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Abbreviations
This glossary is designed to outline common terms and calculations used throughout our web site. Some calculations may vary from one quote provider to another.
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CALENDAR SPREAD An option spread position in which the expiration dates of the options are different, but the strike prices are the same. Also called a Horizontal or Time Spread.CALL (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 maturity. See: Callable.
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 corporation.
CALL LOAN A brokerage firm collateralized loan that has no fixed maturity date, can be called 9terminated) at any time, and has fluctuating interest rates computed daily. Generally, the loan is payable on demand the day after the loan has been contracted. If not called, the loan is automatically renewed for another day. See: Brokers' Loan.
CALL LOAN RATE The rate of interest a bank charges a brokerage firm on collateralized loans for its margin account clients. Usually firms charge their clients a minimum of ½ of 1% over the call rate which is published daily in the Wall Street Journal..
CALL PRICE The price at which a issuer may redeem a bond prior to maturity, usually at a slight premium to par.
CALL RISK The risk to a bondholder that the bond may be redeemed prior to maturity.
CANADIAN METHOD See: True Interest Cost.
CAPITAL GAIN OR CAPITAL LOSS Profit or loss from the sale of stocks, bonds, options real estate, and other property.
CAPITALIZATION Total amount of the various securities issued by a corporation. Capitalization includes bonds, debentures, preferred stock, common stock, and surplus, which represent the sources of long-term financing of the company. Bonds and debentures are usually carried on the books of the issuing company in terms of their par or face value. Preferred and common shares may be carried in terms of par or stated value.
CAPITALIZE (1) For accounting purposes: to record an outlay as an asset (vs. Expense) which is subject to depreciation or amortization. See: Depreciation, Amortization. (2) In general, to take advantage of an opportunity.
CAPITAL MARKET That segment of the securities market that deals in instruments with more than one year to maturity, e.g. long-term debt and equity securities.
CAPITAL STOCK All shares representing ownership of a business, including preferred and common.
CAPITAL SURPLUS An entry on a corporation's balance sheet in stockholders' equity. It is the amount received from sale of stock by a corporation in excess of the stock's par value. Also known as Paid-in Surplus, or Paid-in Capital.
CASH ACCOUNT A brokerage account in which the client pays in full for any purchases. (vs. Margin Account).
CASH ASSET RATIO The most stringent test of liquidity. It is calculated by adding cash and marketable securities and dividing that sum by the total current liabilities.
CASH FLOW Reported net income of a corporation plus amounts charged off for depreciation, depletion, amortization, and extraordinary charges to reserves. These are bookkeeping deductions and not paid out in actual dollars and cents.
CASH SALE A transaction which calls for delivery of the securities the same day. (vs. "Regular Way") See: Settlement.
CERTIFICATE The actual piece of paper which is evidence of ownership of a security (vs. Book-Entry). Certificates may be issued in registered or bearer form. See Bearer, Book-entry. Registered.
CERTIFICATE OF DEPOSIT (CD) A money market instrument issued by banks. The time CD is characterized by its set date of maturity and interest rate and its wide acceptance among investors, companies, and institutions as a very liquid short term investment vehicle.
CHAPTER 11 See: Bankruptcy.
CHARTIST A technical analyst. See: Technical Analysis.
CHURNING Excessive trading in a customer's account. The term suggests that the registered representative ignores the objective and interests of his client and seeks only to increase his own commissions.
CLASS OF OPTIONS All option contracts of the same type (puts or calls) covering the same underlying security.
CLEARING CORPORATIONS A clearing organization affiliated with a securities exchange that expedites the clearance and settlement of securities purchased or sold by members of that exchange.
CLEARING HOUSE FUNDS A check which is a demand deposit drawn on a commercial bank. These are cash the next day. Most dealer-to-dealer securities transactions settle I clearing house funds (vs. Fed Funds).
CLOSED-END INDENTURE Secured bond indenture which prohibits the re-pledging of collateral for additional bonds.
CLOSED-END INVESTMENT COMPANY See: Investment Company.
CLOSE-OUT To liquidate (sell) the position of a client unable to pay for the purchase within 7 business days. See: Frozen Account.
CLOSING TRANSACTION Sale or purchase of an option contract to eliminate or undo an existing position.
