Financial Glossary

Accumulation
The process of gathering stock when volume expands during trading day and price moves up.

Alpha
It is a measure of a stock’s average monthly move over the past consecutive 12 months, if the Standard & Poor’s 500 index (S&P 500) remains unchanged during this 12-month time frame. For example, if a stock has a high alpha of 10, this in turn would mean there is an expected to rise 10% in a month maintaining an unchanged S&P 500 index.

American Depositary Receipt (ADRs)
Foreign securities traded in the U.S. financial markets.

Annual Report
US securities laws require publically traded corporations to send their shareholders an annual report at the end of a fiscal year.

Arbitrage
The concurrent purchase and sale of assets in order to profit from a difference in the price. This usually takes place on different exchanges or marketplaces.

Ask
The lowest price an investor will agree to sell a security. Basically, this is the quoted offer that someone can buy shares of the security.

Balanced Mutual Fund
A mutual fund that buys bonds, common stock, and preferred stock.

Basic Earnings
Calculation of net income divided by shares outstanding that gives you per-share earnings.

Basis Point
Measure used in the bond market to quote yields as a basis point. Basis points are also used to convey interest rates.

Bellwether Stock
A company’s stock recognized as an industry leader. For example, Microsoft is recognized as a bellwether stock in the computer field.

Beta
A commonly used measure of volatility of a share of stock. The S&P P500 Index represents large-company stocks has a beta of 1.

Bid
This highest price an investor will pay to purchase a security. It is the price at which an investor can sell shares of the security.

Bond
Debt issued for more than a one year period. The federal governments, state governments, local governments, water districts, companies and several other institutions offer bonds. Basically, the act of purchasing bonds is the same as lending money.

Book Value
Calculation involves total assets minus intangible assets and liabilities. A company’s book value can be higher or lower than the market value of the company.

Buy Price
The price paid for a security.

Call Option
The opportunity to buy a security at a fixed price within a given time frame.

Certificate of Deposit (CDs)
A financial savings certificate that gives the bearer opportunity to receive interest.

Chief Operating Officer (COO)
A company executive manager responsible for full operational responsibilities for the daily activities of the organization.

Closed-end fund
A mutual find that sells a fixed number of shares to investors. A fund that is closed to new investors.

Commission
Fee paid by an investor to a broker for the buying or selling of securities.

Commodity
A physical substance such as food, oil, etc that investors buy or sell, mainly via futures contracts.

Common Shares
General securities that represent an investor’s equity ownership in a company.

Consumer Price Index
The CPI measures the prices of consumer goods and services. It is also a measure of the pace of U.S. inflation.

Consumer Stock
Company stock that produces consumer-oriented products like food, tobacco, pharmaceuticals. beverages, etc.

Currency
Accepted form of money, including paper notes and coins, issued by a government, then circulated within an economy.

Current Yield
The dividend of security, the yield is the monetary value of a stock dividend. For example, a $10 stock that pays a 60 cent dividend for the year has a 6% yield.

Cyclical Stock
Company stock whose prosperity is closely tied to cyclical ups and downs of the general economy.

Day High
The highest price that a stock has traded during the day.

Day Low
The lowest price that a stock has traded during the day.

Devaluation
The lowering of a nation’s currency relative to currencies and/or gold of other nations. This is the opposite of revaluation.

Debenture
The common bond issue of large, well-established corporations. A holder of a debenture represents a corporate creditor and is entitled to payment before common stock shareholders upon dissolution of the corporation.

Convertible Debenture
Corporate securities are exchangeable for a certain number of another form of security at a stated price.

Subordinated Debenture
A junior debt’s claim on assets to other debt is repayable only after other debts with a superior claim have been fulfilled.

Diluted Earnings
A calculation that includes stock options, convertible securities, and warrants to ascertain per-share earnings.

Discount Rate
The interest rate charged by the U.S. Federal Reserve to member banks for loans.

Distribution
Synonym for professional selling. A stock is stated to be under distribution when its volume expands on days when price moves downwards.

Dividend
Parts of a company’s profit paid to its common and preferred shareholders.

Dow Jones Industrial Average
The most commonly known U.S. index of stocks. The index contains the 30 largest U.S. companies stocks (by market capitalization) that trade on the New York Stock Exchange.

Duration
The measure of a bond price’s sensitivity to a 100-basis point adjustment in interest rates. For example, duration of 10 would mean that, given a 100-basis point change up-down in interest rates, a bond’s price would move up-down by 10%.

Earnings per Share (EPS)
A publically traded company’s profit divided by its number of shares. If the company earned $3 million in one year had 3 million stock shares outstanding, its EPS would be $1 per share.

