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Glossary

Investment Glossary

A B C D E F G H I J KL M N O P QR S T U V W XYZ

Glossary

A

Accumulation

This is another way of saying: professional buying. A stock is under accumulation when volume expands on days when price moves up.

Alpha

Alpha measures a stock's average monthly move over the past 12 months if the S&P 500 index is unchanged during this 12-month period. For example, a stock with a high alpha of 7 would be expected to rise 7% in a month given an unchanged S&P 500 index.

American depositary receipt

Known as ADRs, these securities are created by a U.S. bank and represent foreign securities that trade in the U.S. financial markets.

Annual report

Companies send their shareholders an annual report at the end of a fiscal year. The magazine or brochure sizes up company operations and displays earnings, sales, balance sheets and financial footnotes.

Arbitrage

Arbitrageurs make their living by seizing on price differences for a security traded on a different market or in a different form, such as an option or a futures contract. Someone who buys, say, a soybean contract on one market and sells a soybean contract on another exchange is practicing arbitrage by locking in a profit.

Ask

This is the quoted ask, or the lowest price an investor will accept to sell a stock. Practically speaking, this is the quoted offer at which an investor can buy shares of stock.

B

Balanced mutual fund

This is a fund that buys common stock, preferred stock and bonds.

Basic earnings

A simple calculation that takes net income divided by shares outstanding to get per-share earnings.

Basis point

In the bond market, the smallest measure used for quoting yields is a basis point. One basis point is 0.01 percent of a bond's yield. Basis points also are used for interest rates. An interest rate of 5 percent is 50 basis points greater than an interest rate of 4.5 percent.

Bellwether stock

The stock of a company recognized as a leader in its industry. For example, IBM is considered a bellwether stock in the computer field. Often, the fortunes of an industry are reflected in the behavior of its bellwether stocks.

Beta

This measures the volatility of a share of stock. A high beta stock, for example, will rise more in value than the stock market average on a day when shares in general are rising. And it will fall more sharply than the average on a day when shares are falling. The Standard & Poor's 500 Index of stocks, an index that represents large-company stocks, has a beta of 1.

Bid

This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically speaking, this is the available price at which an investor can sell shares of stock.

Bond

Bonds are debt and are issued for a period of more than one year. The U.S. government, local governments, water districts, companies and many other types of institutions sell bonds. When an investor buys bonds, he or she is lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.

Book to Bill

Book to bill is the semiconductor book to bill ratio. It reports on the amount of semiconductor chips that are booked for delivery as compared with those that companies already have billed for.

Book value

A company's book value is total assets minus intangible assets and liabilities such as debt. Book value might be more or less than the market value of the company.

Breadth

This is one of those technical terms you hear in a trading room. It simply demonstrates how broadly a market is moving. When three-quarters of the stocks on the New York Stock Exchange, for example, rise during a given day, an observer might say the stock market had good breadth. Often, observers will measure the number of stocks advancing against the number declining as one way of monitoring breadth.

Buy Price

Enter here the price you paid for a security. If, for example, you paid 8 1/4 a share for a security, enter 8 1/4.

C

Call option

This security gives investors the right to buy a security at a fixed price within a given time frame. An investor, for example, might wish to have the right to buy shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment.

Certificate of deposit

CDs, as they are called, pay interest to investors for as long as five years.

Change

This shows the change in price of a security from the previous day's closing price. For instance, -1 1/8 means the security has fallen $1.12.

Chief Operating Officer (COO)

A person who has full operational responsibilities for the day-to-day activities of an organization.

Closed-end fund

A closed-end fund sells a fixed number of shares to investors. Those shares sell on an exchange and vary in price, depending on demand for the fund. A fund's shares, for example, can trade below their net asset value or above their net asset value - depending on investors' demand for the shares. Country funds that represent shares in a specific country or region, such as Italy or France, are often closed-end funds.

Commission

This is a fee an investor pays a broker for buying or selling securities.