CODE OF PROCEDURE A section of the NASD By-laws. It deals with the procedure to be used when dealing with violations or complaints related to Rules of Fair Practice.
C.O.D. TRANSACTION A type of securities transaction in which the purchaser pays for the securities when they are delivered to him or his bank. Regulation T requires that the purchaser have funds available for payment on the normal settlement date and that the seller make delivery within 35 days of the trade date. It is also known as DVP (Delivery versus Payment).
COLLATERAL Securities or other property pledged by a borrower to secure repayment of a loan.
COLLATERAL TRUST BOND A corporate bond which is secured by securities deposited as collateral by the issuing corporation.
COMBINATION An option position in which an investor either purchases (is long) a call and a put contract or sells (is short) a call and put contract with different expiration months and/or different strike prices.
COMMERCIAL PAPER Debt instruments issued by well established companies to meet short-term financing needs. Commercial paper is unsecured debt and has a maximum maturity of 270 days.
COMMINGLING The mixing of client owned securities or money with that owned by the broker/dealer. This is illegal.
COMMISSION The broker's basic fee for purchasing or selling securities or property as an agent.
COMMISSION BROKER An agent who executes the public's orders for the purchase or sale of securities or commodities.
COMMITTEE ON UNIFORM SECURITIES IDENTIFICATION PROCEDURES (CUSIP) Committee that assigns codes and numbers to securities for identification purposes.
COMMODITY CHANNEL INDEX (CCI) This oscillator measures how high or low prices are relative to their statistical mean. A high value means prices are relatively high and while a low value means the opposite.
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COMMON 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. See: Capital Surplus.
COMPETITIVE ISSUE A new issue brought to market by having a number of underwriting groups (syndicates) competing to win the issue. It is most often used relative to a new municipal issue.
COMPETITIVE TENDER A bid placed to purchase T-bills at the original auction in which the purchaser specifies a particular yield he is willing to accept (i.e. price he will pay).
COMPETITIVE TRADER A member of the Exchange who trades in stocks on the Floor for an account in which he has an interest. Also known as a Registered Trader.
CONCESSION The discount from a dealer's offering price which the dealer will give to another dealer.
CONDUIT THEORY IRS Rule which avoids double taxation by allowing qualifying Investment Companies and REIT'S to pass income (without taxation) directly to investors, who are taxed as individuals.
CONFIRMATION Written notice summarizing the details of a transaction.
CONGLOMERATE A corporation that has diversified its operations usually by acquiring enterprises in widely varied industries.
CONSOLIDATED BALANCE SHEET A balance sheet showing the financial condition of a corporation and its subsidiaries.
CONSOLIDATED TAPE The ticker tape reporting of transactions in NYSE listed securities that take place on the NYSE or anyof the participating regional stock exchanges and other markets. Similarly, transactions in AMEX listed securities, and certain other securities listed on regional stock exchanges, are reported on a separate tape.
CONSTANT DOLLAR PLAN See: Dollar Cost Averaging.
CONSTANT YIELD METHOD Method used for tax purposes to accrete the cost of a bond purchased at an original issue discount. See: Accretion.
CONTRA BROKER The opposing broker in a dealer-to-dealer securities transaction.
CONTRACTUAL PLAN A method of purchasing mutual funds where the investor signs a contract to make equal monthly payments for a period of years. They are referred to as front-end load plans since the sales charge during the first year is 50%. They are also called penalty plans. Contractual plans are usually organized as a unit investment trust. An investor may choose a contractual plan with a spread load option. Rather than the front and 50% sales charge, the sales charge is spread so that the maximum charge during the first four years is 20%.
CONTROL PERSON Any officer, director, or 10% stockholder of a corporation (and immediate family). Also known as affiliates. See: Insider.
CONTROL RELATIONSHIP A relationship in which a securities firm is in a position to influence the issuance of bonds by an issuer.
CONTROL STOCK Registered stock owned by a control person. See: Control Person.
CONSTRUCTION LOAN NOTE (CLN) Municipal note usually issued to finance construction of multi-family housing projects. The notes are usually repaid from the proceeds of a bond issue after the project is completed. CLN's usually have a maximum maturity of three years.
