Equities Flashcards
(219 cards)
1
Q
balance sheet
A
a sheet with two columns, debit (assets) and credit (liabilities plus net worth), that describe a companies financials.
2
Q
Assets
A
things that are owned or owed by a company
Liquid Assets - cash, accounts receivable, inventory, etc.
Fixed Assets - buildings, furniture, fixtures, etc.
Intangibles - goodwill, etc.
3
Q
Liabilities
A
Current Liabilities - obligations that are due within a year such as utilities payable, salaries payable, notes payable, taxes payable
Long-Term Liabilities - mortgages payable, company’s issued bonds
4
Q
Net Worth
A
AKA stockholder’s equity
Non-corporation - ownership classes
Corporation - preferred or common stock
Both - retained earnings
5
Q
Profit and Loss Statement
A
composed of all revenue (credit balances) and expense (debit balances) accounts
Revenue - sources of income
Expenses - direct or indirect usage of funds and materials in attempting to generate revenue
Net profit or loss - revenue minus expenses
6
Q
Statement of Cash Flows
A
a report showing where funds came from, where they went, and the result
starts with the net earnings figure from P&L and discusses the movement of cash on three aspect’s:
- cash flows fro operations
- cash flows from investing activities
- cash flows from financing activities
7
Q
Debt-to-Equity ratio
A
total liabilities / total shareholders equities
reflects how much financing is be used by a company or how much leverage they are using
8
Q
Leverage
A
the use of other people’s money to increase profits
9
Q
Price-Earnings ratio
A
market value per share / earnings per share
10
Q
Earnings per Share
A
Earnings / common shares outstanding
11
Q
Earnings per Share Diluted
A
the ratio between the earnings and the total amount of shares if all convertible securities were converted to common stock
12
Q
Earnings Before Interest and Taxes
A
Revenue - Expenses (without taxes or interest)
13
Q
EBITDA
A
Earnings Before Interest, Taxes, Depreciation, and Amortization
14
Q
Dividend Payout Ratio
A
total dollar amount dividends payed / net income
15
Q
Times Fixed Charges Earned
A
((earnings before interest and tax)+(fixed charges before tax)) / ((Fixed charges before tax)+(interest))
or
(EBIT+FCBT) / (FCBT+i)
16
Q
Margin-of-Profit Ratio
A
% of sale that turned into a profit
Gross Profit Margin: (Net Sales - Cost of Goods sold) / Net Sales
17
Q
American Depository Receipts (ADR)
A
certificate issued by a US depository bank representing a specified number of shares of a foreign comapany
18
Q
Global Depository Receipts (GDR)
A
certificate issued by an international bank in more than one country for shares in a foreign company
19
Q
Voting Trust Certificate
A
A certificate that allows a small group of individuals to gain control of making decisions for a corporation
20
Q
Voting Rights
A
The right for stock shareholders to vote on corporate policies
21
Q
Cash Dividends
A
Distribution of funds to stock shareholders as part of a corporations’ earnings
22
Q
Dividends: Declaration Date
A
The day a company announces the dividends
23
Q
Dividends: Record Date
A
The night of the date that one must legally own the stock in order to be entitled to the dividend
24
Q
Dividend: Payable Date
A
The day the dividend distribution is made
25
Stock Splits
When companies split their stocks to make more, i.e. 2-1 split will double the number of outstanding shares
26
Stock Dividend
The issuance of new shares to existing shareholders
27
Mergers
The merging of two separate companies into one
28
Acquisition
The buying of one company buy another to be absorbed in the buying company
29
Tender Offers
A bid to purchase a certain percentage of a company
30
Spin-Offs
When a company lets go of a division that has its own management structure, which then becomes its own company
31
Reverse Splits
The consolidation of a number of shares into one share in order to increase share price, decrease the number of shares, etc.