Commodity

A commodity is food, a metal or another physical substance that investors buy or sell, usually via futures contracts.

Common shares

These are securities that represent equity ownership in a company. Common shares let an investor vote on such matters as the election of directors. They also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security.

Consumer Price Index

The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S. Department of Labor publishes the CPI every month.

Consumer stock

The stock of a company that produces consumer-oriented products like food, beverages, tobacco, pharmaceuticals.

Currency

This shows the currency that a security trades in, such as USD for U.S. dollar.

Current Yield

If a security has a dividend, the yield is the price of a stock dividend. A $10 stock that pays a 50 cent dividend for the year has a 5% yield.

Cyclical stock

The stock of a company whose fortunes are closely tied to the cyclical ups and downs of the economy in general. For example, General Motors is a cyclical stock since its business of selling autos is highly dependent on a robust economy with its attendant high levels of employment, rising personal incomes, etc.

D

Day High

This is the highest price that a security has traded at during the day.

Day Low

This is the lowest price that a security has traded at during the day.

Devaluation

A lowering of a country's currency relative to gold and/or currencies of other nations. The opposite is revaluation.

Debenture

The common type of bond issued by large, well-established organizations. Holders of debentures representing corporate indebtedness are creditors of the corporation and entitled to payment before shareholders upon dissolution of the corporation.

Convertible Debenture

Corporate securities (preferred shares or bonds) that are exchangeable for a set number of another form at a prestated price.

Subordinated Debenture

A debt that is junior in claim on assets to other debt, repayable only after other debts with a higher claim have been satisfied.

Diluted earnings

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

Discount rate

This is the interest rate charged by the U.S. Federal Reserve, the nation's central bank, for loans to member banks. The Fed, as it is called, alters rates to increase or decrease the growth of the nation's economic output.

Distribution

This is another way of saying: professional selling. A stock is under distribution when volume expands on days when price moves down.

Dividend

A dividend is a portion of a company's profit paid to common and preferred shareholders. A stock selling for $20 a share with an annual dividend of $1 a share yields the investor 5 percent.

Dow Jones Industrial Average

This is the best known U.S. index of stocks. It contains 30 stocks that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing. There are thousands of investment indexes around the world for stocks, bonds, currencies and commodities.

Duration

A measure of a bond price's sensitivity to a 100-basis point change in interest rates. A duration of 8 would mean that, given a 100-basis point change up/down in rates, a bond's price would move up/down by 8%.

E

Earnings per share (EPS)

EPS, as it is called, is a company's profit divided by its number of shares. If a company earned $2 million in one year had 2 million shares of stock outstanding, its EPS would be $1 per share.

Eurodollar

This is an American dollar that has been deposited in a European bank. It got there as a result of payments made to overseas companies for merchandise.

Ex-dividend

This literally means "without dividend." The buyer of shares when they are quoted ex-dividend is not entitled to receive a declared dividend.

EDGAR

The Securities & Exchange Commission uses Electronic Data Gathering and Retrieval to transmit company documents to investors. Those documents, which are available via DBC's Smart Edgar service, include 10-Qs (quarterly reports), 8-Ks (significant developments such as the sale of a company unit) and 13-Ds (disclosures by parties who own 5% or more of a company's shares).

Exchange

There are three main U.S. stock exchanges on which securities are traded. AMEX is the American Stock Exchange. NASDAQ is the National Association of Securities Dealers. NYSE is the New York Stock Exchange.

F

52 Week High

This is the highest price that a security has traded at during the last 52 weeks.

52 Week Low

This is the lowest price that a security has traded at during the last 52 weeks.

Federal funds rate

This is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. The Fed Funds rate, as it is called, often points to the direction of U.S. interest rates.

Float

The so-called float is the number of shares of a security that are outstanding and available for trading by the public.

Futures contract

This is an agreement that allows an investor to buy or sell a commodity, like gold or wheat, or a financial instrument, like a currency, at some time in future. A future is part of a class of securities called derivatives, so named because such securities derive their value from the worth of an underlying investment.