CONSUMER PRICE INDEX (CPI) A measure of prices of consumer goods. Also known as cost of living index. See: Inflation, Deflation.
CONVERSION PRICE The price stated in the indenture at which the convertible bond may be converted.
CONVERSION RATIO The number of shares of stock into which a convertible security may be converted. Conversion ratio equals the par value of the convertible security divided by the conversion price.
CONVERTIBLE A bond, debenture or preferred stock which may be exchanged by the owner for common stock or another security, usually of the same company, in accordance with the terms of the issue.
COOLING-OFF PERIOD The time period in a new stock issue beginning with the filing of the registration statement and ending on the effective date. Under federal regulation, it must be a minimum of twenty days. During the cooling-off period, the issuing corporation and underwriters will prepare a preliminary prospectus, Blue Sky the issue, hold a due diligence meeting, and prepare the final prospectus.
CO-OP'S See: Banks for the Co-operatives.
CORPORATE CHARTER The document prepared when a corporation is formed. It will set forth the objectives and goals of the corporation as well as a complete statement as to what the corporation can and cannot do in seeking these goals. When a corporation opens a margin account, the securities firm must obtain a copy of the corporate charter to be sure that the corporation is permitted to engage in transactions on margin.
CORPORATE RESOLUTION A document stating that the corporation's board of directors has authorized a particular individual to act on behalf of the corporation. This document is necessary when the corporation opens a cash or margin account.
CORPORATION A legal, taxable entity chartered by a state or the federal government. Ownership of the corporation is held by stockholders.
CORRESPONDENT A securities firm, bank, or other financial organization which regularly performs services for another in a place or market to which the other does not have direct access. Securities firms may have correspondents in foreign countries or on exchanges of which they are not members. Correspondents are frequently linked by private wires. Member organizations of the NYSE with offices in New York City may also act as correspondents for out-of-town member organizations that do not maintain New York City offices.
COUPON The interest rate on a bond. On a bearer bond, it refers to the collection of interest by presenting the coupons which are attached to the bond.
COUPON BOND A bearer bond with interest coupons attached. The coupons are clipped as they come due and are presented by the holder for payment of interest.
COVENANT Protective clause in an indenture.
COVERAGE The number of times income will meet (or exceed) fixed charges. (1) Municipal bonds: Net revenues divided by annual debt service (2) Corporate interest coverage: E.B.I.T. divided by interest expense. (3) Preferred divided coverage: Net Income divided by preferred dividends.
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.
CREDIT BALANCE (CR) In a cash account, the amount that the firm owes to the customer. Ina short margin account, it is the sum of the proceeds of the sale and the required margin.
CREDITOR Any person who has lent money, goods, or services. The claim of the creditor may be secured by collateral or unsecured in which case the lender is known as a general creditor. See: Secured bond, Debenture.
CREDIT RISK The risk that the issuer of a security may go into bankruptcy or default on payments and cause the investor to lose all or part of his investment.
CREDT SPREAD An option spread position in which the premium of the option sold is greater than the premium of the option purchased.
CREDIT UNION SHARES Shares in a credit union which represent ownership by its members. They are not considered securities under the Uniform Securities Act.
CROSSED MARKET A situation in which one broker's bid exceeds the lowest offer of another or vice versa. NASD rules prohibit a broker from intentionally entering such bids or offers.
CROWDING OUT The situation in which government borrowing forces interest rates up, squeezing the private sector (business and consumer) from the credit markets.
CUM- "With" (vs. Ex-).
CUM-RIGHTS With right: During a rights offering, the time period during which the purchaser of stock will receive the rights.
CUMULATIVE PREFERRED A stock having a provision that if one or more dividends are omitted, the omitted dividends (arrearage) must be paid before dividends may be paid on the company's common stock.
CUMULATIVE VOTING A method of voting for corporate directors that enables the shareholder to multiply the number of his shares by the number of directorships being voted on and cast the total for one director or a selected group of directors. For example, if a corporation has 12 openings to the Board of Directors, in statutory voting, a 10-share holder casts 10 votes for each opening thus having 120 votes. Under the cumulative voting principle he may do that or he may cast 120 (10 x 12) votes for only one nominee, 60 for two, 40 for three, or any other distribution he chooses. Cumulative voting is required under the corporate laws of some states, and is permitted in most others (vs. Statutory Voting).
