All or None (AON) - A type of
order where the client wants the entire order executed or none of it.
(2) A type of best efforts underwriting in which the issuer will only
sell the entire amount, not just a part.
Depository Receipt (ADR) - A security
issued by a U.S. bank in place of the foreign shares held in trust by
that bank, thereby facilitating the trading of foreign shares in U.S.
Stock Exchange (AMEX) - The second
largest stock exchange in the United States, located in the financial
district of New York City. (Formerly known as the Curb Exchange from
its origin in a Manhattan street).
Price - The price at which a person
is ready to sell. Opposed to bid, the price at which one is ready to
market - The system of trading
securities through brokers or agents on an exchange such as the New
York Stock Exchange. Buyers compete with other buyers while sellers
compete with other sellers for the most advantageous price.
Averages - Various ways of measuring the trend of securities
prices. One of the most popular is the Dow Jones average of 30 industrial
stocks listed on the New York Stock Exchange. The prices of the 30 stocks
are totaled and then divided by a divisor which is intended to compensate
for past stock splits and stock dividends and which is changed from
time to time. As a result, point changes in the average have only
the vaguest relationship to dollar price changes in the stocks included
in the average. Other Dow Jones averages are the Transportation
(20 stock), Utilities (15 stocks), and the composite (65 stocks).
price - Often referred to as a
quotation or quote. The bid is the highest price anyone has declared
that he wants to pay for a security at a given time and the asked is
the lowest price anyone is willing to sell at the same time.
- Basically an IOU or promissory note of
a corporation, municipality, or the U.S. Government. They are usually
issued in multiples of $1,000 or 5,000. A bond is evidence of a debt
on which the issuer usually promises to pay the bondholder a specified
amount of interest for a specified length of time and to repay the loan
on the expiration date. In every case, a bond represents debt. Its holder
is a creditor of the issuer.
Bull - One who believes the
market will rise.
Buy - Purchase of a stock/option/mutual fund or other
investment to hold ownership in the company.
limit order - is placed below
the current market price of the security.
stop-limit order - A buy stop-limit
order is always placed above the current market price of the security.
It is used to limit the loss (or protect a profit) on a short position.
Once activated, it becomes a buy limit order
stop order - A buy stop order
is always placed above the current market price. It is typically used
to limit a loss or protect a profit on a short sale.
to close - A person reduces or
eliminates a short position by repurchasing an equivalent contract.
to cover - Buying stock to return
stock previously borrowed to make delivery on a short sale.
to open - A person creates or
increases a long position by the purchases of an option.
Power - The amount of securities
which could be purchased in a margin account by using the SMA.
- (1) An option in which the holder has
the right to buy a fixed amount of the underlying security at a stated
price within a specified period of time. (2) To redeem a bond before
Callable - A bond issue, all or part of which may be redeemed
before maturity by the issuer under specified conditions,. The term
also applies to preferred shares that may be redeemed by the issuing
stock - (1) Securities which represent
an ownership interest in a corporation. If the company has also issued
preferred stock, both common and preferred have ownership rights. Common
stockholders assume the greater risk, but generally exercise the greater
control and may gain the greater reward in the form of dividends and
capital appreciation. The terms common stock and capital stock are often
used interchangeably when the company has no preferred stock. (2) Accounting
measure, carried at par value on the books of the company. Common stock
plus capital surplus represent the shareholder's initial investment
in the company.
Covered - Refers to a short option position in which the
investor has another investment position which will meet the obligation
of the option contract. A covered short call involves owning the underlying
security or a security convertible into the underlying security. A covered
put requires cash or a short stock position.
order - An order to buy or sell
which, if not executed, expires at the end of the trading day on which
it was entered.
Delivery - The physical act of exchanging securities and
monies on settlement date. The industry has established rules regarding
the condition of the securities which are considered in good "deliverable
Dividend - The payments designated by the Board of Directors
to be distributed pro rata among the shares outstanding. On preferred
shares, it is generally a fixed amount. On common shares, the dividend
varies with the fortunes of the company and the amount of cash on hand
and may be omitted if business is poor or the directors determine to
withhold earnings to invest in plant and equipment. Sometimes a company
will pay a dividends out of past earnings even if it is not currently
operating at a profit.
(EO) - a combination of a buy
limit and a buy stop or a sell stop and a sell limit - if order is partly
filled, reduce both sides by that amount.
