12B-1 FEES IRA/KEOGH ACCOUNTS
ALPHA LAST SPLIT
ALPHA EQUATION LIMIT ORDER
AMERICAN-STYLE OPTION LOAD MUTUAL FUND
ANALYST LONG POSITION
ANNUAL REPORT LONG POSITION (OPTIONS)
ARBITRAGE LONG TERM ASSETS
ARMS INDEX LONG TERM DEBT
ASSIGNMENT LONG TERM DEBT/CAPITALIZATION
AT-THE-MONEY LONG TERM LIABILITIES
AUTOREGRESSIVE LOW PRICE
AVERAGE MANAGEMENT/CLOSELY HELD SHARES
AVERAGE MATURITY MARGIN ACCOUNT (STOCKS)
AVERAGE WEEKLY VOLUME MARGIN REQUIREMENT (OPTIONS)
BACK OFFICE MARKET CAP
BANKER'S ACCEPTANCE MARKET CYCLE
BASIS MARKET ORDER
BASIS POINTS MINIMUM PURCHASES
BEAR MONEY MARKET FUND
BEAR RAID MOVING AVERAGE
BETA (MUTUAL FUNDS) MUTUAL FUND
BETA EQUATION (MUTUAL FUNDS) MUTUAL FUND TRACKER
BETA (STOCKS) NET ASSET VALUE (NAV)
BETA EQUATION (STOCKS) NET INCOME
BLOW-OFF TOP NM
BREAKOUT NO LOAD MUTUAL FUND
BULL MARKET OBJECTIVE (MUTUAL FUNDS)
BUYOUT OPEN INTEREST
CALL OPTION OPENING PURCHASE
CAPITAL EXPENDITURES OPENING SALE
CAPITAL GAIN OPTION
CAPITAL LOSS OTHER CURRENT ASSETS
CASH AND EQUIVALENTS OTHER LONG TERM LIABILITIES
CASH DIVIDEND OUT-OF-THE-MONEY
CHANGES IN FINANCIAL POSITION OVERBOUGHT\OVERSOLD INDICATOR
CHURNING PAYMENT DATE
CLOSING PURCHASE PHONE SWITCHING
CLOSING SALE PIVOT
COMMISSION POINT AND FIGURE CHART
COMMON STOCK/OTHER EQUITY PREFERRED STOCK
CONFIDENCE INDICATOR PREMIUM
CONFIDENCE LEVEL PRICE/BOOK RATIO
CONFIRMATION PRICE/EARNINGS RATIO
CONVERGENCE P/E RATIO
CORNER A MARKET PRICE/SALES RATIO
COUPON RATE PRICES
COVERED CALL PRIMARY MARKET
COVERED PUT PROFIT MARGIN
CURRENT ASSETS PROGRAM TRADING
CURRENT LIABILITIES PROSPECTUS
CURRENT RATIO PROXY
CURRENT YIELD PUT OPTION
DAY ORDER QUICK RATIO
DEBT/EQUITY RATIO RANGE
DECILE RANK RATE OF RETURN
DECLARATION DATE RECORD DATE
DEFERRED TAXES REDEMPTION CHARGE
DEPRECIATION RELATIVE STRENGTH
DERIVATIVE SECURITY RETRACEMENT
DETREND RETURN ON ASSETS (ROA)
DIFFERENCE FROM S&P RETURN ON EQUITY (ROE)
DISTRIBUTIONS REVERSE STOCK SPLIT
DIVERGENCE RIGHTS OFFERING
DIVIDEND SALES CHARGE
DIVIDEND REINVESTMENT PLAN SEC
DIVIDEND YIELD (MUTUAL FUNDS) SECONDARY MARKET
DIVIDEND YIELD (STOCKS) SELLING SHORT
DIVIDENDS PER SHARE SERIES
DOWNGRADE SETTLEMENT DATE
EARNINGS SHARE REPURCHASE
EARNINGS PER SHARE (EPS) SHORT POSITION (OPTIONS)
EARNINGS YIELD SHORT POSITION (STOCKS)
EQUITY SHORT SALE
EQUITY OPTIONS SIC
EUROPEAN-STYLE OPTION SLIPPAGE
EX-DIVIDEND DATE STOCK DIVIDEND
EXCHANGE STOP ORDER
EXECUTION STRIKE PRICE
EXERCISE TICK INDICATOR
EXPENSE RATIO TIME VALUE
EXPIRATION CYCLE TOTAL REVENUE
EXPIRATION DATE TRADE
FREE CASH FLOW TRADE DATE
FREE CASH FLOW PER SHARE TRADING RANGE
FUND FAMILY TURNOVER RATIO
FUND MANAGER TYPE
FUTURES CONTRACT UNCOVERED CALL
GOOD 'TIL CANCELED UNCOVERED PUT
GROWTH RATES UNDERLYING SECURITY
HEAD AND SHOULDERS VOLATILITY (MUTUAL FUNDS)
HEDGING WALL STREET TRACKER
HIGH PRICE W-TYPE BOTTOM
HOLDING COMPANY WARRANT
IN-THE-MONEY WASTING ASSET
INDICATED DIVIDEND WITHDRAWAL PLAN
INDICATED YIELD WRITER
INITIAL PUBLIC OFFERING (IPO) YIELD TO CALL
INSIDE INFORMATION YIELD TO MATURITY
Annual report required by the SEC each year. Provides a comprehensive
overview of a company's state of business. Must be filed within 90 days
after fiscal year end.