CURB EXCHANGE See: American stock Exchange CURRENT ASSETS Those assets of a company which are reasonably expected to be realized in cash, or sold, or consumed during one year. These include cash, marketable securities, accounts receivable, and inventories.
CURRENT LIABILITIES Money owed and payable by a company, usually within one year.
CURRENT RATIO A test of a corporation's liquidity. It is found by dividing current assets by current liabilities.
CURRENT YIELD Also called current return. It is found by dividing the yearly interest by the price of the bond.
CUSIP See: Committee on Uniform Securities Identification Procedures.
CUSTODIAN ACCOUNT See: Uniform Gift to Minors Act.
CUSTODIAN BANK The bank designated by a mutual fund to act as its custodian. The custodian bank hold the cash and securities of the fund and usually provides clerical functions. It does not perform any management function.
CYCLE A system regulating the expiration of equity (stock) options resulting in a maximum option life of nine months, and three expiration months available for trading at any point in time.
CYCLICAL STOCK Stocks which are strongly affected by the business cycle, i.e. changes in economic activity. Examples of cyclical stocks are automobile, steel, and paper stocks (vs. Defensive Stock).
DAILY BOND BUYER The daily newspaper of the municipal industry. It contains news and announcements. It is primarily new issue oriented. The Bond Buyer publishes a variety of statistics which are used in the municipal industry. These include: Visible Supply, Placement Ratio, Twenty Bond Index, Eleven Bond Index, and Revenue Bond Index.
DATED DATE The date from which interest begins accruing on a new municipal issue.
DAY ORDER An order to buy or sell which, if not executed, expires at the end of the trading day on which it was entered.
DEALER An individual or firm in the securities business who buys and sells securities for its own account rather than as an agent. The dealer's profit or loss is the difference between the price he pays and the price he receives for the same security. The dealer's confirmation must disclose to his customer that he has acted as principal. An individual or firm may function, at different times, either as broker or dealer.
DESENTURE A promissory note backed by the general credit of a company and not secured by a mortgage or lien on any specific property.
DEBIT BALANCE (DR) In a customer's margin account, that portion of the purchase price of stocks or bonds that is covered by credit extended by the broker to the margin customer.
DEBIT SPREAD An option spread position in which the premium of the purchased option is greater than the premium of the option sold.
DEBT A legal obligation to pay. The written agreement promising to pay is known as a debt instrument. Examples include bonds, notes, bills mortgages, etc.
DEBT CEILING See: Debt Limit.
DEBT LIMIT The maximum amount of debt which a municipality may incur.
DEBT SERVICE The yearly amount of interest and principal payable on a bond issue.
DEBT TO EQUITY The ratio of those securities which create fixed charges for a corporation to the company's common stock. It is calculated by dividing the total amount of bonds and preferred stock by the amount of common stock.
DEDUCTION An expense allowed by the IRS in calculating tax liability. See: Expense.
DEED OF TRUST See: Indenture.
DEEP DISCOUNT A bond trading substantially below its face value; a term typically used in reference to zero coupon bonds. See: Discount.
DEFAULT Failure of a debtor to make principal and/or interest payments. See: Bankruptcy.
DEFEASED BONDS Another term for advanced refunded bonds. Debt service is provided by escrowed government obligations and the defeased bonds are no longer an obligation of the issuer. See: Advanced Refunding.
DEFENSE COMPANY A company engaged in the production of armaments.
DEFENSIVE STOCK A stock which is relatively resistant to changes in general economic activity. Examples include food, utility, and tobacco stocks.
DEFICIENCY LETTER A notice sent by the SEC to the issuer of a new issue regarding omissions of material fact in the registration statement.
DEFLATION A persistent and appreciable fall in the general level of prices. It is characterized by production exceeding demand and normally takes place during a recession.
DELAYED OPENING The postponement of trading of an issue on a stock exchange beyond the normal opening of a day's trading because of market conditions that have been judged by exchange officials to warrant such a delay. Reasons for the delay might be an influx of either buy or sell orders, an imbalance of buyers and sellers, or pending corporate news that requires time for dissemination.