Exchange - (1) A centralized location where security or
commodity transactions take place. (2) To switch from one mutual fund
to another at little or no cost. See: Family of Funds. (3) An offer
made by a corporation to replace on type of security with another.
- A synonym for "without dividend".
The buyer of a stock selling ex-dividend does not receive the recently
declared dividend. Every dividend is payable on a fixed date to all
shareholders recorded on the books of the company as of a specific date
of record. For example, a dividend may be declared as payable to holders
of record on the books of the company on a given Friday. Since three
business days are allowed for delivery of stock in a "regular way"
transaction on the New York Stock Exchange would declare the stock "ex-dividend"
as of the opening of the market on the preceding Wednesday (two business
days prior to the record date). That means anyone who bought it on and
after Wednesday would not be entitled to that dividend. When stocks
go ex-dividend, the stock tables include the symbol "x" following
or Kill (FOK) - Immediately executed
a transaction in its entirety, or cancel completely.
Market - direct institutional
trading - Institutional Network - Instinct.
till cancelled order or (GTC) Open order -
An order to buy or to sell which remains in effect until it is either
executed or cancelled.
Period - The time period that
an investor has owned a security. It commences on the day after the
purchase (day after trade date) and ends on the day of the sale (trade
date). It determines whether a gain or loss is considered short-term
or cancel - immediately fill as
much of the order as possible in one trade and cancel the remainder.
- (1) A statistical yardstick expressed in terms of percentages of a
base year or years. For instance, the Federal Reserve Board's index
of industrial production is based on 1967 as 100. An index is not an
average. (2) Statistical measure of a group of stocks such as the S
& P 500. The indices can be broad based (which cover a wide range
of companies and mirror the "market" as a whole) or narrow
based (which consist of securities from a particular industry).
Public Offering (IPO) - The first
public issue of stock from a company which has not been publicity traded
IRA - Individual Retirement Account. A pension plan
with major tax advantages. Any worker with earned income can begin an
IRA and contribute up to $2,000 annually. An IRA permits investment
through intermediaries like mutual funds, insurance companies, and banks
or directly in stocks and bonds through stock brokers.
Tenants (JT) - An account with
two owners. (1) "WROS": With Rights of Survivorship. In the
event of the death of one party, the survivor receives total ownership.
(2) "TIC": Tenants in Common: In the event of the death of
one party, the survivor receives one half of the account, the other
half goes to the deceased's estate.
Plan - Tax advantaged personal
retirement program that can be established by a self-employed individual.
Currently, annual contributions to a plan can be up to $30,000. Such
contributions and reinvestments are not taxed as they accumulate but
will be when withdrawn (presumably at retirement when taxable income
may be less).
order - An order to buy or sell
a stated amount of a security at a specified price or at a better price
For example: A customer places an order to buy 100 shares
of ABC stock at 50. The order may not be executed unless the stock can
be purchased at $50 or below. If the order was to sell 100 shares at
50, it could not be filled unless the sale price was $50 or above.
Market - NYSE, AMEX, regional
exchanges - auction market ( specialist )
The stock of a company which is traded on a securities or other property
into cash. (2) The dissolution of a company, with cash remaining after
sale of its assets and payment of all indebtedness being distributed
to the shareholders.
call - Minimum equity required
to be kept in a margin account. Current NASD/NYSE maintenance requirements
are 25% in a long account and 30% in a short account.
Margin - (1) Profit e.g."Gross Margin" (2)
"On Margin": To use credit to finance securities transactions
(3) "Account": An account established by a broker-dealer to
extend credit (4) "Dept": The area of brokerage operations
supervising the extension of credit.
call - A demand upon a customer
to deposit money or securities with the broker. A Reg T margin call
is sent when a purchase is made and a maintenance margin call is sent
when equity falls below specific levels. See: Maintenance Requirements,
and Regulation T.
index - (1) A statistical yardstick
expressed in terms of percentages of a base year or years. For instance,
the Federal Reserve Board's index of industrial production is based
on 1967 as 100. An index is not an average. (2) Statistical measure
of a group of stocks such as the S & P 500. The indices can be broad
based (which cover a wide range of companies and mirror the "market"
as a whole) or narrow based (which consist of securities from a particular
order - A order to buy or sell
a stated amount of a security at the most advantageous price obtainable
after the order is entered.