The predetermined percent of a mutual fund's assets used to defray marketing
expenses. The amount of the fee is stated in the fund's prospectus.
Marketing fees are included in the expense ratio when there are no 12b-1
A measure of selection risk (also known as residual risk) of a mutual fund
in relation to the market. A positive alpha is the extra return awarded to
the investor for taking a risk, instead of accepting the market return.
For example, an alpha of 0.4 means the fund outperformed the market-based
return estimate by 0.40%. A -0.6 means a fund's monthly return was 0.60%
less than would have been predicted from the change in the market alone.
The alpha of a fund is determined as follows:
[ (sum of y) - ((b)(sum of x)) ] / n
where: n =number of observations (36 months)
b = beta of the fund
x = rate of return for the S&P 500
y = rate of return for the fund
An option contract that can be exercised at any time between the date of
purchase and the expiration date. Most exchange-traded options are American
Employee of a brokerage or fund management house who studies companies and
makes buy and sell recommendations on their stocks. Most specialize in a
Yearly record of a publicly held company's financial condition. It includes
a description of the firm's operations, its balance sheet and income
statement. SEC rules require that it be distributed to all shareholders.
A more detailed version is called a 10-K.
Profiting from differences in the price of a single security that is traded
on more than one market.
Also known as TRading INdex (TRIN):
= #advancing issues/#declining issues
Total up volume/total down volume
An advance/decline market indicator. Less than 1.0 indicates bullish
demand, while above 1.0 is bearish. The index often is smoothed with a
simple moving average.
The receipt of an exercise notice by an options writer that requires him to
sell (in the case of a call) or purchase (in the case of a put) the
underlying security at the specified strike price.
An option is at-the-money if the strike price of the option is equal to the
market price of the underlying security. For example, if XYZ stock is
trading at 54, then the XYZ 54 option is at-the-money.
Using previous data to predict future data.
An arithmetic mean of selected stocks intended to represent the behavior of
the market or some component of it. One good example is the widely quoted
Dow Jones Industrial Average, which adds the current prices of the 30 DJIA's
stocks, and divides the results by a predetermined number, the divisor.
The average time to maturity of securities held by a mutual fund. Changes
in interest rates have greater impact on funds with longer average life.
AVERAGE WEEKLY VOLUME
This indicator is determined by adding the number of shares traded for the
past week and dividing by the number of trading days in that week.
Brokerage house clerical operations that support, but do not include, the
trading of stocks and other securities. Includes all written confirmation
and settlement of trades, record keeping and regulatory compliance.
A short-term credit investment created by a non-financial firm and
guaranteed by a bank as to payment. Acceptances are traded at discounts
from face value in the secondary market. These instruments have been a
popular investment for money market funds.
The price an investor pays for a security plus any out-of-pocket expenses.
It is used to determine capital gains or losses for tax purposes when the
stock is sold.
Refers to yield on bonds. Each percentage point of yield in bonds equals
100 basis points. If a bond yield changes from 7.25% to 7.39%, that's a
rise of 14 basis points.
An investor who believes a stock or the overall market will decline. A bear
market is a prolonged period of falling stock prices.
A situation in which large traders sell positions with the intention of
driving prices down.
BETA (MUTUAL FUNDS)
The measure of a fund's risk in relation to the market. A 0.7 beta means
the fund's total return is likely to move up or down 70% of the market
change; 1.3 means total return is likely to move up or down 30% more than
BETA EQUATION (MUTUAL FUNDS)
The beta of a fund is determined as follows:
[(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]
where: n = # of observations (36 months)
x = rate of return for the S&P 500 Index
y = rate of return for the fund
Measure of a stock's risk in relation to the market. A 0.7 beta means a
stock price is likely to move up or down 70% of the market change; 1.3 means
the stock is likely to move up or down 30% more than the market.
BETA EQUATION (STOCKS)
The beta of a stock is determined as follows:
[(n) (sum of (xy)) ]-[(sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[(sum of x) (sum of x)]
where: n = # of observations (24-60 months)
x = rate of return for the S&P 500 Index
y = rate of return for the stock
A steep and rapid increase in price followed by a steep and rapid drop in
price. This is an indicator seen in charts and used in technical analysis
of stock price and market trends.