DELIVERY The physical act of exchanging securities and monies on settlement data. The industry has established rules regarding the condition of the securities which are considered in good "deliverable form".
DELIVERY VERSUS PAYMENT (DVP) See: COD Transactions.
DELTA A statistical measure of the price movement of an option contract in relation to the price movement of the underlying security. For example, if the underlying security increased by 2 points and the price of a call option on that security increased by 1 point that call option would have a Delta of ½.
DEMAND DEPOSIT A deposit in a bank where the depositor retains the right to withdraw at any time (on demand) without giving prior notice. Checking accounts are demand deposits.
DEPLETION ACCOUNTING Natural resources, such as metals, oil, gas, and timber, which conceivably can be reduced to zero over the years, present a special problem in capital management. Depletion is an accounting practice consisting of charges against earnings based upon the amount of the asset taken out of the total reserves in the period for which accounting is made. A bookkeeping entry, it does not represent any cash outlay nor are any funds earmarked for the purpose.
DEPOSITORY TRUST COMPANY (DTC) A central securities certificate depository through which members effect security deliveries between each other via computerized bookkeeping entries thereby reducing the physical movement of stock certificates.
DEPPRECIATION Normally, charges against earnings to write off the cost of an asset over its estimated useful life. It is a bookkeeping entry and does not represent any cash outlay nor are any funds earmarked for the purpose. See: Accelerate, Straight-line.
DESCENDING YIELD CURVE See: Inverted Yield Curve.
DESIGNATED ORDER An order given to a municipal syndicate which designates one or more members to receive credit for the sale. The order is generally from a large institution.
DESIGNATED ORDER TURNAROUND (DOT) NYSE's automated order entry system. See: Automated Order Entry System.
DEVELOPMENTAL PROGRAM A type of oil and gas program which drills in areas of proven reserves (vs. Wildcatting).
DIAGONAL SPREAD An option spread position in which both the expiration dates and strike prices of the options are different.
DIRECTIONAL MOVEMENT INDEX (DMI) A trend-following designed to determine whether a security is in a trending or non-trending market.
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DIRECT PARTICIPATION PROGRAM (DPP) A business venture structured to pass-through income and "tax losses" to investors. Commonly structured as a limited partnership. See: Tax Shelter, Limited Partnership.
DISCLOSURE DOCUMENT A booklet outlining the risk associated with option trading, which must be given to clients at or before their account is approved for option trades.
DISCOUNT (1) A bond trading in the market at a price below its face value. (2) The amount a bond's market price is below its face value. (3) Securities which are issued for less than their face value and mature at per such at T-bills. At maturity the difference between purchase price and face is considered interest. (4) As a verb, to apply all available information in evaluating the price of a security.
DISCOUNT RATE The rate of interest charged by a Federal Reserve Bank on a loan to a member bank.
DISCOUNT WINDOW The mechanism by which member banks may borrow from the federal reserve. See: Discount Rate.
DISCOUNT YIELD Yield on a discount security (most notably T-bills). The computation of a discount yield differs from the calculation of yield to maturity on interest bearing securities. Therefore, one must adjust the discount yield in order to compare it with yields on interest bearing securities. See: Discount, Bond Equivalent Yield, Yield to Maturity.
DISCRETIONARY ACCOUNT An account in which the customer gives the broker or someone else authorization to buy and sell securities or commodities including selection, timing, amount, and price to be paid or received.
DISINTERMEDIATION The withdrawal of monies from a low yielding financial intermediary, such as a bank saving account, and the reinvestment into other, higher yielding securities.
DISPROPORTIONATE A sharing arrangement in an oil and gas D.P.P., in which the general partner bears a part of the program's cost in return for a greater percentage of the income.
DISSOLUTION The termination of a business venture.
DISTRICT BUSINESS CONDUCT COMMITTEE (DBCC) NASD committee that has original jurisdiction in handling violations by or complaints against NASD members. See: Code of Procedure.
DIVERSIFICATION Spreading investments among different types of securities and various companies in different fields.
DIVERSIFIED INVESTMENT COMPANY Under the Investment Company Act of '40, an Investment Company with respect to 75% of its portfolio, has no more than 5% of its portfolio invested in any one security and owns no more than 10% of the voting shares of any one company.