32
Common Stock
Denotes the ownership in a corporation and is the voting stock of a company
33
Preferred Stock
Stock that has no voting rights but often has higher claims on company's assets
34
Purchase Rights
The right for shareholders to purchase an agreed amount of shares at a predetermined price
35
Rights Issues
An invitation for existing shareholders to purchase additional new shares in a company
36
Cum Rights
Enable existing shareholders to buy new shares of a new issuance or at a predetermined price
37
Ex Rights
Shares trading without the attached rights
38
Warrants
Allows the owner to purchase shares of common stock directly from the company over a period of time
39
Preferred Stock
Represents a nonvoting share in the ownership of a company
The owner receives dividends before common stock holders
40
Straight Preferred Stock
A type of preferred stock that pays its dividends quarterly and will be outstanding for the duration of the existence of the company
41
Cumulative/Noncumulative Preferred
Cumulative is a type of preferred stock that insures that the preferred stock holders get paid before the common stockholders in case of an incomplete payment on the payable date
Noncumulative allows the preferred dividend to be lost if payment is not payed by the dividend date. Common stockholders will be able to receive dividends on the next payable date.
42
Participating Preferred
A type of preferred stock that has irregular payment amounts due to a business cycle.
They can make up for low payments by giving a special dividend at the high point of the business cycle.
43
Convertible Preferred Stock
A type of preferred stock that is able to be converted into another security, typically common stock
44
Preferred Equity Redemption (PERC)
Similar to a convertible preferred stock but has a lifespan for which it can be converted.
45
Callable Preferred
A type of preferred stock that can be called in by the company or redeemed so that they can eliminate or reduce the dividend payments.
46
Adjustable (Floating) Rate Preferred (ARP)
A type of preferred stock that is able to change dividend payment rates
47
Reverse Floating Rate Preferred
A type of preferred stock that lowers its payment rate as interest rates increase, and vice-versa
48
Putable Preferred
A type of preferred stock that can be "put" back to the original issuer by the owner.
49
Rule 144A
Allows for the sale of equities by a qualified intuitional buyer (QIB) without it being registered with the SEC
50
Market Risk (for Bonds)
The potential for the price of a bond to be higher or lower in the future due to changes in interest rates
51
Credit Risk (for Bonds)
The risk associated with a company issuing the bond to fold, go bankrupt, etc.
52
Bond Ratings
A measure of the creditworthiness of a bond based on it's risk and reward.
53
Debt Dollar Pricing
Presented as 10% of the actual money value. For example, a $1000 bond trading at a dollar pricing of 98 is trading at $980.
54
Debt Basis Pricing
Represents the yield or percent return the buyer can expect if the bonds are held to maturity
55
Current Yield
Annual Interest Rate/Cost of Bond
56
Present Value of Cash FLows
```
PV = PO / (1+r)^t
PV = Present Value
PO = Payout
r = yield rate
t = number of times the payout occurs
```
It is the current value of a future sum of money given a rate of return
57
Yield to Maturity
The total rate of return of a bond that has made all interest payments plus the principal
58
Yield to Call
A feature to some bonds that allow them to be callable; the issuer is able to retire the bond before it reaches maturity
59
Yield Curve
A graph of several yields of equal credit but from differing maturity
60
Accrued Interest
The amount of interest accrued between payment periods. For example, a $1000 6% bond paying every six months would have an accrued interest at 4 months in of:
$1000 x .06 x ~(120/360) = $20
~estimating 120 days in 4 months and 360 days a year
61
Procedural Debt Retirement: Maturity
The bond issuer must repay the face amount to the bondholder and any accrued interest
62
Procedural Debt Retirement: Refunding
The process of issuing new debt in order to pay off old debt.
or
Asking the current bondholders to exchange their old debt for new debt
63
Procedural Debt Retirement: Callable
A feature of bonds that are typically issued during periods of high interest rates that allows the issuer to retire the bond in part or full before maturity. Called a "call feature".
64
Procedural Debt Retirement: Convertible
A type of bond that is able to be converted into another equity (usually common stock) at a fixed ratio
65
Procedural Debt Retirement: Sinking Fund
When a bond issuer buys some of their bonds with net earnings before maturity.
66
Quarterly Paying Debt
Bonds with quarterly payouts compared to the typically 6 month payout.
