amount or percentage subtracted from the bid price when the customer sells over-the-counter stock to market maker or principal firm.
Price per share of a stock multiplied by the total number of shares outstanding; also the market total valuation of a public company.
An NASD member firm that disseminates bid and asks prices at which it stands ready to buy stock into and sell stock from its own inventory at its own risk; synonymous with dealer.
An order to buy or sell stock immediately at the best available market price. No price is specified by a customer placing this order.
In concept, a value weighted index of all securities. In practice, it is an index like the FTSE 100 or S&P 500 that proxies the return of the entire value of the stock market through the returns on the stocks composing the index.
- The last reported sale price for an exchange-traded security.
- For over -the-counter securities, a consensus among market makers.
Also known as non-diversifiable risk, price risk and position risk and position risk. Risk in holding shares that is not specific to the particular company or companies share price performance, but that is sensitive to fluctuations in the stock market as whole.
Generally a synonym for market capitalizations that is the value of 100 per cent of a firm’s shares on the stock market. Also called market price.
The break-up value of a firm, often thought to be higher than its current market capitalizations.
The liquidation value of a firm; that is what you would be left with for the shareholders after selling all assets and paying off all liabilities. Market value is most often used in the first sense.
How easily a security can be bought and sold.
The amount or percentage added to the ask price when a customer buys an over-the-counter stock from a firm acting as a principal or market maker in the transaction.
The mathematical average of a range of numbers (calculated by dividing the sum total of all the items in the range by the total number of items in the range).
The middle number in a defined distribution; when looking at estimates, median refers to the estimate above and below which lie an equal number of estimates for the period indicated.
Late-stage venture capital, usually the final round of financing prior to an IPO.
Stocks with market capitalization less than US$ 150 million.
MID-CAPITALISTION (MID-CAP) STOCK:
Stocks with market capitalization less than US $ 1 billion and about US $ 10 billion.
A transaction on an exchange at a price below the previous transaction in a given security.
MISSING THE MARKET:
The failure by a member of the exchange to execute an order, due to his or her negligence. The member is obliged to reimburse the customer promptly for any losses due to the mistake.
A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower (mortgagor) gives the lender (mortgagee) a lien on the property as collateral for the loan. In other words, your house is at risk if you do not keep up payments on it.
Wholesale market for funds of large corporations and rich individuals.
MONEY MARKET FUND:
Open-ended mutual fund that invests in commercial paper, banker’s acceptance, repurchase agreements, and safe securities, certificates of deposit and other highly liquid dividend payments and sales proceeds-in a customer’s brokerage account is typically invested in a money market mutual fund. The fund’s net asset value remains constant US $ 1 a share, only the interest rate goes up.
Fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities or money market securities. Known as unit trusts in the UK.
Light trading and great price fluctuations with regard to the volume on a securities or commodities market. Also known as think market and inactive market.
Acronym For National Association of Securities Dealers Automated Quotation system; the electronic trading system that enables brokers and dealers that trade NASDAQ-listed stocks to get real-time quotes and execute orders directly with each other. The NASD(National Association Of Securities Dealers) is the self -regulatory organization of the securities industry responsible for the regulation of the Nasdaq Stock Market and the over-the -counter markets. The NASD operates under the authority granted to it by the 1983 Maloney Act Amendment to the Securities Exchange Act of 1934.
A security whose ownership is readily transferred when it is bought or sold.
NET ASSET VALUE (NAV):
The company’s shareholder’s funds divided by the number of shares/stock in issue. The NAV is the market value of a fund share, synonymous with a bid price. In the case of no-load funds, the NAV, market price and offering price are all the same figure, which the public pays to buy shares. Load fund market or offer prices are quoted after adding the sales charge to the net asset value of all securities owned plus all other assets such as cash, subtracting all liabilities, then dividing the result (total net assets) by the total number of shares outstanding can vary each day, depending on the number of purchase and redemptions.
An index of more than 200 blue -chip stocks traded on the Tokyo Stock Exchange.
Offered by open end investment companies that impose no sales charge (load) on shareholders. Investors buy shares in no-load funds directly from the fund companies, rather than through a broker as is done in loads funds. Many no-load fund families allow switching of assets between stock, bond and money market fund in the newspaper is accompanied by the designation NL. The net asset value, market price and offer prices of this type of fund are exactly the same, since there is no sales charge.