Bond - A bond issued by a state
or a political subdivision, such as county, city, town or village. The
term also designates bonds issued by state agencies and authorities.
In general, federal incomes taxes and state and local income taxes within
the state of issue.
fund - A type of investment company
that offers for sale or has outstanding securities which it has issued
and which are redeemable on demand by the fund at current net asset
value. All owners in the fund share in the gains or losses of the fund.
- The National Association of Securities
Dealers-an association of brokers and dealers in the over-the-counter
securities business. NASD is dedicated to "adopt, administer, and
enforce rules of fair practice... and in general to promote just and
equitable principles of trade for the protection of investors".
NASDAQ - An automated information network which provides
brokers and dealers with price quotations on securities traded over-the-counter.
NASDAQ is an acronym for National Association of Securities Dealers
Automated Quotations. The system has three levels. Level I shows individual
market maker's quotes. Level III is used by market makers to enter their
quotes into the system.
York Stock Exchange (NYSE) - The
largest organized securities market in the United States, founded in
1792. The exchange itself does not buy, sell, own, or set the prices
of stocks traded there. The prices are determined by public supply and
demand. The Exchange is not-for-profit corporation of 1,366 individual
members, governed by a Board of Directors consisting of 10 public representatives,
10 Exchange members or allied members, and a full-time paid chairman
and president. Also known as the Big Board.
Held (NH) - when a customer instructs
a registered representative to buy or sell a specific amount of a security,
but grants to the floor broker discretion concerning time and price
- never on the Specialist's book.
order - An amount of stock less
than the established unit of trading ( round lot ): from 1 to 99 shares
for the great majority of issues. 1 to 9 for certain inactive stocks.
Option - A right to buy (call) or sell (put) a fixed
amount of a given stock at a specified price within a limited period
of time. The purchaser hopes that the stock's price will go up (if he
bought a call or down (if he bought a put) by an amount sufficient to
provide a profit when he sells the option. If the stock price holds
steady or moves in the opposite direction, the price paid for the option
is lost entirely. Individuals may write (sell) as well as purchase options
clearing corporation (OCC) - The
OCC is the organization through which the various options exchanges
clear their trades. It supervises the listing of options and guarantees
performance on option contracts.
Market (OTC) - unlisted - negotiated
market ( market makers ).
Ratio (P/E ratio) - A popular
way to compare stocks selling at various price levels. The PE ratio
is the price of a share of stock divided by earnings per share for a
twelve-month periods. For example, a stock selling for $50 per share
and earning $5 per share is said to be selling at a price-earning ration
Market - New Issues are
always initially sold OTC ( Over-the-counter ).
Prospectus - The official selling circular that must be given
to purchasers of new securities registered with the Securities and Exchange
Commission. It highlights the much longer Registration Statement
filed with the Commission. It warns that the issue has not been approved
(or disapproved) by the Commission and discloses such material information
as the issuer's property and business, the nature of the security
offered, use of proceeds, issuer's competition and prospects, management's
experience, history , and remuneration and certified financial statements.
A preliminary version of the prospectus, used by brokers to obtain indications
of interest from investors, is called a red herring. This is because
of a front-page notice (printed in red ink) that the preliminary prospectus
is "subject to completion or amendment" and "shall not
constitute and offer to sell.."
Quote - The highest bid to buy and the lowest offer
to sell a security in a given market at a given time. If you ask your
broker for a "quote" on a stock, he may come back with something
like "451/4 to 451/2." This means that $45.25 is the highest
price any buyer wanted to pay and that $45.50 was the lowest price which
any seller would take at the same time. A market maker is obligated
to purchase or sell a minimum quantity if the quote is "firm".
A nominal quote is one in which the market maker is not obligated to
trade at the prices quoted.
T - The federal regulation governing
the amount of credit which may be advanced by brokers and dealers to
customers for the purchase of securities.
Lot - A unit of trading or a multiple
thereof. On the NYSE the unit of trading is generally 100 shares
in stocks and $1,000 or $5,000 par value in the case of bonds.
In some inactive stocks, the unit of trading is 10 shares.
distribution - Also known as a
secondary offering. The redistribution of a block of stock some time
after it has been sold by the issuing company. The sale is handled off
the NYSE by a securities firm or group of firms and the share are usually
offered at a fixed price which is related to the current market price
of the stock. Usually the block is a large one, such as might be involved
in the settlement of an estate. The security may be listed or unlisted.