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 dividend out of past earnings even if it is not currently operating at a profit.
DIVIDEND ACCOUNT A form of a new issue syndicate where a member is liable to sell a percentage of the issue equal to his participation. The member's liability ceases after selling his participation amount. A divided account is also known as a Western Account.
DIVIDEND FREQUENCY How often an issue pays dividends.
DIVIDEND PAYOUT RATIO This ratio analyzes a company's policy of paying cash dividends and is calculated by dividing the dividends paid on common stock by the net income available for common (earnings per share).
DIVIDEND REINVESTMENT A program in which a dividend paying company (especially mutual funds) will automatically apply an investor's dividend to the purchase of additional shares. The IRS taxes the dividend as a cash dividend whether received as cash or reinvested.
DIVIDEND YIELD The annual percentage of return that an investor receives on either common or preferred stock. The yield is based on the amount of the dividend divided by the market price 9at the time of purchase) of the stock.
DK (Don't Know) NOTICE A term used when dealers compare confirmations on a transaction. If a dealer receives a confirmation and the dealer does not recognize the trade, the dealer would send the other dealer a D.K. notice.
DOLLAR BOND A municipal term issue which is quoted and traded at a dollar price rather than at a yield to maturity.
DOLLAR COST AVERAGING A system of buying securities at regular intervals with a fixed dollar amount. Under this system the investor periodically purchases a certain dollars worth of a security rather than a certain number of shares. If each investment is for the same number of dollars, payments buy more shares when the price is low and fewer when it rises. Thus temporary downswings in price benefit the investor if he continues periodic purchases in both good times and bad. Dollar cost averaging will result in a lower average cost than the average price of the stock.
DOLLAR PRICE The price of a bond expressed as a percentage of face value. A dollar price of 85 represents 85% of face value or $850 per $1,000 face value.
DO NOT REDUCE (DNR) A designation on an order that the price should not be reduced for cash dividends.
DOT See: Designated order turnaround.
DOUBLE-BARRELED BOND A municipal bond with two separate pledged sources of security. Generally the revenues of the project or special revenues provide the initial security with secondary security provided by the general obligation taxing powers of the issuer.
DOW JONES AVERAGES See: Averages.
DOWN TICK See: Up Tick.
DOW THEORY A theory of market analysis based upon the performance of the Dow Jones industrial and transportation stock price averages. The theory states that the market is in a basic upward trend if one of these averages advances above a previous important high, accompanied or followed by a similar advance in the other. When the averages both dip below previous important lows, this is regarded as confirmation of a downward trend.
DUAL LISTINGS Same security listed both on the New York Stock Exchange and on a regional exchange.
DUAL-PURPOSE FUND A closed-end investment company that issues two types of shares: Income and capital. The income shares receive all the income, and the capital shares receive all the capital gains.
DUE-BILL A printed statement showing the transfer of a security's title or rights, or showing the obligation of a seller to deliver the securities or rights to the purchaser. If a security is purchased prior to the ex-date but delivered after the record date, the security will be delivered with a due-bill attached. The due-bill states that the purchaser is entitled to receive the dividend, rights, or additional shares of stock.
DUE DILIGENCE A phrase referring to careful consideration of a new issue. Underwriters will conduct meeting to asure that all pertinent information has been considered before issuance.
DUTCH AUCTION A method sometimes used when the Treasury is selling new notes or bonds. The Treasury opens all bids and determines the lowest acceptable bid price 9stop-out price). All successful bidders pay the stop-out price.
EARNED INCOME Income generated form employment: Wages, salary, commissions, bonuses, etc.
EARNED SURPLUS See: Retained Earnings.
EARNINGS BEFORE INTEREST AND TAXES (EBIT) Earning Before Interest and Taxes: The earnings of a company prior to paying bond interest taxes.
EARNINGS PER SHARE (EPS) (1) The amount of a corporation's earnings which is available to each share of common stock. It is calculated by dividing net income minus preferred dividends by the number of outstanding common shares. (2) "fully diluted" earnings per share assumes that all common stock equivalents (convertible bonds, preferred, warrants, rights) have been changed into common stock.
