Investment Terms (S to Y)

SALES CHARGE The fee charged by a mutual fund when purchasing shares, usually payable as a commission to a marketing agent, such as a financial advisor, who is thus compensated for his assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value.

SECONDARY MARKET A market that provides for the purchase or sale of previously owned securities. Most trading is done in the secondary market. The New York Stock Exchange, as well as all other stock exchanges, the bond markets, etc., are secondary markets.

SELLING SHORT If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, s/he must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for 8 per share. Then, on Aug 1, you purchase 1000 shares of XYZ at 7 per share. You've made 1000 (less commissions and other fees) by selling short.

SERIES Options: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price.Stocks: shares which have common characteristics, such as rights to ownership and voting, dividends, par value, etc. In the case of many foreign shares, one series may be owned only by citizens of the country in which the stock is registered.

SETTLEMENT DATE The date on which payment is made to settle a trade. For stocks traded on exchanges, settlement is currently 3 business days after the trade. For mutual funds, settlement usually occurs the day following the trade. In some regional markets, foreign shares may require months to settle.

SHARES Certificates or book entries representing ownership in a corporation or similar entity.

SHARE REPURCHASE Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.

SHORT POSITION (OPTIONS) A position wherein a person's interest in a particular series of options is as a net writer (ie, the number of contracts sold exceeds the number of contracts bought).

SHORT POSITION (STOCKS) Occurs when a person sells stocks he does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought to close out the transaction. This technique is used when an investor believes the stock price is going down.

SHORT SALE Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price.

SLIPPAGE The difference between estimated transaction costs and actual transaction costs. The difference is usually composed of revisions to price difference or spread and commission costs.

SIC Abbreviation for Standard Industrial Classification. Each 4-digit code represents a unique business activity.

STOCK DIVIDEND Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.

STOP (-LOSS) ORDER An order to sell a stock when the price falls to a specified level.

STRIKE PRICE The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.

TICK INDICATOR A market indicator based on the number of stocks whose last trade was an uptick or a downtick. Used as an indicator of market sentiment or psychology to try to predict the market's trend.

TIME VALUE The portion of the premium that is based on the amount of time remaining until the expiration date of the option contract, and that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value.

TOTAL REVENUE Total sales and other revenue for the period shown.

TRADE A verbal (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.

TRADE DATE The date on which a trade occurs. Trades generally settle (are paid for) 1-3 business days after a trade date.

TRADING RANGE The difference between the high and low prices traded during a period of time; with commodities, the high/low price limit established by the exchange for a specific commodity for any one day's trading.

TURNOVER Mutual Funds: A measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover ratio of 25 % means that the value of trades represented one-fourth of the assets of the fund. Finance: The number of times a given asset, such as inventory, is replaced during the accounting period, usually a year. Corporate: The ratio of annual sales to net worth, representing the extent to which a company can growth without outside capital. Markets: The volume of shares traded as a percent of total shares listed during a specified period, usually a day or a year.

TYPE The classification of an option contract as either a put or a call.

UNCOVERED CALL A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price.

UNCOVERED PUT A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.

UNDERLYING SECURITY Options: the security subject to being purchased or sold upon exercise of an option contract. For example, IBM stock is the underlying security to IBM options. Depositary receipts: The class, series and number of the foreign shares represented by the depositary receipt.

WALLFLOWER Stock that has fallen out of favor with investors; tends to have a low P/E.

WANTED FOR CASH A statement displayed on market tickers which indicates that a bidder will pay cash for same day settlement of a block of a specified security.

WARRANT A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This "warrant" is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are usually issued as a "sweetener" bundled with another class of security to enhance the marketability of the latter.

WASTING ASSET An asset which has a limited life and thus, decreases in value (depreciates) over time. Also applied to consumed assets, such as gas, and termed depletion.

WATCH LIST A list of securities selected for special surveillance by a brokerage, exchange or regulatory organization; firms on the list are often takeover targets, companies planning to issue new securities or stocks showing unusual activity.

WITHDRAWAL PLAN The ability to establish automatic periodic mutual fund redemptions and have proceeds mailed directly to the investor.

WRITER The seller of an option contract.

YIELD The percentage rate of return paid on a stock in the form of dividends, or the rate of interest paid on a bond or note.

YIELD TO CALL The percentage rate of a bond or note, if your were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price.

YIELD TO MATURITY The percentage rate of return paid on a bond, note or other fixed income security if you buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.

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