Eurodollar
American dollar currencies that are deposited in a European bank. American currency got in Euro banks as a result of payments made to overseas companies for products and services.

Ex-dividend
Means “without dividend.” An investor who buys shares are quoted ex-dividend is not entitled to get a declared dividend.

EDGAR
The Securities & Exchange Commission (SEC) uses the Electronic Data Gathering and Retrieval to pass on company documents to investors.

Exchange
The three best known U.S. stock exchanges on which securities are traded are New York Stock Exchange (NYSE), National Association of Securities Dealers (NASDAQ), and American Stock Exchange (AMEX)

52 Week High
Highest price reached of a traded security during the last 52 weeks.

52 Week Low
Lowest price reached of a traded security during the last 52 weeks.

Federal Funds Rate
Interest rate that Federal Reserve district bank charge member banks for overnight loans.

Float
The number of outstanding shares of a security and available for trading by the public.

Futures Contract
An agreement that permits an investor to buy or sell a commodity, such as gold, wheat, currency, at some time in future.

GAAP (General Accepted Accounting Principles)
Rules, conventions, and measures that define general accounting practice that also include broad guidelines as well as detailed procedures.

Growth Stock
A company’s stock whose business is believed to be recession resistant and also shows an above-average growth rate.

High Price
The highest price during the day of a security which has changed hands between a seller and buyer.

Initial Public Offering (IPO)
The first time a company goes public and offers an initial offering of its stock and is traded on an exchange for the first time.

Insiders
Senior level officer and directors of a corporation, people who have access to inside information about a company. Additionally, an insider has ownership of more than 10 percent of the voting shares of a company.

Junk bond
A bond that has a credit rating of BB or lower, very risky speculative bonds. Junk bonds offer higher yields than bonds with BB credit ratings but also carry higher risk.

Kaffirs
Gold mining shares of South African companies that trade on the London Stock Exchange.

Kangaroos
Australian stocks.

Kansas City Board Of Trade (KCBT)
American based options and futures exchange for no. 2 red wheat futures and options, Value Line Index futures, options, and Mini Value Line futures.

Kappa
The ratio of a dollar price adjustment in the price of an option to a 1% change in the expected volatility.

Keiretsu
A matrix of Japanese corporations organized around a major bank. Also describes how a big corporation with many subsidiaries and associated companies can manipulate revenues. For example, if corporation A controls company A and B and company A is forced to purchase its input from company B at a high price, results in A being unprofitable and B is extremely profitable.

Keogh Plan
A Keogh plan is a tax-deferred pension account for self-employed businesses. Plan’s earnings grow tax deferred until the capital is withdrawn.

Kerb Trading or Dealing
Also known as Curb Trading. It is trading which occurs outside of general market regulations, usually through telephones or computers after the official close of exchanges.

Key Industry
An industry that has a critical role in a country’s economy.

Key Man Insurance
A life insurance policy taken out by a company on the life of a key executive. The company itself is the beneficiary of the life insurance upon the executive’s death.

Keynesian Economics
An economic theory proposed by economist John Maynard Keynes that active government involvement is essential to ensure stability and economic growth.

Last
The most recent trade of a security.

LEAP
Long-term equity anticipation securities, long-term option contracts for a corporation’s stock. The contract generally runs for one or more years.

Limit Order
The ability of an Investor to place an order to buy or sell securities at a certain set price. The security can only be bought or sold at the set or lower price.

Long
The act by an Investor to go “long” means that the investor owns stock or another security for the long-term, usually more than a year.

Low Price
The lowest price of a security during the day’s trading, changing hands between a seller and a buyer.

Margin
Investors can purchase securities by entering into an agreement with their broker to borrow the money. It is the difference between the market value of a stock and the loan a broker makes.

Market Cap
A corporation’s market capitalization. Market cap can be calculated by multiplying a company’s outstanding shares and the current selling price of the company’s shares.

Market Order
An order to sell or buy a security at the current trading price.

Momentum
The acceleration rate of an economic, volume, or price movement. An economy with strong growth is said to have momentum.

Money Market
Financial instruments used for borrowing and lending money for three years or less. The underlying securities in a money market account can be Treasury Bills, U.S. government bonds, and commercial paper from companies and banks.

Money Supply
The amount of money in circulation and deposits in savings and checking accounts in an economy

Moving Average
An average of a security’s price movement over a specific time period. Moving averages frequently indicate levels of resistance or support for a security.

Municipal Bond
Also known as Munis, bonds offered by state or local government. Munis are used to pay for special projects such as highways, etc. Interest earned on Munis by investors is often exempt from federal income taxes and state income taxes.

Mutual Fund
Professionally managed pool of money that is collected in a fund by an investment company.