67
Zero-Coupon Bonds
Bonds that do not have regular payouts but instead pays out the face value at maturity. These bonds are priced so that the purchase price plus the accrued interest over the duration of maturity is equal to the face value
68
Floating/Adjustable Rate bonds
A bond that adjusts its interest rates in relation to a target bond. For example, a bond can be 250 points above US treasury bonds. So if a US TB had an interest of 4.5% or 450 points, the floating bond would be at 7%. If the US TB rates changed, the floating bond would change by the same amount.
69
Collateral Trust Bonds
A type of bond that is supported by an underlying assets in case of default. In case of default, the bondholder would claim the underlying assets.
70
Mortgage Bond
Bonds that are backed by the issuers real estate, factories, office buildings, etc
71
Equipment Trust Bonds
Bonds backed by the rolling stock a company, such as vehicles, computers, etc.
72
Debenture Bonds
Bonds backed by nothing.
73
Adjustment Bonds
Bonds issued when a company is facing bankruptcy and needs to restructure their capitalization. They are often stated to only make payouts when the company has earnings
74
Receiver's Certificates
A certificate issued by a receiver in case of bankruptcy to allow the company to finish its operating cycle and therefore repay more obligations or protect the company's assets during bankruptcy.
75
Covered Bonds
A package of loans issued by a bank and sold to financial institutions to be issued as bonds. If the bond issuer defaults, then the bondholders are covered by the loans.
76
Junk Bonds
Bonds not backed by anything or issued by companies that do not live up to their obligations
77
Corporate Notes
Short-term debt instruments with maturity between 1-10 years with all the same characteristics
of a bond.
78
Taxable/Nontaxable Interest
Corporate Bonds - Interest is considered taxable income at the federal, state, and sometimes local levels
Municipal Bonds - Interest is considered tax free at federal, state, and local levels if the owner resides in the state of issuance - "triple tax free"
79
Municipal Bonds
Issued by state and local governments to fund various activities. Bonds that fund projects for the larger population are tax-free while bonds issued for smaller groups are not tax-free.
80
Underwriting
Buyers of securities (in this case bonds) from the issuer with intent to resell.
81
Serial Offering
The process of structuring the maturity of bonds so that the number of outstanding decreases as time goes on.
82
General Obligations Municipal Bond Offering
Bonds that are backed by the issuers creditworthiness and its ability to repay debt using taxes generated
83
Revenue Bond
A bond backed by the income that could be generated from the finished project such as tolls, fees, etc. from bridges, roads, stadiums, etc.
84
Insured Municipal Bonds
Bonds that are insured against default. Broker-dealers/banks will insure lower rated bonds, insure them with a bond insurance company like MBIA or AMBAC, and then sell them at a higher rating.
85
Municipal Notes
Short-term debt instruments issued by municipal.
86
Bond Anticipation Notes
Bonds issued when the state or municipality is expecting a fall in interest rates in the near-future
87
Tax Anticipation Notes
Issued when expecting tax revenue in the near-future. The notes are payed off after the tax is collected
88
Revenue Anticipation Notes
Issued when anticipating revenues generated from things such as tolls from bridges, roads, etc. in the near-future. The notes are payed off after collection fo the fees.
89
Project Notes
Issued to temporary fund construction of hospitals, schools, etc., After the project is completed, bonds are issued and the proceeds are used to payoff the notes
90
Treasury Bonds, Notes, Bills
Issued as an obligation of the federal government.
Bonds - 10-30 years
Notes - 1-10 years
Bills - <1 year
91
Cash Management Bills
Short-term debt instruments issued by the Federal Reserve for temporary funding until regular funding is in place
92
Treasury Inflation-Protected Bonds
Treasury bonds that compensate for inflation by increasing coupon payment and principal amount by changes in consumer price index
93
Separate Trading of Registered Interest and Principal of Securities (STRIPS)
Treasury derivative product that is a treasury bond that a financial institution spilts into the principal portion and interest portion.
94
Mortgage-Backed Securities
Securities that consist of mortgages, either alone or pooled up, that are sold by banks. The mortgage holder will receive the regular payments by the mortgagee minus a service fee put on by the bank.