New York Stock Exchange.
NYSE COMPOSITE INDEX (NYSE):
The NYSE Composite index (NYSE) is a market value-weighted index which relates all NYSE stocks to an aggregate market value as of Dec.31,1965, adjusted for capitalization changes. The base value of the index is US$ 50 and point changes are expresses in dollars and cents.
ODD LOT TRADE:
A stock trade involving between one and 99 shares.
A synonym for asked price.
When a security is first offered for public sale.
A market dominated by a small number of participants who are able to collectively exert control over supply and market prices.
Order that remains valid until it is executed or cancelled. Same as a good-’til-cancelled (GTC) order.
- The price at which a security or commodity starts trading;
- A short period during which interest rates drop and corporations can issue bonds at reduced prices.
The cost of passing up one investment in favour of another. For instance, if you pull money out of a money market fund where it is earning five per cent interest to invest it in a stock that has promise but yields just three per cent, your opportunity cost while you’re waiting is two per cent.
A contract wherein one party (the option writer) grants another party (buyer) the right to demand that the writer perform a certain act.
OUT OF THE MONEY:
The relationship between the market price of the underlying security and the option’s strike price is such that the holder (buyer) would not exercise the option because it would result in a loss; a phrase that describes an option with intrinsic value.
OVER THE COUNTER (OTC) MARKET EXAMPLE:
The market is currently segmented into two main groups. The first, containing approximately 5, 400 of the highest quality over-the-counter stocks, is called the NASDAQ Stock Market. The second is called the Pink Sheets and consists of approximately 8000-10000 lesser quality stocks.
OVER- THE- COUNTER (OTC) MARKET:
A decentralized, negotiated market in which many dealers in diverse locations execute trades for customers over an electronic trading system or telephone line.
A technical term used to describe a stock (or market) whose value has risen quickly and unexpectedly and thus may represent a price far above its actual worth; usually an indication of a future price decline.
The inventory in a security at the end of a trading day.
A technical term used to describe a stock (or market) whose value has fallen quickly and sharply, far below its real value; usually interpreted as an indication of an impending price rise.
In securities trading, a security whose market price is higher than it should be in the opinion of fundamental analysts.
- For common stock, an arbitrary (and meaningless) value assigned the stock at the time it is issued
- For preferred stock, the fixed value- US$ 100, US5$ 50 or, more common today, US $ 25-upon which dividend payments are based.
When the total market value of the common shares into which a security can be converted equals the market value of the convertible security.
The date on which a dividend or split will be paid to stockholders by the issuers paying agents. The payable date is th date on which one must own shares (at the close of the session) in order to receive the split.
Generally a recently issued stock selling for under US$ 5 a share and traded over the counter. Usually issued by small, relatively unknown companies and lightly traded, making them more prone to price manipulation than larger, better established issues. Increasingly, the term refers to stock listed on the Pink Sheets with a market value of less than US$ 5.
Sheets listing the bid and ask prices of certain thinly traded over-the-counter stocks, mostly low priced stocks, foreign issues and unsponsored ADRs. Named for the colour of the paper and published each business day by the National Quotation Bureau.
The price movement on an individual stock equal to dollar. on bonds, a point represents one per cent of face value.
Jargon used to describe a security whose features are specifically designed to defend against a hostile takeover.
POWER OF ATTORNEY:
A legal document that authorizes a particular person to act on behalf of someone else; for example, to make investment decisions on their behalf.
Capital stock that provides a specific dividend paid before any dividends are paid to common stock holders-also takes precedence over common stock in the event of liquidation. Preferred stocks shareholders do not enjoy any of the voting rights of a common stockholder. Unlike common stock, a preferred stock pays a fixed dividend that does not fluctuate, although the company does not have to pay this dividend if it lacks the financial ability to do so. The main benefit to owning preferred stock is that investor has a greater claim on the company’s assets than common stockholders. Preferred shareholder always receives their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before common stockholders. There are usually four types of preferred stock: cumulative preferred, non-cumulative, participating and convertible. Also called preference shares.