G

GAAP (General Accepted Accounting Principles)

Conventions, rules and procedures that define general accounting practice, including broad guidelines as well as detailed procedures.

Growth stock

The stock of a company whose business is considered recession-resistant and also possesses an above-average growth rate.

H

High price

This is the day's highest price of a security that has changed hands between a buyer and seller.

I

Initial public offering

An IPO is stock in a company that is being traded on an exchange for the first time. Investors first read a prospectus that describes the potential of the company and the risks of investing in it.

Insiders

These are directors and senior officers of a corporation -- in effect those who have access to inside information about a company. An insider also is someone who owns more than 10 percent of the voting shares of a company.

J

Junk bond

A bond with a speculative credit rating of BB or lower is a junk bond. Such bonds offer investors higher yields than bonds of financially sound companies. Two agencies, Standard & Poor's and Moody's Investor Services, provide the rating systems for companies' credit.

KL

Last This indicates the most recent trade of a security.

LEAP

A LEAP is a long-term option contract for a company's stock. They usually run for one year or more and are available on several U.S. exchanges.

Limit order

Investors can place an order to buy or sell securities at a set price. The trade can take place only at that price or a lower one.

Long

Investors who go "long" simply own stock or another security. It is a term that means the opposite of "short," in which investors are short a stock or security because they have borrowed it and sold it to someone else.

Low price

This is the day's lowest price of a security that has changed hands between a buyer and a seller.

M

Margin

This allows investors to buy securities by borrowing money from a broker. The margin is the difference between the market value of a stock and the loan a broker makes.

Market Cap

This is the company's market capitalization. If a company has 10 million shares and the company's shares are selling for $10, the market cap is $100 million.

Market order

This is an order to buy or sell a security at the current trading price.

Momentum

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

Money market

Money markets are for borrowing and lending money for three years or less. The securities in a money market can be U.S. government bonds, Treasury Bills and commercial paper from banks and companies.

Money Supply

The stock of money in the economy, consisting of currency in circulation and deposits in checking and savings accounts. M1, M2 and M3 represent money and near-money.

Moving average

A moving average is an average of a security's price over a specific time period. The average changes, for example, on a 30-day moving average, so that it includes the most current 30 trading days. Moving averages often indicate levels of support or resistance for a security.

Municipal bond

State or local government offer muni bonds, as they are called, to pay for special projects such as highways or sewers. The interest that investors receive is exempt from some income taxes.

Mutual fund

Mutual funds are pools of money that are managed by an investment company. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge.

N

Net asset value

Listed as NAV in mutual fund listings, net asset value is the market value of a fund's shares. It is calculated at the close of trading.

Net Change

This is the difference between a day's last trade and the previous day's last trade.

Net Profit

This is the difference between the total price you paid for a security, with the brokerage commission you paid, and the current value. It will show either a profit or a loss.

Number of Shares

This is the number of stock shares that a company has outstanding.

Notes

Enter here important notes, such as your reason for buying or selling a security.

NYSE Beta Index

The beta is the covariance of the stock in relation to the rest of the stock market. The Standard & Poor's stock index has a beta coefficient of 1. Any stock with a higher beta is more volatile than the market. Any with a lower beta does the reverse.

O

Open

The price at which a security opens the trading day. Generally, the opening price reflects the previous day's close -- unless extraordinary news or demand to buy or sell have occurred before the market opens.

Open-end mutual fund

A fund that sells its shares at net asset value is an open-end fund. It creates shares as investors demand them. Investors buy the shares at their market price. Most mutual funds are open-end funds. Those that aren't are closed-end funds that sell a fixed number of shares to investors.

Open order

An open order is any order to buy or sell securities that has yet to be executed.

Options

These contracts give the holder the right to buy or sell securities at a set price or a set period of time. Investors often use them to protect, or hedge, an existing investment. An option is part of a class of securities called derivatives, so named because these securities derive their value from the worth of an underlying investment.

