Glossary of Terms.

Daily Range
The difference between the high and low price during one trading day.

Dated Date
The date from which accrued interest is calculated on new bonds and other debt instruments. The buyer pays the issuer an amount equal to the interest accrued from the dated date to the issue's settlement date. With the first interest payment on the bond, the buyer is reimbursed.

Day Order
Unless an investor specifies otherwise, an order to buy or sell a security will expire if not filled at the end of the day.

Day Trading
Refers to establishing and liquidating the same position or positions within one day's trading, thus ending the day with no established position in the market.

Debenture
Another word for a bond.

Debit Spread
The difference in value of two options, where the value of the long position exceeds the value of the short position.

Debt
Money borrowed from lenders for a variety of corporate or personal purposes. The borrower pays interest for the use of the money and is obligated to repay the principal amount on a set date.

Debt Financing
Raising money for working capital or for capital expenditures by selling bonds, bills or notes to individual or institutional investors. In return for the money lent, the individuals or institutions become creditors and receive a promise to repay principal and debt interest.

Debt Investment
A type of investment where the investor, in effect, lends money for a written promise to return the principal plus interest after an agreed period of time (e.g. term deposit).

Debt Issues
The issuance of bonds or other forms of debt on the public markets.

Debt Security
A security representing a loan by an investor to an issuer such as a corporation, municipality, the federal government or a federal agency. In return for the loan, the issuer promises to repay the debt on a specified date and to pay interest.

Debt Service
The schedule for repayment of interest and principal (or the scheduled sinking fund contribution) on an outstanding debt.

Deduction
An item or expenditure subtracted from adjusted gross income to reduce the amount of income subject to tax.

Deductive Logic
Logic traditionally used in expert systems, which defines a method for reasoning from the general to the specific.

Deep Discount Bond
A bond that sells for a discounted price of less than 80% of the face value of the bond.

Deep-in-the-Money
A deep-in-the-money call option has the strike price of the option well below the current price of the underlying instrument. A deep-in-the-money put option has the strike price of the option well above the current price of the underlying instrument.

Default
1. The failure to pay interest or principal promptly when due.
2. The failure to perform on a futures contract as required by an exchange.

Defensive Investment Strategy
A method of portfolio allocation and management aimed at minimizing the risk of losing principal. Defensive investors place a high percentage of their investible assets in bonds, cash equivalents and stocks that are less volatile than average.

Defensive Merger
A form of shark repellent: a strategic move by a takeover target company to make its stock less attractive to a potential acquirer. The defensive merger strategy is for the target company to combine with another corporation that would create antitrust or other regulatory problems if the original unwanted takeover proposal was consummated.

Defensive Stock
Stock of a company with continuous dividend payments, which has demonstrated relatively stable earnings despite poor economic conditions.

Delivery Date
This is the third business day following a regular way transaction of stocks or bonds, or the first day of the month in which delivery is to be made under a futures contract. Futures Contract sales are made on a seller's option basis, therefore delivery can be on any day of the month as long as proper notice is given.

Delta
The amount by which the price of an option changes for every dollar move in the underlying instrument.

Delta-Hedged
An options strategy that protects an option against small price changes in the option's underlying instrument. These hedges are constructed by taking a position in the underlying instrument that is equal in magnitude but opposite in sign (+/-) to the option's delta.

Delta Neutral
This is an "options/options" or "options/underlying instrument" position constructed so that it is relatively insensitive to the price movement of the underlying instruments. This is arranged by selecting a calculated ratio of offsetting short and long positions.

Delta Position
A measure of option price vs. the underlying futures contract or stock price.

Discount Brokers
Brokerage firms that offer lower commission rates than investment dealers, but do not offer the services that investment dealers do, such as advice, research and portfolio planning.

Dividend
When companies pay part of their profits to shareholders, those profits are called dividends. A mutual fund's dividend is money paid to shareholders that comes from the investment income the fund has earned. This amount is announced before it is paid and is distributed to shareholders of record on a per share basis. Dividends may be in the form of cash, stock or property. All dividends must be declared by the board of directors.

Dow Jones Averages
The most widely quoted and oldest measures of change in stock prices. Each of the four averages is based on the prices of a limited number of stocks in a particular category.

Dow Jones Industrial Average (DJIA)
An average made up of 30 blue chip stocks that trade daily on the New York Stock Exchange. The DJIA is used as an overall indicator of market performance although criticism is periodically raised over how it is calculated, as well as the fact that so few companies are included so that it may not be a truly representative indicator of market activity.

Dow Jones Transportation Average
Similar to the Dow Jones Industrial Average, this average is made up of 20 transportation stocks that trade daily on the New York Stock Exchange.

Downgrade
A classic negative change in ratings for a stock, and or other rated security.

Earnings
Net income for the company during the period.

Earnings or Income Statement
A financial statement that shows a company's revenues and expenditures resulting in either a profit or a loss during a financial period.