- The amount by which the market value of a preferred stock or a bond exceeds its par value
- The market price of a call or put option.
In technical terms, the point at which supply statistic in which the price of a stock is divided by the reported book value (as of the date specified) of the issuing firm.
A stock analysis statistic in which the price of a stock is divided by the reported book value (as of the date specified) of the issuing firm.
PRICE-CASH FLOW RATIO:
A financial ratio that compares stock price with cash flow from operations per outstanding shares.
PRICE- EARNINGS (P-E) RATIO- 1:
Computed by dividing a stock’s current market price by its annual earnings per share, this ratio measures the number of times a stock’s price exceeds its earnings.
PRICE- EARNINGS (P-E) RATIO- 2:
Alternatively, the P-E ratio measures how expensive a stock’s market price is relative to the earnings per share.
PRICE-EARNINGS (P-E) RATIO-3:
Traditionally, this ratio is used by fundamental analysts to determine when the share price of a company, a sector or the overall market is overvalued or undervalued, hence indicating a time to sell or buy, respectively. Analysts sometimes refer to this ratio as “the multiple”.
The PSR is the stock’s price divided by its company’s latest annual sales per share. It is favored by some investors as a measure of stock’s relative value. The lower the PSR, according to this school of thought, the better the value.
The market in which the issuer and underwriter first offer and sell securities to the public, with the proceeds from the sale going to the issuing corporation:
The short-term interest rate that commercial banks charge their most creditworthy business customers for unsecured loans.
The original funds put into an investment.
Activity by a broker/dealer when buying or selling for its own account and risk.
A drop-off in general market prices after a sharp increase, in the absence of any adverse socio-economic influence. Traders are assumed to be taking short-term profits.
A legal document providing information about a potential investment, including discussions of its investment objectives, policies, past performance, risk and cost.
- A formal authorization (power of attorney) from a stockholder that empowers someone to vote on his or her behalf
- The person who is authorized to vote on behalf of a stockholder.
PUBLICLY TRADED FUND:
See closed-end management company:
PURE NO-LOAD FUND:
A mutual fund that charges no front-end sales charge, no back-end sales charge and no 12b-1 fees (compare o load fund)
An illegal investment scheme in which investors are promised impossibly high returns on an investment. These are scams in which money from later investor is used to pay earlier investors. The creators of the scheme get most of the profits while those who come later are left with nothing because there are eventually an insufficient number of new investors to pay the existing ones. These scams inevitably collapse because they require exponential growth in the number of participants at each step, which is impossible. Letters or emails that encourage the recipient to send money and then pass the message along to certain number of new targets are a type of pyramid scheme.
Qatar Financial Centre, the international financial centre based in Doha.
The Nasdaq 100 index Tracking Stock. The QQQ is an Exchange Traded Fund that allows investors to essentially invest in all of the stocks that make up the Nasdaq 100 in a single security.
A brisk rise following a decline in the general price level of the market or in the price of an individual stock.
RANDOM WALK THEORY:
A hypothesis stating that historical prices, because they react to random influences on the market, are of no use in forecasting price movements. Espoused in 1900 by the French mathematician, Louis Bachelier, and revived in the 1960’s this theory contradicts the principals used in technical analysis.
A set of prices consisting of the opening sale, high sale, low sale and latest sale of the day for a given security.
Organizations that publicly rate the credit quality of the securities issuers, the most often cited being Moody’s Investors Service Inc. and standard & Poor’s corporation.
READING THE TAPE:
Appraising a security’s performance by monitoring the price changes on the ticker.
REAL ESTATE INVESTMENT TRUST (REIT):
A closed-end investment company that buys real estate properties or mortgages and passes virtually all the profits on to its shareholders,
- A certificate (stock or bond) clearly inscribed with the owner’s name
- A stock or bond that is registered with the SEC at the time of its sale. If such an initial registration does not take place, then the term also includes any security sold publicly and in accordance with the SEC’s rules.
In technical analysis, an area above the current stocks price where the stock is available in abundance where selling is aggressive. This area is said to contain what chartists call a resistance the price.
Net profits kept to accumulate in a business after dividends are paid.