95
Government National Mortgage Association (GNMA)
Division of Housing and Urban Development
Pools government-insured mortgages known as pass-throughs
Guarantees the payment of principal and interest but not the mortgage itself
96
To Be Announced (TBAs)
Pending pools of mortgages sold to a GNMA dealer that consist of mortgages that have not started regular payments by the homeowner yet.
97
Asset-Backed Securities
Financial securities backed by income generating assets such as credit card receivables, student loans, etc.
98
Real Estate Investment Conduits (REMIC)
Pools of residential and commercial mortgages that are placed in a trust, securitized, and sold to the public. Structured as a CMO type with tranches.
99
Collateralized Debt Obligations (CDOs)
Financial products that are backed by a pool of loans and other assets and sold to institutional investors
100
Collateralized Bond Obligations
A pool of corporate junk bonds that are rated as investment grade due to the risk being spread over a the entire pool
101
Collateralized Mortgage Obligations
A mortgage-backed security that contains a pool of mortgages bundled together and sold as an investment
102
Banker's Acceptance
A short-term issuance by a bank that guarantees the payment at a later date.
It is often used in importing and exporting, where the importer's bank issues banker acceptance to the exporter
103
Commercial Paper
An unsecured debt (without collateral) issued by corporations that has maturity lasting up to 270 days.
104
Asset-Backed Commercial Paper (ABCP)
Backed by receivables due to the company and can be outstanding between 90 to 180 days.
105
"Jumbo" Certificates of Deposits
A CD that requires a minimum deposit, $100,000
106
Foreign Exchange
The conversion of one currency to another
107
Spot Market (Foreign Exchange)
Buying the foreign currency today for delivery two days from the trade date.
108
Forward Market (Foreign Exchange)
Sets the rate at which currency will be converted at a later date
109
Currency Options (Foreign Exchange)
A contract that allows the buyer to convert their currency at a determined rate up until expiration
110
Currency Futures
Exchange traded future contracts that specify the conversion rate of two currencies that the buyer must exercise at delivery
111
Open-End Mutual Funds
A fund that consist of pooled investors money for which shares are sold directly to the investor and can be redeemed by the investor at any time by the mutual fund.
The open-end means that there are an unlimited number of shares that can be issued
112
Close-End Mutual Funds
A mutual fund that sets a target amount to raise, usually through an initial public offering. Once achieved, no new cash flow comes into the fund, the number of shares stays constant, and the shares are traded on an exchange.
113
Joint Ventures
A type of mutual fund that consist of participants pooling their resources in order to achieve a specific task, event, or outcome.
114
Unit Investment Trusts
A type of mutual fund that use pooled funds to acquire a portfolio of securities. They are usually issued through an IPO and are not traded on an exchange. Unlike open/closed end mutual funds, UIT have an expiration date and the underlying securities are not traded.
115
Balanced Funds
A type of mutual fund that invests in multiple asset types of a market, usually socks and bonds.
116
Equity Funds
Mutual funds that invest primarily in stocks
117
Bond Funds
A mutual fund that invest in bonds.
118
Foreign Funds
A mutual fund that invests in foreign companies, governments, financial institutions, etc.
119
Index Funds
Mutual funds that replicate the performance of indexes such as the SP500 and DJI
120
Derivative Funds
Mutual funds that specialize in derivative products like options and futures.
121
Fund of Funds
A type of mutual fund that consist of a pool of different types of funds
122
Mutual Fund Board of Directors
Oversees the activity of the fund and makes sure that the investments and policies are maintained in accordance to the fund's charter.
Must compose of at-least 75% of people who are not affiliated with the fund.
123
Mutual Fund Investment Advisors
A group that advises management on the state of the market, economy, investments, etc., and recommends strategies.
124
Mutual Fund Custodian
A group, usually a bank, that is responsible for the safekeeping of the portfolio. This includes issuing payouts to the fund holder and keeping up-to-date records
125
Mutual Fund Transfer Agent
Responsible for the issuance of new shares when bought by customers and the surrender of shares when sold by clients.