A rise in a security's price above a resistance level (commonly its previous
high price) or drop below a level of support (commonly the former lowest
price.) A breakout is taken to signify a continuing move in the same
direction. Can be used by technical analysts as a buy or sell indication.
An investor who thinks the market will rise.
A market which is on a consistent upward trend.
Purchase of a controlling interest (or percent of shares) of a company's
stock. A leveraged buyout is done with borrowed money.
An option contract that gives the holder of the option the right (but not
the obligation) to purchase, and obligates the writer to sell, a specified
number of shares of the underlying stock at the given strike price, on or
before the expiration date of the contract.
Amount used during a particular period to acquire long term assets such as
property, plant, or equipment.
When a stock is sold for a profit, it's the difference between the net sales
price of securities and their net cost, or original basis. If a stock is
sold below cost, the difference is a capital loss.
The difference between the net cost of a security and the net sale price, if
that security is sold at a loss.
CASH AND EQUIVALENTS
The value of assets that can be converted into cash immediately, as reported
by a company. Usually includes bank accounts and marketable securities,
such as government bonds and Bankers' Acceptances.
A dividend paid in cash to a company's shareholders. The amount is normally
based on profitability and is taxable as income.
CHANGES IN FINANCIAL POSITION
Sources of funds internally provided from operations which alter a company's
cash flow position: depreciation, deferred taxes, other sources, and capital
Excessive trading of a client's account in order to increase the broker's
A transaction in which the purchaser's intention is to reduce or eliminate a
short position in a stock, or in a given series of options.
A transaction in which the seller's intention is to reduce or eliminate his
long position in a stock, or a given series of options.
The fee paid to a broker to execute a trade, based on number of shares,
bonds, options and their dollar value. In 1975, deregulation led to the
creation of discount brokers, who charge lower commissions than full service
brokers. Full service brokers offer advice and usually have a full staff of
analysts who follow specific industries. Discount brokers simply execute a
client's order--and do not offer an opinion on a stock.
COMMON STOCK/OTHER EQUITY
Value of outstanding common shares at par, plus accumulated retained
earnings. Also called shareholders' equity.
A measure of investors' faith in the economy and the securities market. A
low or deteriorating level of confidence is considered by many technical
analysts as a bearish sign.
The degree of assurance that a specified failure rate is not exceeded.
The written statement that follows any "trade" in the securities markets.
Confirmation is issued immediately after a trade is executed. It spells out
settlement date, terms, commission, etc.
The movement of the price of a futures contract toward the price of the
underlying cash commodity. At the start, the contract price is higher
because of the time value. But as the contract nears expiration, the
futures price and the cash price converge.
CORNER A MARKET
To purchase enough of the available supply of a commodity or stock in order
to manipulate its price.
In bonds, notes or other fixed income securities, the stated percentage rate
of interest, usually paid twice a year.
A short call option position in which the writer owns the number of shares
of the underlying stock represented by the option contracts. Covered calls
generally limit the risk the writer takes because the stock does not have to
be bought at the market price, if the holder of that option decides to
A put option position in which the option writer also is short the
corresponding stock or has deposited, in a cash account, cash or cash
equivalents equal to the exercise of the option. This limits the option
writer's risk because money or stock is already set aside. In the event
that the holder of the put option decides to exercise the option, the
writer's risk is more limited than it would be on an uncovered or naked put
Value of cash, accounts receivable, inventories, marketable securities and
other assets that could be converted to cash in less than 1 year.
Amount owed for salaries, interest, accounts payable and other debts due
within 1 year.
Indicator of short-term debt paying ability. Determined by dividing current
assets by current liabilities. The higher the ratio, the more liquid the
For bonds or notes, the coupon rate divided by the market price of the bond.
An order to buy or sell stock that automatically expires if it can't be
executed on the day it is entered.
Indicator of financial leverage. Compares assets provided by creditors to
assets provided by shareholders. Determined by dividing long term debt by
common stockholders' equity.
Performance over time, rated on a scale of 1-10. A 1 indicates that a
mutual fund's return was in the top 10% of funds being compared, while a 3
means the return was in the top 30%. Objective Rank compares all funds in
the same investment strategy category. All Rank compares all funds.
The date on which a firm's directors meet and announce the date and amount
of the next dividend.
A non-cash expense that provides a source of free cash flow. Amount
allocated during the period to cover tax liabilities that have not yet been
A non-cash expense that provides a source of free cash flow. Amount
allocated during the period to amortize the cost of acquiring long term
assets over the useful life of the assets.
A financial security, such as an option, or future, whose value is derived
in part from the value and characteristics of another security, the
To remove the general drift, tendency or bent of a set of statistical data
as related to time.