RETURN ON CAPITAL:
A distribution of cash resulting from depreciation tax savings, tha sale of capital asset or securities in a portfolio, or any other transaction unrelated to retained earnings.
RETURN ON EQUITY (ROE):
A measure of how well a company used reinvested earnings to generate additional earnings, equal to a fiscal year’s after-tax income (after preferred stock dividends but before common stock dividends) divided by book value, expressed as a percentage. Used as a general indication of the company’s efficiency; in other words, how much profit it is able to generate given the resources provided by its stockholders. Investors usually look for companies with returns on equity that are high and growing.
RETURN ON TOTAL ASSETS:
(Net income divided by total net assets) A measure of the net income that a firm’s management is able to earn with the firm’s total assets.
Money that a company collects from customer’s for the sale of products or services. Take away costs from revenues and you get profits or earnings.
A stock split that reduces the number of outstanding shares and proportionately increases the price per share. Take a “one-for-ten” reverse split; for every ten shares you owned, you would now be left with one, while the share price is increased tenfold. If yesterday you owned 100 shares at US$ 5 each, today you own 10 shares at US$ 50 each. The value is still US$ 500. Often a sign that a company is in trouble.
The manipulation of a security price in an attempt to attract buyers and sellers.
A right that is granted by a corporation and that enables shareholders to purchase a number of shares of new issue of common stock, usually at a lower price than the market price of the existing shares. the offer is made to the shareholders before the issue is offered to the public.
A measure of how much risk a portfolio has employed to earns its returns.
The measurement of an investor’s willingness to suffer a decline (or repeated decline) in the value of investments while waiting and hoping for them to increase in value.
A hundred shares of stocks, the preferred number for buying and selling and most economical unit when commissions are calculated.
The sales fee that the buyer pays in order to acquire an asset. The fee varies according to the type of asset and the way it is sold. Many mutual funds impose a sales charge. As a result of the load, only a portion of the investor’s funds go into the investment itself.
Saudi Arabia Monetary Agency.The Central Bank of the Kingdom of Saudi Arabia established in 1952.
A market maker who puts heavy mark-ups or markdowns on transactions.
Documents evidencing the fractional share of a stock distributed by a company because of an exchange of stock, split or spin-off. The owner can buy the remaining fraction to make a full share.
The general name given to stock exchange; the over-the-counter market and other marketplaces in which stocks, bond, mortgages and other investments are sold after they have been issued and sold initials. Original issues are sold in the primary market; subsequent sales take place in the secondary market.
The primary market for a new issue stock is the team of underwriters; the secondary market is one of the stock exchanges or the over-the -counter market. The primary market for a mortgage is the lender, which may then sell it to Fannie Mae or Freddie Mac in the secondary mortgage market.
A mutual fund that invests its shareholder’s money in a relatively narrow market sector, e.g. technology, energy, the internet or banking.
A fancy name for shares of stock, bonds or any kind of financial asset that can be traded.
SECURITIES AND EXCHANGE COMMISSION (SEC):
A US government agency responsible for the supervision and regulation of the securities industry.
A transferable instrument evidencing ownership or creditorship. Example: A note, stock or bond, evidence of debt, interest or participation in a profit-sharing agreement, investment contract, voting trust certificate, fractional undivided interest in oil, gas or other mineral rights, or any warrant to subscribe to or purchase any of the foregoing or other similar instruments.
SELL THE BOOK:
An instruction to the broker/dealer to sell as many shares as possible at the best available bid.
SETTLEMENT (DELIVERY) DATE:
The day on which certificate involved in a transaction as possible at the best available bid.
A stock certificate-a unit of measurement of the equity ownership of a corporation.
Any step taken by a “target “corporation to discourage a take-over. Also called a porcupine provision.
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.
A technique used to take advantage of an anticipated decline in the price of stock or other security by reversing the usual order of buying and selling.
In a short sale, the investor (1) borrows stock from the broker and (2) immediately sells it. Then, if the investor guessed right and the price of the stock does indeed decline, he can replace the borrowed shares by (3) buying them at the cheaper price.
The profit is the difference between the price at which he sells the shares and the price at which he buys them later on. Of course, if the price of the shares rises, the investor will suffer a loss.