Also is responsible for keeping registered owners' records up to date and distributing dividends/capital gains to the owners.
126
Investment Company Act of 1940
1) determines how the fund is to calculate the net asset value and requires it to update the value by the next business day
2) at-least 75% of the board of directors must be disinterested members
3) establishes the criteria in determining whether a person qualifies as a disinterested member
4) mandates the timely filing of reports
5) sets the requirements for timeliness and accuracy of information in sales information
6) sets the requirements for custodial activity
7) capital gains must not exceed once per taxpayer year and that dividends should be distributed in the period received
8) contains other provisions aimed at protecting the investing public
127
Mutual Fund Sales: Front-End Load Funds
A sales charge paid by mutual fund investor paid to the broker-dealer at the when the investor purchases the mutual fund
128
Mutual Fund Sales: Break-Point Sales
The point/level at which the sales charge is lowered.
129
Mutual Fund Sales: Rights of Accumulation
Allows the investor to be charged lower sales charges after accumulating enough of the mutual fund over time to meet the break-point.
130
Mutual Fund Sales: Letter of Intent
Allows the investor to be charged a rate at which they intend to invest over the next 13 months
131
Mutual Fund Sales: Voluntary Plan
A sales charge based on what an investor attempts to reach a certain predetermined goal. Similar to a letter of intent but for the duration of years rather than months
132
Mutual Fund Sales: Contractual Plan
The sales charge is based on a total commitment with the majority taken up in the first few years
133
Mutual Fund Sales: Back-End Load
Mutual Funds with sales charge imposed when the investor sells/redeems their shares
134
Mutual Fund Sales: ABC Funds
Mutual Funds that offer the option of how investors want their sales charge:
A - front-end load
B - back-end load
C- a small back end load charge that may be removed if the investor holds on to their investment for a predetermined amount of time
135
Family of Funds
A set of mutual funds managed by a particular investment management firm
136
Option
A contract that allows the owner certain privileges for a specified period of time
137
Option: Call
The privilege to buy the underlying asset
138
Option : Put
The privilege to sell the underlying asset
139
"In/At/Out the Money"
In - when an options strike price has been surpassed
At - when an options strike price has been reached
Out - when an options strike price has yet to be reached
140
Listed Options
Options traded on an exchange and have a fixed structure
141
OTC Options
Options that are traded over the counter and whose terms are negotiated between buyer and seller
142
Option: Buy Write
A strategy consisting of the investor buying a security with options available on it and then selling call options on it with a higher striking price than the current price so that if the underlying price goes down, the investor will be able to keep their premiums on the option
143
Option: Spread
Buying one or more options while simultaneously selling another option/options
144
Bull Call Spread
Buying call options while simultaneously selling the same number of call option at a higher striking price.
145
Bear Put Spread
Buying put options while simultaneously selling the same number of put options at a lower striking price.
146
Vertical Spread
A technique of trying to benefit from differing striking prices of options with the same expiration date
147
Time/Horizontal/Calendar Spread
Spreads that have the same striking price but different expiration dates.
148
Straddle Spread
Owning equal number of put and call options of the same underlying in the hopes of some event changing the price enough, up or down, to cover the cost of both the puts and calls.
149
Deep-in-the-Money Options
Options that have a striking price farther away from the current price so that the time-value is lessoned in comparison with the intrinsic value.
150
Synthetics
A combination of owning shares, put, and call options to minimize risk.
151
Index Options
Options that are derived from indexes. The price of the option is the difference between the strike price and the current price.
152
Currency Option
Options on currency exchange rate
153
Interest Rate Options
Cash settled option that derives it value from changes in interest rates of Treasury bills
154
Debt Options
Options that use bonds as the underlying asset
155
Binary Options
An option that is exercised for a predetermined if the underlying asset has reached some price at the time of expiraition.
156
Capped Options
An option that is automatically exercised if the capped price is reached or surpassed at the close of the trading price.
157
Exchange Traded Fund
A financial instrument that tracks an index and is backed up by securities or assets from that index.
