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Glossary
The following glossary contains definitions to hundreds of common and not so common investment terms. (Note: These are simplified definitions for the purposes of this web site. Investors should not rely solely on these to develop their understanding of the stock market.)
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Partial Fill |
When only a portion of the total volume of your buy or sell order trades, leaving the remaining volume unfilled.
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Penny Stock / Junior / Micro-cap |
Shares that are generally under $2.00 per unit, or companies that have a total market capitalization of only a few million dollars.
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Point |
Refers to security prices. In the case of shares, it means $1 per share.
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Portfolio |
Holdings of securities by an individual or institution. A portfolio may contain debt securities, stocks, and other types of securities.
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Preferred Stock |
A class of share capital that entitles the owners to a fixed dividend ahead of the company's common shares and to a stated dollar value per share in the event of liquidation. Usually do not have voting rights.
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Price Earnings Ratio |
A common stock's current market price divided by its annual per share earnings.
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Prime Rate |
The interest rate chartered banks charge their most credit-worthy borrowers.
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Private Placement |
The underwriting of a security and its sale to a few buyers, usually institutional, in large amounts.
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Profit Taking |
Selling to take a profit - the process of converting paper profits into cash.
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Program Trading |
A sophisticated computerized trading strategy whereby a portfolio manager attempts to earn a profit from the price spreads between a portfolio of equities similar or identical to those underlying a designated stock index.
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Prospectus |
A legal document which describes securities being offered for sale to the public.
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Quote |
The highest bid to buy and the lowest offer to sell a security at a given time.
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Rally |
A brisk rise in the general price level of the market or an individual stock.
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Reaction |
Temporary price weakness following a price upswing.
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Regular Delivery |
Unless otherwise stipulated, sellers of stocks must deliver such shares by the third full business day after sale.
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Retained Earnings |
The cumulative total of annual earnings retained by a company after paying all expenses and dividends.
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Reverse Split |
The exchange of a greater number of a company's shares for a fewer number, e.g. one for three. Results in a higher share price and less shares outstanding. Same as consolidation.
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Right |
A short-term privilege granted to a company's common shareholders to purchase additional common shares, usually at a discount, from the company itself, at a stated price and within a specified period of time.
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Risk-Averse |
Descriptive term used for an investor unable or unwilling to accept the probability or chance of losing capital.
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Risk-Tolerant |
Descriptive term used for an investor willing and able to accept the probability of losing capital.
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SEC |
The Securities and Exchange Commission, a federal body established by the United States Congress, to protect investors.
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Secondary Offering or Secondary Distribution |
The redistribution of a block of stock sometime after it has been sold by the issuing company.
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Sell Order |
A request to have your broker sell shares of a stock you own from your account, at a set price and volume that you have defined.
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Short Sale |
The sale of a security which the seller does not own. This is a speculative practice done in the belief that the price of a stock is going to fall and the seller will then be able to cover the sale by buying it back later at a lower price, thereby making a profit on the transactions.
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Short-Term Debt |
Company borrowings repayable within one year that appears in the current liabilities section of the balance sheet.
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Speculative Investment |
An investment that has little or no value in an immediate sense, but gains its value from the potential of becoming valuable or highly profitable.
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Speculator |
One who is prepared to accept calculated risks in the marketplace. Objectives are usually short to medium-term capital gain, as opposed to regular income and safety of principal.
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Split |
The division of a company's outstanding common shares into a larger number of common shares. Each common shareholder's proportionate interest in the company remains the same.
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Spread |
The gap between bid and asked prices in the quotation for a security.
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Stock Broker |
The individual or organization that will execute your trade orders for you and will keep an account for you investments and cash.
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Stop Buy and Stop Loss Orders |
Orders to buy or sell, placed above or below the market price, which become market orders as soon as the price of a board lot of the stock rises or falls to the specified price. A stop buy order is used to protect loses in a short sale, whereas a stop loss order may be used to protect a paper profit or to limit a possible loss when shares are already owned. Since such orders become market orders when the stop price is reached, there is no certainty that they will be executed at that price.
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Subsidiary |
Company which is controlled by another company usually through its ownership of the majority of shares.
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Take-Over Bid |
An offer made to security holders of a company to purchase voting securities of the company which, with the offeror's already owned securities, will in total exceed 20% of the outstanding voting securities for the company. For federally incorporated companies, the equivalent requirement is more than 10% of the outstanding voting shares of the target company.
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Tax Loss Selling |
Selling a security for the sole purpose of generating a loss for tax purposes. There may be times when this strategy is advantageous but investment principles should not be ignored.
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Technical Analysis |
A method of market and security analysis that studies investor attitudes and psychology as revealed in charts of stock price movements and trading volumes. The object of this is to predict future price action.
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Ticker Symbol |
The two to five letter symbol that is used to represent the shares of a company on an exchange.
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Trade |
When cash is exchanged for shares of stock on an exchange.
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Underwriting |
The purchase for resale of a security issue by one or more investment dealers or underwriters.
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Unlisted |
A security not listed on a stock exchange but traded on the over-the-counter market.
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Volatility |
The tendency for a stock price to increase or decrease in value, and the magnitude and frequency of the price swings.
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Volume |
Refers to the number of shares, whether for a trade order or for overall trading activity for the day, week, etc... Penny stocks usually trade in lots of 1000 at one time.
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Working Capital |
Current assets minus current liabilities. This figure is an indication of the company's ability to meet its short-term debts.
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Yield - Bond and Stock |
Return on an investment. A stock yield is calculated by expressing the annual dividend as a percentage of the stock's current market price.
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