SMALL-CAPITALISATION (“SMALL-CAP”) FUND:
A mutual fund that invests in companies whose market value is less than about US$ 1 billion.
SMALL-CAPITALISATION (“SMALL-CAP”) STOCKS:
Companies with a market capitalization of US$ 1 billion or less. See market capitalization.
The employment of funds in high-risk transactions for relatively large and immediate gains in which the safety of principal or current income is of secondary importance.
The nickname for S&P 500 Depositary Receipts, which trade on the American Stock Exchange under the ticker symbol SPY. Spiders are an easy way for investors to buy and sell the aggregate stock of the companies represented in the S&P 500 index.
A division of the outstanding shares of a corporation into a large number of shares, by which each outstanding share entitles its owner to a fixed number of new shares. Individual shareholder’s overall equity remains the same, but they own more stock, since the total value of the shares remains the same.
For example, in a two-for-one split, the owner of 100 shares, each worth US$100, would be given 200 shares, each worth US$ 50
The difference between the bid and asked prices of a security, also known as the broker’s markup. For example, if a stock’s best bid is US$ 24.25 and best ask (or offer) is US$ 24.6, the spread is US$ 0.01.
In options and futures trading, a spread is the practice of simultaneously buying a contract for the delivery of a commodity in one month and selling a contract for a delivery of the same commodity in another. The aim is to offset possible loses in one contact with possible gains in the other.
A speculator who buys and sells stocks rapidly for fast profits.
STANDARD AND POOR’s 500 (The S&P 500 index):
More formally known as the S&P 500 Composite Stock Price Index, this is a European-style, capitalization-weighted index (shares outstanding multiplied by stock price) of 500 stocks that are traded on the New York Stock Exchange, American Stock Exchange and Nasdaq National Market. The advantage of “cap-weighting” is that each company’s influence on index performance is directly proportional to its relative market value. It is this characteristic that makes the S&P 500 such a valuable tool for measuring the performance of actual portfolios.
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.
A securities price indicator such as the Nasdaq-100. Standard & Poor or Dow Jones series created to measure the relative value of the market.
A unique four -or five-letter symbol assigned to a Nasdaq security. If a fifth letters appears, it identifies the issue as other than a single issue of a common stock or capital.
STOP LIMIT ORDER:
An order to buy or sell a certain quantity of a certain security at a specified price or better, but only after a specified price has been reached-a combination of a stop order and a limit order.
STOP LOSS ORDER:
A customer’s order to set the sell price of a stock below the market price, thus locking in profits or preventing further losses.
A stock split is simply an alternation in the number of its shares outstanding and proportionally adjusting the share price to compensate. For example, a 2-for-1 stock split. A company will announce that it’s splitting its stock 2-for-1 in month. One month from that date, the company’s shares (having traded the day before stay at, say US$100) will now be trading at half the price from the previous day (so they’ll open at US$50). The company, which had 10 million shares outstanding, now has 20 million shares outstanding. The price has been halved in order to accommodate a doubling of the share total.
The description given to securities held in the name of a brokerage firm but belonging to the firm’s customers. Holding stocks in street name facilities trading because there is no need for the customer to pick up or deliver the certificates.
Bonds, usually issued by the U.S. treasury, whose two components, interests and repayment of principal, are separated and sold individually as zero-coupon bonds. Strip is an acronym for Separate Trading of Registered Interest and Principal of Securities.
The temporary ceasing of trading of an issue.
TDFX, a Swiss registered foreign exchange brokerage house, specialized in catering to a well-off Middle Eastern clientele through efficient trading software. TDFX is proudly introducing Musharaka and value services include flexible leverage, real-time news coverage, trading help and personalized education.
TAKE A BATH:
Slang meaning to incur a large loss.
TAKE A FLIER:
Slang meaning to enter into a highly speculative investment.
TAKE A POSITION:
- To hold stocks or bonds, in either a long or short position
- To purchase securities as a long-term investment.
The assumption of a control over a corporation by another corporation through acquisition or merger. ( See Poison Pill; Shark Watcher; Tender Offer).
A financial news service that reports the prices and sizes of transactions.
An account executive’s executing personal orders before executing a sizeable customer order to take advantage of the large order’s effect on prices.
An approach to market theory stating that previous price movements, properly interpreted, can indicate future price patterns.