EARNINGS REPORT A statement (also called a profit and loss, or income statement) issued by a company that shows its earnings or losses over a given period. The earnings report lists the revenues, expenses, and the net result.
EARNINGS TEST See: Additional Bonds Test.
EASTERN ACCOUNT See: Undivided account.
EASY MONEY Loose Credit - A period during which there is an ample supply of money available for loan purposes.
EFFECTIVE DATE The day on which a new stock issue begins trading in the secondary market.
ELEVEN BOND INDEX The average yield (on a particular day) of eleven selected general obligation municipal bonds with 20 year maturities. It is comprised of eleven out of the twenty bonds from the Twenty Bond Index. It is calculated on Thursday afternoon and published in the Daily bond Buyer on Friday.
ENGINEERING REPORT A study followed by a report which is done by an engineering firm. It is done as part of the feasability study for a proposed municipal revenue issue.
EQUIPMENT TRUST CERTIFICATE A type of security, generally issued by a railroad to pay for new equipment. Title to the equipment, such as a locomotive, is held by a trustee until the notes are paid of. An equipment trust certificate is usually secured by a first claim on the equipment.
EQUITY (1) The ownership interest in a business venture; net worth. (2) Securities evidencing ownership: Preferred, common stock. (3) Margin Account: The customers ownership in the account, defined as market value of long positions minus debit balance, or credit balance minus market value of short positions.
EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA) OR 1974 Federal law regulating private sector pension and retirement plans.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) A plan that encourages employees to buy the stock of their employer.
ERISA See: Employment Retirement Income Security Act of 1974.
ERRONEOUS REPORT RULE A rule of the NYSE in which a client must accept a valid execution as it occurred, regardless of any mistake in reporting.
ESCROW Money or securities held by a third party until conditions of a contract are met.
ESCROW RECEIPT The certificate provided by an approved bank which guarantees that the underlying securities of an option contract are on deposit at the bank and will be delivered if the option is exercised.
ESCROWED TO MATURITY (ETM) See: Advanced Refunding.
EX- "Without" (vs. Cum).
EXCHANGE (1) A centralized location where security or commodity transactions take place. (2) To switch form one mutual fund to another at little or no cost. See: Family of Funds. (3) An offer made by a corporation to replace one type of security with another.
EXCHANGE DISTRIBUTION A "cross" of a large block of stock where one broker is representing both the buyer and seller. Represented on the ticker by "DIST".
EXCHANGE RATE Price at which one country's currency can be converted into another currency.
EX-DIVIDEND 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 o a given Friday. Since five business days are allowed for delivery of stock in a "regular way" transaction on the New York stock Exchange, the exchange would declare the stock "ex-dividend" as of the opening of the market on the preceding Monday (four business days prior to the record date). That means anyone who bought it on and after Monday would not be entitled to that dividend. When stocks go ex-dividend, the stock tables include the symbol "x" following the name.
EX-DIVIDEND DATE The date when a stock is adjusted for its dividend.
EXEMPT SECURITIES Those securities which are exempt form the filing provision of the Securities Act of 1933 and from many of the provisions of the Securities Exchange Act of 1934. Exempt securities include municipals, governments, nonprofit organizations, and bank securities (vs. Non-Exempt).
EXEMPT TRANSACTION Is a securities transaction which is exempt from the requirements of registration, advertising, and sales literature.
EXERCISE PRICE The price at which the underlying security in an option contract can be bought (called) or sold (put).
EX-LEGAL The situation in which a municipal bond will be delivered without a legal opinion.
EXPENSE (1) For accounting purpose to record an outlay against revenue in the period incurred (vs. Capitalize). (2) An item which reduces income.
EXPIRATION The day on which an option contract becomes void.
EXPLORATORY PROGRAM See: Wildcatting.
EXPORT-IMPORT BANK (EXIM) A federal agency which facilitates exports by providing financing. It is backed by the full faith and credit of the U.S. Government.
EX-RIGHTS Without rights: During a rights offering, when the purchaser of stock does not receive rights. If stock is purchased on or after the ex-rights date (four business days prior to the record date), the purchaser does not receive rights.
EXTRA The short-term of "extra dividend". A dividend in the form of stock or cash in addition to the regular or usual dividend the company has been paying.