Over-the-counter

The O-T-C market is for securities not listed on a stock exchange.

P

Pay Date

The date on which a declared stock dividend or a bond interest payment is scheduled to be paid.

Percent Change

This calculates the percentage change in the price of a security from the previous trading day's closing price.

Percent Profit

This is your profit or loss expressed as a percentage of your original investment and including the cost of your brokerage commission. If you bought 1,000 shares of a stock at $10, paid a $100 commission and saw the shares rise to $14, your percentage would be 39.6 percent.

Preferred shares

Preferred shares give investors a fixed dividend from the company's earnings. And more importantly: preferred shareholders get paid before common shareholders.

Premium

This generally refers to extra money an investor is willing to pay to buy or sell something. For a bond, a premium is the amount for which the security sells above its par value. For a stock, a premium is the amount that a security's price exceeds those of its peer group, or comparable stocks.

Previous

This is the closing price of a security from the previous trading day.

Prime Rate

The interest rate banks charge, determined by market forces affecting a bank's cost of funds and the rates the borrowers will accept. This rate tends to become standard for the banking industry when a major bank raises or lowers its rate.

P/E

A stock has a price-to-earnings ratio: the share price divided by earnings per share for the company's most recent four quarters. A projected P/E divides the share price by estimated earnings per share for the coming four quarters.

Put option

This security gives investors the right to sell fixed number of shares at a fixed price within a given time frame. An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment.

QR

Reaction

This term has been around as long as the stock market itself and is used to describe a short-term drop in prices.

Real time

A real-time stock, bond, option or futures quote is one that reports the most current price available when a security changes hands. A delayed quote shows a security's price 15 minutes and sometimes 20 minutes after a trade takes place.

Record Date

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

Relative Strength

Stocks which have been strong relative to all other stocks should continue to be relatively stronger in the future and securities which have been relatively weak tend to continue to be weaker.

Return on equity

Return on equity measures the return, expressed as a percentage, earned on a company's common stock investment for a specific period. It is calculated by common stock equity, or a company's net worth, into net income. The calculation is performed after preferred stock dividends and before common stock dividends. The figure shows investors how well -- how effectively -- their money is being used by managers.

S

Securities & Exchange Commission

The SEC is a federal agency that regulates the U.S. financial markets.

SEC EDGAR

The Securities & Exchange Commission uses Electronic Data Gathering and Retrieval to transmit company documents to investors. Those documents, which are available via DBC's Smart Edgar service, include 10-Qs (quarterly reports), 8-Ks (significant developments such as the sale of a company unit) and 13-Ds (disclosures by parties who own 5% or more of a company's shares).

Security

This piece of paper proves ownership of stocks, bonds and other investments.

Sell Price

Enter here the price you received when you sold a security. If you received $10 for a share that you sold at 10, then enter 10.

Settlement date

In U.S. financial markets, an investor must pay for the purchase of shares by the third business day after he or she buys securities. And an investor must deliver an investment that he or she has sold by the third business day after the transaction.

Shareholders' equity

This is a company's total assets minus total liabilities. A company's net worth is the same thing.

Shares

Enter here the number of shares you own. If you bought shares of a specific security at different times and various prices, enter the total number of shares here and enter the average price for the purchases under Buy Price.

Short sale

Investors who borrow stock and sell it to someone else are betting the shares go down in price. Then, they can buy back the stock at a lower price and pocket the difference as profit. Going "short" is the opposite of going "long," or owning shares for the long haul.

Short interest

This is the total number of shares of a security that investors have sold short -- borrowed, then sold in the hope that the security will fall in value. An investor then buys back the shares and pockets the difference as profit.

Special

CBS MarketWatch's portfolio and multiple quote pages offer special buttons that give users the choice to do more research. N = News - This function searches news sources including CBS MarketWatch and Reuters for news pertaining to the ticker symbol selected. S = SEC filings. E = Earnings information from Zacks. H = Hoover's capsules. M = MarketGuide. F = Fundamentals, such as price-earnings ratios and 52-week highs and lows. C = 180 day Chart. FP = Mutual Fund profiles.