Net Asset Value (NAV)
Concerns mutual fund; NAV is the market value of a fund’s shares at the close of trading.

Net Change
The difference between the day’s and the previous day’s last trade.

Net Profit
This is the difference between the total price you paid for a security, including brokerage commissions and the current value of the security. Net profit reflects gains.

Number of Shares
The number of shares a company has outstanding.

NYSE Beta Index
Beta is the covariance of a stock in relation to the entire stock market. For example, S&P 500 index has a beta coefficient of 1. A beta higher than 1 reflects a security more volatile than the market. A beta lower than 1 reflects a security less volatile than the market.

Open
The price of the security when it opens on trading day. Usually, the opening price reflects the previous day’s close.

Open-end Mutual Fund
Mutual funds that sells shares to new investors at net asset value, fund shares are available on investors demand.

Open Order
An investor order to buy or sell securities that has yet to be executed.

Options
Derivative contracts that give the holder the right to purchase or sell securities at a certain set price or at a set period of time.

Over-the-Counter (OTC)
The OTC market securities are not listed on a stock exchange.

Pay Date
Date on which a declared stock dividend or debenture interest payment is planned to be paid.

Percent Change
Percentage change in the security’s price from the previous trading day’s closing price.

Percent Profit
Profit expressed as a percentage of the investor’s original investment, inclusive of brokerage commissions.

Preferred Shares
Corporation shares that provide shareholders a fixed dividend from the firm’s earnings. Preferred shareholders are paid before common shareholders.

Premium
The extra money an investor is willing to pay for a security or sell a security.

Prime Rate
Interest rate charged by banks, based on market forces influencing a bank’s cost of funds and the rates borrowers are charged.

P/E
Price-to-earnings ratio, share price divided by earnings per share for the firm’s most recent four quarters.

Put Option
Investors have the right to sell fixed amount of shares at a fixed price within a given period of time.

Q Ratio Or Tobin’s Q Ratio
Market value of a company’s assets divided by replacement value of the company’s assets.

QQQ
It is Nasdaq’s 100 Index Tracking Stock, which trades like an mutual fund index that follows the Nasdaq 100 index, trading continuously.

Qualified Endorsement
The signing of the back of a negotiable instrument, in order to transfer the amount to another party; however includes wording limiting the endorser’s liability.

Qualified Financial Contract (QFC)
Financial agreements which include but are not limited to, forward contracts, securities contracts, swap agreements, and repurchase agreements.

Qualified Opinion
Auditor’s opinion that states certain limitations of an audit.

Qualified Plan or Trust
Tax-deferred plan that permits employer and employee contributions to build up savings, which in turn are paid out at retirement or on termination of employment.

Qualified Retirement Plan
Retirement plans initiated by employers for their employees that meet the criterion of the Internal Revenue Code Section 401(a) or 403(a) eligible for special tax considerations.

Qualified Terminable Interest Property Trust (Q-TIP)
A trust that permits surviving spouses to get income generated from the trust, while the real distribution of the trust’s assets are given to other beneficiaries like the grantor’s children.

Qualified Total Distribution
Proper distribution from an employee’s qualified retirement plan. The payment must be prompted by retirement death, disability, or attainment of age 59-1/2 without federal penalties.

Qualifying Annuity
An annuity that can be used as an investment for a qualified plan or trust.

Qualifying Child
A child for the earned income credit meets age, residency, and relationship tests.

Qualifying Person
A person who qualifies for tax credit for a child and dependent care expenses that meets specific requirements.

Reaction
This term describes a short-term drop in prices.

Real Time
The real-time stock, option, bond, or futures quote is one that reports the most updated price available when a security trades. A quote other than a real quote is called a delayed quote which reflects a price 15 minutes ago.

Record Date
The date on which a shareholder must officially own shares of the company in order to be entitled to a dividend. A date after the date of record the stock is said to be ex-dividend.

Relative Strength
Security stocks that have been strong relative to entire stocks will continue to be relatively stronger in the future; meanwhile securities that have been relatively weak will continue to be weaker.

Return on Equity
Measures the return, shown as a percentage earned on a corporation’s common stock investment for a certain time period. The calculations include stock equity, or a corporation’s net worth, into net income. The calculation is performed before common stock dividends and after preferred stock dividends.

Securities & Exchange Commission (SEC)
A federal agency that regulates the U.S. financial markets and enforces securities laws.

SEC EDGAR
The SEC uses Electronic Data Gathering and Retrieval to transmit corporation documents to investors. Documents are available through the DBC’s Smart Edgar service; include quarterly reports 10-Qs, sale of a company unit 8-Ks, and disclosures by parties who own 5% or more of a corporation’s stock shares 13-Ds.