Market - The trading in existing
or outstanding securities (vs. new issues). Secondary market transactions
take place on exchanges or over the counter.
and exchange commission (SEC) - The
Securities and Exchange Commission, established by Congress to help
protect investors. The SEC administers the Securities Act of 1933, the
Securities Exchange Act of 1934, the Securities Act Amendments of 1975,
the Trust indenture Act, the Investment Company Act, the Investment
Advisers Act, and the Public Utility Holding Company Act.
investor protection corporation (SIPC) - A nonprofit membership corporation created by
an act of congress to protect clients of brokerage firms that are forced
into bankruptcy. Membership is composed of all brokers and dealers registered
under the Securities Exchange Act of 1934, all members of national securities
exchanges, and most NASD members. SIPC provides customers of these firms
protection of up to $500,000 of coverage for their cash and securities
held by the firm.
Sell - Selling of the stake of ownership in
a stock/option/mutual fund.
limit order - is placed above
the current market price of the security.
stop-limit order - A sell stop-limit
order is always placed below the current market price of the security.
It is used to limit the loss (or protect a profit) on a long position.
Once activated, it becomes a sell limit order.
stop order - A sell stop order
is always placed below the current market price of the security. It
is typically used to limit a loss or protect a profit on a long stock
to close - A person eliminates
or reduces a long position by selling an equivalent contract.
to open - A person creates or
adds to a short position by selling an option.
Sale - When selling short, a customer
is selling securities which he does not own. He anticipates that
the market price of the stock will decline and he can then purchase
the stock (cover his short position) at a lower price and thus make
a profit. Since the customer has sold stock which he does not own, the
brokerage firm must lend him the stock.
- (1) The difference between the bid and offer price of a security.
(2) The difference between the public offering price of a new issue
and the proceeds received by the issuer; the "underlying spread".
(3) The purchase and sale of puts or calls on the same underlying security
with different expirations and /or strike prices. (4) The difference
in the premium paid and premium received in an option spread position
& Poor's 500 Index (S & P 500) -
A composite index consisting of 500 stocks. It consists of four other
indexes: S & P Industrial (400 stocks), S & P Transportation
(20 stocks), S & P Utilities (40 stocks), and S & p Financial
ahead - Sometimes an investor
who has entered an order to buy or sell a stock at a certain price will
see a transactions at that price reported on the ticker tape while his
own order has not been executed. The reason is that other buy and sell
orders at the same price came in to the specialist ahead of his and
order - A stop-limit order is
similar to a stop order in that a stop price will activate the order.
However, , once activated, the stop-limit order becomes a buy limit
or sell limit order and can only be executed at a specified price or
better. It is a combination of both the stop order and the limit order.
Order - (1) An order to buy at
a price above or sell at a price below the current market. Stop buy
orders are generally used to limit loss or protect unrealized profit
on a short sale. Stop sell orders are generally used to protect
unrealized profit or limit loss on a holding. A stop order or beyond
the specified price and, thus, may not necessarily be executed at that
price. (2) Notice sent by the SEC which prevents an offering of a new
Floor of the Exchange:
Floor broker ( Commission broker ) - trades for
customer of member firm
Specialist - conducts the auction as broker or dealer
Maintains a fair and orderly market by matching up buyers and sellers
according to the Rules of the Exchanger - parity, priority, precedence
Stopping stock - Guaranteeing a price for a public order.
Market - a listed security trading
OTC ( over-the-counter )
Date - Day on which a transaction
Uncovered - Refers to a short option position in
which the investor does not currently have another investment position
which will meet the obligation of the option contract (vs. covered).
Also known as "naked".
- The number of shares traded in a security
or an entire market during a given period. Volume is usually considered
on a daily basis and a daily average is computed for longer periods.
Warrant - A certificate giving the holder the right
to purchase securities at a stipulated price within a specified time
limit or perpetually. Sometimes a warrant is offered with securities
as an inducement to buy.
Yield - Also known as return. The dividends or interest
paid by a company expressed as a percentage of the current price. A
stock with a current market value of $40 a share paying dividends at
the rate of $3.20 is said to return 8 percent ($3.20-:$40.00). May also
refer to yield to maturity.
Bonds - A bond sold at a substantial
discount which does not pay periodic interest.