A formal proposition to stockholders to sell their shares in response to a large purchase bid. The buyer customarily agrees to assume all costs and reserves the right to accept all one or a specific number of the shares presented for acceptance.
A life insurance plan that calls for low annual payments (“premiums”) that will increase as you age.
Transactions in exchange-listed stocks by broker/dealer.
THIRTY PARTY ACCOUNT:
A brokerage account carried in the name of a person other than a customer. The practice is prohibited by NYSE regulation.
A transaction on the stock exchange. See minus Tick; Plus Tick; Zero minus Tick; Zero plus Tick.
A shorthand acronym-style abbreviation for company’s name, used by stock-quote reporting services and brokerages.
TIRED INTEREST RATES:
Where the interest rates increase according to how much money you have invested.
An active, vigorous market with narrow bid-offer spreads.
An economic condition characterized by scarce credit, generally the results of a money supply restricted by the Federal Reserve.
Attempting to buy or sell a security at the optimum moment in its price movement.
A suggestion as to what to buy or sell.
The percentage gain or yield on an investment that consider both the income made from dividends and the capital gain made on the stock (or mutual fund’s) price appreciation.
An option is the right to buy or sell a share at a stated price at some future date. In recent years, the market in buying and selling the options themselves has developed, and these are known as traded options.
A person or firm engaged in the business of buying and selling securities, options or commodities for a profit.
The legal right conferred by a person or institution upon another to effect the purchase and/sale of securities in the former’s account.
The location at any organized exchange where buyers and sellers meet to transact account.
23 locations on the floor of the NYSE, 23 meters high. Horshoe-shaped structures with an outside circumference of between 26 and 31 feet. The one exception is a table-like structure, Post 30, in the garage, where most inactive preferred stocks are traded in multiples of 10 shares. Now replaced by a round structure with a large electronic display.
The P-E (price-earnings) ratio calculated using the previous year’s earnings per share.(Compare Forward P-E ratio)
Movement, up or down, in a security’s market price, or in the market itself, for a period of six months or more.
The line superimposed by technical analysts on price plotting to indicate a price trend. Drawn beneath the prices, the line reflects an upward trend; above the prices, it means the trend is downward.
A formal document that lays down the terms of a trust.
A way in which one or more person(s), the ‘trustee(s) look after the investments of others. The trustees are the legal owners of the assets, but they must use them for the benefit of the other person, usually called the beneficiary, in accordance with the trust deed.
A security that is not doing an investor any good.
TWELVE B-1 FEES:
An annual percentage of a mutual fund’s total assets assessed to existing shareholders.
UN ALLOCATED GAIN:
Fund distributions that are not categorized as short, medium or long term.
Term used to describe a call or put writer who is unprotected against the maximum possible loss on a short option position.(compare covered option)
The investment banking firm that brings a company public.
A form of investment where investor’s money is pooled in order to purchase a range of shares to spread the risk. This enables an investor to have exposure to a large number of companies than individual resources alone might allow. Called mutual funds in the US.
Virtually synonymous with over-the-counter stocks; a term used to describe any stock or other security that does not trade is not listed on an exchange. (Compare Listed stock).
The profit resulting from an increase in the value of a security position that is still being held.
An American depository receipt created and issued in the United States by a bank or other financial services firm that had no relationship with the foreign company whose common stocks back the ADR.
The upward movement of a stock’s price or of the market as measured by an average or index over a period of time.
Pertaining to a large city. And, of late, an offshoot of US R&B- Rap/Hip Hop/soul//R&B/ hyybrid, perhaps.
Investing in a company’s common stock whose market value appears to be bargain (i.e. the price is below the company’s “real” worth or earnings power, or below the value of comparable companies in the same business sector). As soon as the stock becomes “fully valued” based on these, the manager will typically sell the stock out of the portfolio.
Value Added Tax. A consumption tax that is levied at each stage of production based on the value added to the product at that stage. Not in the UAE yet.
VARIABLE RATE (cards):
Prime rate (which varies) plus an added percentage. (For example, your rate may be PR+ 3.9 per cent)
All the cash in a bank’s vault.
VENTURE CAPITAL COMPANY:
An investment company whose objective is to invest in new or underdeveloped companies.