158
ETF Creation Units
When banks or large financial institutions buy a large blocks of securities that replicate an index, they place those in a trust and then form creation units, which are bundles of stock typical consisting of 50,000 shares. Shares are then issued on the creation unit, offering a small ownership of it.
159
Future
A contract that determines the price at which delivery will l occur at a future date. Futures are traded on exchanges
160
Forward
A contract the determines the price of a delivery at a future date. Forwards are traded over the counter
161
Structure of a Future Product
1. Underlying Product
2. Quantity required
3. Quality level
162
Structure of a Forward Product
1. Underlying Product
2. Negotiated quantity
3. Negotiated quality
4. Agreed-to delivery dates
5. Agreed to location for delivery
6. Agreed -to payment vehicle
7. Agreed-to payment location
163
Hedge
An investment that is intended to reduce risk of adverse price movements of an asset
164
Speculator
One who sees and opportunity and takes advantage of it
165
Futures: Fundamental Research
1. Demand for the product in the future
| 2. How demand affects each step of the flow from raw material to finished product
166
Interest-Rate Futures
A futures contract with an underlying asset being interest-bearing.
167
Index Futures
A cash-settling product that delivers cash at the time of delivery. The amount delivered is the difference between the closing price of the index and the contract at the time of the trade.
168
Currency Futures
Futures on currency with the one of the currencies as the commodity and the other currency as the cash to pay for the commodity
169
TRAKRs (Total Return Asset Contracts)
Exchange traded product with a duration of 3-5 years. Trades on the Chicago Mercantile Exchange Global Platform.
170
Options on Futures
Exercising an option on a future during its life will involve ownership of the future.
Exercising an option on a future at the end of the future's life will involve the underlying product of the future.
171
SPAN Margin (standardized portfolio analysis of risk)
Based on a software that uses algorithms to analyze complex future and option-on-futures positions to determine the minimum risk associated with that holistic position.
Margin requirements are then based the risk assesment.
172
Swaps
A derivatives product in which two parties exchange cash flows from two different financial instrunments.
Regulated by Commercial Code rather then the SEC (securities) or Commodity Futures Trading Commission (Futures).
173
Currency Swaps
When two different currencies are exchanged between two parties without the use of a foreign exchange.
For example, a company from country A expanded its operations in country B, and a company in country B expanded its operations in country A. Since they both need the other countries currency, they can swap currencies without taking on the foreign-exchange risks.
174
Cash Flow Swaps
When two parties exchange cash flows.
For example, if company A has high cash flows in season A but low cash flows in season B, and Company B has low cash flows in season A but high cash flows in season B, the two companies can loan extra cash during the high season to supplement for the low season.
175
Commodity Swap
Exchanging a commodity for another asset such as a future.
176
Currency Default Swaps (CDS)
A contract that allows financial institutions (loaner) to swap their credit risk with an investor in the case that the borrower defaults.
For a fee, the investor agrees to pay the debt in the case that the borrower defaults
177
Credit Default Indexes
Indexes that track the credit default market
178
Alternative Investments
An investment in any product other than a stock or bond
179
Hedge Funds
Actively managed investment pools that use not-traditional strategies to try to gain higher returns than the market. A high minimum investment means that few are able to invest but the wealthy.
180
Leveraged Buyouts (LBOs)
The acquisition of another company using a significant amount of borrowed money to meet the cost of the acquisition
181
Venture Capital
A form of private equity and a type of financing that investors provide to startup companies and small businesses which are believed to have long-term growth.
182
Special Purpose Vehicles (SPVs) or Special Purpose Entities (SPEs)
Formed and funded by financial institutions as a subsidiary or a stand=alone entity who:
- can buy assets from the institution, pool the loans securitize the pools, and sell them into the market as CDOs.
- Obtain assets from the parent company
- save taxes for the parent company
183
Structured Investment Vehicle (SIV)
Funds in longterm assets are financed by issuing short-term securities. They try to profit from the credit spread between the short-term interest and the long-term interest.