Security
A certificate or parallel of that proves ownership of stocks, bonds, and other investments.

Sell Price
The price you receive when you sell a security.

Settlement Date
Investors must pay for security shares by the third business day after he or she purchases securities. Also, an investor must deliver the security that he has sold by the third business day after the transaction.

Shareholder’s Equity
A firm’s total assets minus total liabilities. A firm’s net worth is the same thing.

Shares
A reflection of physical ownership in a corporation.

Short Sale
Investor who borrow stock securities and sell it to another person betting that the shares price will go down. Then, the investor can purchase back the stock security at a lower price and keep the difference as profit.

Short Interest
Total amount of shares of a security that investors have sold short and haven’t been repurchased to close out of the short position

Spinoff
A firm creates an independent company from an existing part of the firm by distributing or selling new security shares in a spinoff.

Split
Corporations split their outstanding shares into bigger number of shares.

Spread
It is the gap between bid and ask price of a stock or another security.

Stock Ticker
Lettered symbol(s) assigned to stocks, mutual funds, and other securities that trade on U.S. financial exchanges.

Symbol
The ticker symbol of the security.

Tick
The change in the price of a security. An uptick happens when the last trade in a security occurs at a higher price than the prior trade. A downtick happens when the last trade in a security occurs at a lower price than the prior trade.

Trading Halt
Halting trading of securities, including stocks, bonds, options or future contracts by an exchange during the announcement of news about the security.

Turnover (Securities)
The volume of security shares traded as a percentage of all the shares listed on an exchange during a certain period, generally a day or a year.

U.S. Treasury Bill
U.S. government debt that has a maturity of less than a year..

U.S. Treasury Bond
U.S. government debt that has a maturity exceeding 10 years.

U.S. Treasury Note
U.S. government debt that has a maturity of one to 10 years.

Value
The current price of a security multiplied by the number of shares you own. For example, 3000 shares of IBM are selling for $30, the value should be $90,000.

Value Stock
A stock believed by the market to be undervalued based on certain qualifications, such as its price-to-earnings ratio, dividend yield, price-to-book ratio, etc.

Volatility (Historical)
The fluctuations in stock price or another type of security. The stock price is capable of huge swings; the stock has an extremely high volatility.

Volume
Daily number of security shares that changes hands between a seller and a buyer.

Warrant
A paper that gives an investor the right to buy securities at a fixed price within a fixed time period.

W-9
A form certifies a shareholder’s tax identification number or social security number as true and accurate, to avoid federal tax withholding.

WACC
Weighted average cost of capital

Wage-Push Inflation
Inflation that is the result of skyrocketing wages.

Wages
Employee compensation for services performed.

Waiting Period
The time period during which the Securities and Exchange Commission (SEC) studies a company’s registration statement.

Waiver of Premium
A rider in an insurance policy that permits insurance premiums payments to be temporarily or permanently stopped in the event the insured’s incapacity.

Wall Street
Securities firms that buy, sell, and underwrite securities, major ones found on Wall St in New York.

Wall Flower
Stocks no longer in favor with investors; stock with low P/E (price-to-earnings ratio).

Wallpaper
A security that no longer has any monetary value.

Wanted for Cash
A market ticker statement that indicates that a bidder will pay cash funds for same-day settlement for a block of a certain security.

War Babies
Stocks and bonds of defense industry corporations.

War Chest
Cash maintained aside to defend against a takeover bid.

War Risk Insurance
Insurance coverage to protect against loss or damage due to acts of war.

Yankee Bonds:
Foreign bonds issued in the U.S. by foreign banks and corporations denominated in U.S. dollars. Bonds are generally registered with the SEC.

Yankee CD
Certificate of Deposits issued in the U.S. by a branch of a foreign bank.
Source

Yankee Market
The market in the United States for foreign instruments.

Yard
Slang term for one billion currency units, found commonly in currency trading.

Year-end Dividend
A dividend declared at the end of a fiscal year that generally signifies distribution of unexpected company profits.

Year-to-date (YTD)
The time period starting at the beginning of the calendar year up to the current date.

Yen Bond
Bonds denominated in Japanese yen.

Yield
The effective rate of bond or note interest or a financial instrument’s rate of return, expressed as a percentage.

Yield Advantage
Purchasing convertible securities offers advantages instead of buying common stock, which is the difference between the rates of return of common shares and a convertible security.

Yield Burning
A method of financing municipal bonds.

Yield Curb
Mainly applicable to convertible securities. It is the difference in current yield between the convertible security and the underlying common stock.

Yield Curve
A graphic representation of the relationship between the bond yield of the same credit quality but with varying maturities.

Zero Coupon Bond
Debt security that pays an investor no interest, sold at a discount to its face value.