Spinoff

A company can create an independent company from an existing part of the company by selling or distributing new shares in the so-called spinoff.

Split

Sometimes, companies split their outstanding shares into larger number of shares. If a company with one million shares did a two-for-one split, the company would have two million shares. An investor, for example, with 100 shares before the split would hold 200 shares after the split. The investor's percentage of equity in the company remains the same.

Spread

This is the gap between bid and ask prices of a stock or other security.

Stock ticker

This is a lettered symbol assigned to securities and mutual funds that trade on U.S. financial exchanges.

Symbol

This is the ticker symbol of the security. New York Stock Exchange and American Stock Exchange tickers, for example, are three or fewer letters. Example: Ford is F. Nasdaq tickers are four and sometimes five letters. Example: Intel Corp. is INTC. Mutual Fund tickers end with the letter "X." Options tickers have their own help tables.

T

Tick

This refers to a change in the price of a security. An uptick occurs when the last trade in a security takes place at a higher price than the prior trade. A downtick occurs when the last trade in a security takes place at a lower price than the prior trade. An indicator may be fashioned from the difference between the number of NYSE issues showing upticks on the last trade and the number of NYSE issues showing downticks on the last trade. This indicator is known as the TICK, and is found on many quote screens. A TICK of +236 means 236 more NYSE issues last traded on upticks than those trading on downticks.

Trade sizes

On most trading screens, investors can see the amount of stock available for buyers and sellers. In a stock with a bid price of 18 and an ask price of 18 1/2, for example, a trade size of 10x5 indicates that investors have bids in to buy 10 blocks of 100 shares at the price of 18. Sellers, on the other hand, are willing to sell five blocks of 100 shares at 18 1/2.

Trading halt

Trading of a stock, bond, option or future contract can be halted by an exchange while news is being broadcast about the security.

Triple-Witching

This occurs on the third Friday of March, June, September and December when futures and stock options, based on the S&P 500 index, all expire on the same day.

Turnover (Securities)

The volume of shares traded as a percentage of total shares listed on an exchange during a period, usually a day or a year. The same ratio is applied to individual securities and the portfolio of individual or institutional investors.

U

U.S. Treasury bill

U.S. government debt with a maturity that is less than a year is a bill.

U.S. Treasury bond

U.S. government debt with a maturity of more than 10 years is a bond.

U.S. Treasury note

U.S. government debt with a maturity of one to 10 years is a note.

V

Value

This is the current price of the security multiplied by the number of shares you own. If you own 1000 shares of Apple Computer, and the shares are selling for $25, the value should be $25,000.

Value stock

A stock perceived by the marketplace to be undervalued based on criteria such as its price-to-earnings ratio, price-to-book ratio, dividend yield, etc.

Volatility (Historical)

This describes the fluctuations in the price of a stock or other type of security. If the price of a stock is capable of large swings, the stock has a high volatility. The pricing of options contracts depends in part on volatility. A stock with high volatility, for example, commands higher prices in the options market than one with low volatility. Volatility may be gauged by several measures, one of which involves calculating a security's standard deviation. Stock investors sometimes prefer to measure a stock's volatility versus that of an index, such as the Standard & Poor's 500 Index. This is known as a stock's beta. A beta of 1.2 implies a stock that is 20% more volatile than the S&P 500. When the S&P rises 10%, the stock is expected to rise 12%.

Volume

This is the daily number of shares of a security that changes hands between a buyer and a seller.

W

Warrant

This piece of paper gives an investor the right to purchase securities at a fixed price within a fixed time span. Warrants are like call options, but with much longer time spans -- sometimes years.

XYZ

Zero coupon bond

Such a debt security pays an investor no interest. It is sold at a discount to its face price and matures in one year or longer.






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