The relative amount or percentage by which a stock’s price rises and falls during a period of time.
The relative amount or percentage by which a stock’s price rises and falls during a period of time.
Number of bonds or shares traded during specific periods, such as daily, weekly, or monthly.
An individual or corporation that purchases a security from an issuer or affiliated person and offers it for public sale under an effective registration statement.
A trust , usually having maximum life of 10 years, established to control the voting shares of a corporation.
A stock that investors are, by and large, just no attracted to.
The main street in New York City’s financial district, used mainly to refer to the establishment of investing professionals. Named because it was once the site of a wall built in the by the Dutch to protect what was then New Amsterdam.
Securities of corporations engaged in defiance contracts. Also known as war brides.
The illegal sale of a corporate security with a provision for its repurchased by the seller at some future date and at a prearranged price.
A certificate issued by a company giving the holder the right to purchase securities at a stipulated price within specific time limits or perpetually. A warrant is sometimes offered by a company as an inducement to buy an offering of common stock or other securities.
For regulatory purposes, the purchase and sale of the same security at the same time and price without any real change of ownership. This practice is outlawed under the Securities Exchange Act 1934.
For tax purposes, a sale at a loss and repurchase of the same or a similar issue, within 30 days before or after the first transaction, while intending to use that loss to offset capital gains or taxable income in that year. The loss is generally not allowed as a tax deduction.( See Manipulation).
A list of securities, established by a broker/dealer or an exchange, that is under scrutiny for evidence of illegal or unethical practices.
A market characterized by a greater number of seller than buyers, which creates a general downtrend in prices.
An investment strategy designed to increase one’s net worth over time.
The method for determining the worth of each company’s stock relative to the value of the overall index.
Colloquial expression for a person or firm who blocks a hostile take-over attempt by taking over the target company itself.
WHOLE LIFE INSURANCE:
A life insurance product with an investment component.
Transactions that are not cleared through the SCC or NCC and that are completed in the office of the purchasing firm by means of a certificate deliver versus immediate payment.
Any large exchange member firm.
An area in each branch office and in the home office where messages may be received and sent using machinery that creates a printed copy of the messages. Message traffic normally consists of order data, reports of order executions, trade settlement information and other sales data.
WITH OR WITHOUT SALE ORDER:
An odd-lot limit order to buy or sell either at price derived from an effective round-lot quotation (with a sale) or at the existing round-lot quotation plus differential (without a sale), whichever occurs first in accordance with the customer’s limit.
A failure by a broker/dealer to make a bona fide distribution of a hot issue, thus encouraging demands at a premium price. This practice is a violation of the NASD Rules of Fair Practice. ( See free-Riding)
In the OTC market, a range of prices quoted by a market maker who is not certain that a market is available, but who feels he or she can “work one out” within a reasonable period of time.
Colloquial term for a feature in a security that could benefit the older.
The process of selling an option. The writer is the investor who sells the option.
An exchange floor procedure by which specialists are allowed to buy stock for themselves from a customer’s offering in their books, or, sell from their accounts to customer’s bid. They must, however, allow the broker who entered the order to execute and “write out” the confirmation of the transaction and earn the contingent brokerage fee.
X or XD:
A symbol used by newspapers to signify that a stock is trading ex-dividend, that a bond is trading without interest or that a mutual fund recently paid a capital gain or dividend.
A symbol used by newspapers to signify is trading ex-dividend, that a bond is trading without interest or that a mutual fund recently paid a capital gain or dividend.
A symbol used by newspapers to signify that a stock is trading without rights attached. Those rights remain with the seller.
In general, a return on an investor’s capital investment. For bonds, the coupon rate of interest divided by the purchase price called current yield. Also, the rate of return on a bond, taking into account the total of annual interest payments, the purchase price, the redemption value and the amount of time remaining until maturity.
A bankrupt or insolvent company that continues to operate while it awaits a closure or merger. Also a beverage, perhaps enjoyed by employees of said bankrupt company-and a movie monster.
ZERO BALANCE ACCOUNT (ZBA):
A cheque account in which a zero balance is maintained by transfers of funds from a master account in an amount only large enough to cover cheques presented.