In order to continue making payments on the long-term assets, the issuance of short-term securities must continually be rolled over.
184
Day Orders
Orders that expire at the end of the day if not executed
185
Good Till Canceled Orders
Orders that remain in the marketplace until executed or canceled by the owner
186
Good Thru (time period)
Orders that expire after a time period if they are not executed by then
187
Market Order
An order that buys at the current ask price or sells at the current bid price.
188
Limit Order
An order that executes only if it executed above a certain asking price or below a certain bid price.
189
Stop Order
An order that becomes activated once a price level is reached, which the becomes a market order. For example, a buy order will execute at the market ask after the market ask has reached the stop price.
190
Stop Limit
A stop order that becomes a limit order once it is activated.
191
Short Sale
The use of borrowed stock to sell at the current price with the intentions of buying it back later at a lower price
192
Short Against the Box
Entering a short position to hedge against a current long position so that the current profits of the long position wont change in value
193
Fill or Kill (FOK)
Orders that must be filled immediately in entirety or else they are cancelled.
194
Immediate or Cancel
Orders that must be immediately filled, with any quantity available, and canceling the rest
195
All or None
An order that must be filled in its entirety but has a specified time period to be filled
196
Not Held
An order that relieves the broker-dealer from executing at the next best price and allows them a period of time to search for the best price.
For example, if a large enough order buys all of the lowest ask, the broker-dealer would have to buy the the second lowest ask price after, and so on, until the order is filled. With a Not Held order, the broker-dealer can wait until the ask price goes back down.
197
Step
A series of limit orders entered at ever-increasing buy orders or ever-decreasing sell orders
198
Spread Order
Entering equal numbers of long and short positions on an investment product and benefiting from the gain on one minus the loss on the other
199
Straddle Order
Longing or shorting an equal number of calls as puts on an option.
200
Principal Trading
When a broker-dealer uses its own inventory to full-fill a clients order. They will profit off both commissions and the bid-ask spread
201
Agency Trading
The broker-dealer acts as an intermediary between buyer and seller and only profiting from the commission
202
Intermarket Trading System
A system that posts the best bid and best offer among all the exchanges
203
Over-the-Counter (Principal-Type) Market
A dealer market in which trades are satisfied by dealers or market makers, while an exchange is a broker market.
204
Municipal Bond Market
Bought and sold through brokers or banks that are municipal securities dealer.
205
The Third Market
Consist of non-exchange member broker-dealers and institutional investors of exchange listed stocks trading over the counter
206
The Fourth Market
Institution to institution trading without the use of broker-dealers. They trade through ECN
207
Dark Pools
A market area within financial instituions and block-trading firm's network that allow large orders to have negotiated prices and moved all in one block
208
Margin
Money borrowed from a broker to purchase an investment
209
Minimum Equity Requirment
According to FINRA rules, an account must have $2,000 before it can be considered for margin.
The margin rate is 50% for stocks, meaning an investor must pay at least half of the total investment.
210
Buying on Margin: Equity
The amount that an investor would receive if they converted all their securities to cash on a position:
Equity = Market Value - Debit Balance (money borrowed with margin)
211
Buying on Margin: Maintenance
FINRA rules state that equity cannot go lower than 25% of the market value, or that the debit balance cannot surpass 75% of market value.
212
Call for Collateral
When a margin account goes under the maintenance requirements and the broker calls the client to deposit enough cash to meet 25% equity level.
213
Special Memorandum Account
A dedicated investment account in which excess margin generated from a clients margin account is deposited.
214
Margin: Buying Power
The amount of money an investor has in a margin account plus the margin they have available to them.
215
Option Margin
Used as collateral to secure a position.
Margin requirements differ based on the type of option.
216
Futures Margin
Used as leverage to buy a bigger postion.
217
Committee for Uniform Security Identification Procedures (CUSIP) number
A nine-digit security identification code:
- first six digits identify the issuer
- the next two identify the issue
- the last is the check digit
218
Dated Date
The day that interest on a newly issued debt instrument begins to accrue
219
Deed of Trust
A document describing the terms and features of a debt issue