Earnings Per Share (EPS)
A corporation's net income available for common stock divided by its number of shares of common stock outstanding. For example, if a company made $1,000,000 in profit and has 1,000,000 shares outstanding, the EPS is $1/share.

Earnings Yield
A firm's current annual earnings per share divided by the share's market price. Reciprocal of the price-earnings ratio. Often viewed as a rough indicator of investment return. The inverse of the Price/Earnings ratio. It's the Total Twelve Months Earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage.

Equity (EQ)
1. The ownership interest of common and preferred stockholders in a corporation.
2. In a margin or short account, equity equals what is owned minus what is owed.

Equity Capital
The capital in a firm that represents ownership. The difference between the assets and liabilities of a corporation-sometimes called the "net worth."

Equity Earnings
A company's share of an unconsolidated subsidiary's earnings. The equity accounting method is used when a company owns 20% to 50% of a subsidiary.

Equity Financing
Raising money for working capital or for capital expenditures by selling common or preferred stock to individual or institutional investors. In return for the money paid, the individuals or institutions receive ownership interests in the corporation.

Equity Investment
A type of investment that gives the investor ownership and the rights of ownership to the investment vehicle. (e.g., common stock, real estate, gold).

Eurodollar
Dollars deposited in foreign banks, with the futures contract reflecting the rates offered between London branches of top US banks and foreign banks.

European Style Option
An option contract that can only be exercised on the expiration date

Ex-Dividend
A.K.A. ex-stock dividend, this is the opposite of Cum Dividend, and literally means without dividend. The buyer of the stock in question will not receive the dividend that was just declared. The ex-dividend is taken into factor, as reflected in the stock price that will usually drop by the amount being paid. If you buy shares quoted cum dividend, i.e,. before the ex-dividend date, you will receive an upcoming already declared dividend.

Ex-Dividend Date
The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend payment. This date set by the NYSE (and generally followed on other US exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is marked with an X in newspaper listings on that date. Option contracts are usually adjusted for stock dividends but not for cash.

Exercise
To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security. When you exercise an option, you carry out the terms of an option contract.

Extra
Short for "extra dividend." A dividend in the form of either stock or cash in addition to the regular common dividend the company usually pays to shareholders. Also referred to as a special dividend.

Face Value
The amount of principal owed on a debt instrument.

Fair Values
The theoretical value of what the option should be worth. The theoretical prices generated by an option-pricing model (i.e., the Black-Scholes option pricing model).

Fast Market
When a stock has so much volume that the order entry systems have difficulty processing all of the orders. This causes problems for brokers who want to give their clients current prices so that they can buy or sell securities. A declaration that market conditions in the futures pit are so disorderly temporarily to the extent that floor brokers are not held responsible for the execution of orders. This usually happens when a company announces important information.

Fee-based Accounts
Client accounts in which the investment dealer does not charge commissions, but charges a fee based on the value of the investor's account instead.

Fill
An executed order; sometimes the term refers to the price at which an order is executed.

Fill Order
An order that must be filled immediately (or canceled).

Fill or Kill
When you place an order to buy or sell securities and want that exact number of unit or you don't want any.

Financial Leverage
Arises from the partial use of debt or other fixed-income securities to finance investments. Fixed-financing charges have the effect of magnifying the potential variations of returns on the equity portion of the investment. The degree of financial leverage is sometimes defined as the percentage change in earnings per share (EPS) caused by a given percentage change in earnings before interest and taxes (EBIT).

Floor Broker
An exchange member who is paid a fee for executing orders for Clearing Members or their customers. A Floor Broker executing orders must be licensed by the CFTC.

Floor Trader
An exchange member or "local" who executes transactions from the floor of the exchange only for his own account.

 

Form 10K
An annual audited report that covers essentially all the information contained in an issuing company's original registration statement. A Form 10K is due within 90 days of year-end.

Form 10Q
A quarterly report containing a corporation's unaudited financial data. Certain non-recurring events that arise during the quarterly period, such as significant litigation, must be reported. A Form 10Q is due 45 days after the end of each of the first three fiscal quarters.

Formula Investing
These are investment strategies. One formula involves shifting funds from common shares to preferred shares or bonds as the stock market rises above a predetermined point-and returning funds to common shares as the stock market declines.

Forward Contract
An individually negotiated contract, with prearranged terms, covering a transaction that is set to take place at a specified future date.

Front Month (Option)
Usually the option with the shortest time to expiration or the future with the nearest time to delivery.

Full Service Broker
A type of stockbroker that provides more than stock quotes, but generally (and not limited to) Portfolio Planning and Management, Investment Ideas, Researching specific investments. Since these brokers provide more than order taking and stock quotes, their commissions are higher.

Fully Diluted Earnings Per Share
Earnings per common share calculated on the assumption that all convertible securities are converted into common shares, such as convertible preferred shares, convertible debentures, stock options (under employee stock-option plans) and warrants.

Fundamentals
The theory that holds that stock market activity may be predicted by looking at the relative data and statistics of a stock as well as the management of the company in question and its earnings.