DIFFERENCE FROM S&P
A mutual fund's return minus the change in the Standard & Poors 500 Index
for the same time period. A notation of -5.00 means the fund return was 5
percentage points less than the gain in the S&P, while 0.00 means that the
fund and the S&P had the same return.
Payments of fund earnings (dividends) or gains (capital gains).
Distributions can be made by check or by investing in additional shares.
Funds are required to distribute gains (if any) to shareholders at least
once per year. Technical analysts look on a pattern of distribution as a
tipoff that the stock will soon fall in price.
When two or more averages or indices fail to show confirming trends.
Distribution of a portion of a company's earnings to shareholders, in cash
or additional stock.
DIVIDEND REINVESTMENT PLAN
Automatic reinvestment of shareholder dividends in more shares of a
company's stock. Dividend reinvestment plans allow shareholders to
accumulate capital over the long term using dollar cost averaging.
DIVIDEND YIELD (MUTUAL FUNDS)
Indicated Yield represents return on a share of a mutual fund held over the
past 12 months. Assumes fund was purchased 1 year ago. Reflects effect of
sales charges (at current rates), but not redemption charges.
DIVIDEND YIELD (STOCKS)
Indicated Yield represents annual dividends divided by current stock price.
DIVIDENDS PER SHARE
Dividends paid for the past 12 months divided by the number of common shares
outstanding, as reported by a company. The number of shares often is
determined by a weighted average of shares outstanding over the reporting
A classic negative change in ratings for a stock, and or other rated
Net income for the company during the period.
EARNINGS PER SHARE (EPS)
Also referred to as Primary Earnings Per Share. Net income for the past 12
months divided by the number of common shares outstanding, as reported by a
company. The company often uses a weighted average of shares outstanding
over reporting term.
The ratio of Earnings Per Share after allowing for tax and interest payments
on fixed interest debt, to the current share price. 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.
The value of the common stockholders' equity in a company as listed on the
Securities that give the holder the right to buy or sell a specified number
of shares of stock, at a specified price for a certain (limited) time
period. Typically one option equals 100 shares of stock.
An option contract that can only be exercised on the expiration 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. The
length of time ensuing between the ex-dividend date and the date of actual
payment may be up to a month. A stock that has gone Ex-Dividend is marked
with an x in newspaper listings.
The marketplace in which shares, options and futures on stocks, bonds,
commodities and indices are traded. Principal US stock exchanges are: New
York Stock Exchange (NYSE), American Stock Exchange (AMEX) and the National
Association of Securities Dealers (NASDAQ).
The process of completing an order to buy or sell securities. Once a trade
is executed, it is considered final. Settlement (payment and transfer of
ownership) occurs between 1 and 5 days after an order is executed.
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.
The percentage of the assets that were spent to run a mutual fund (as of the
last quarterly fund report). This includes expenses such as brokerage
commissions, management fees, and overhead costs. Excludes 12b-1 fees.
An expiration cycle relates to the dates on which options on a particular
security expire. A given option will be placed in 1 of 3 cycles, the
January cycle, the February cycle, or the March cycle. At any point in
time, an option will have contracts with 4 expiration dates outstanding, 2
in near-term months and 2 in far-term months.
The last day (in the case of American-style) or the only day (in the case of
European-style) on which an option may be exercised. For stock options,
this date is the Saturday immediately following the 3rd Friday of the
expiration month; however, brokerage firms may set an earlier deadline for
notification of an option holder's intention to exercise. If Friday is a
holiday, the last trading day will be the preceding Thursday.
FREE CASH FLOW
Indicator of liquidity. Amount of cash produced or consumed by a company
for a specific period. Useful in determining the company's ability to meet
obligations, pay dividends and fund business expansion.
FREE CASH FLOW PER SHARE
Free cash flow divided by the number of common shares outstanding.
The management company that runs and/or sells shares of the fund. Fund
families often offer several funds with different investment objectives.
The person who determines how mutual fund assets are invested.
Agreement to buy or sell a set number of shares of a specific stock in a
designated future month at a price agreed upon by the buyer and seller. The
contracts themselves are often traded on the futures market. A futures
contract differs from an option because an option is the right to buy or
sell, whereas a futures contract is the promise to actually make a
GOOD 'TIL CANCELED
Sometimes simply called "GTC", it means an order to buy or sell stock that
is good until you cancel it.
The amount a company grows, year by year.
HEAD AND SHOULDERS
In technical analysis, a chart formation in which a stock price reaches a
peak and declines, rises above its former peak and again declines and rises
again but not to the second peak and then again declines. The first and
third peaks are shoulders, while the second peak is the formation's head.
Technical analysts generally consider a head and shoulders formation to be a
very bearish indication.
A strategy designed to reduce investment risk using "call" options, "put"
options, "short" selling, or futures contracts. A hedge can help lock in
existing profits. Its purpose is to reduce the potential volatility of a
portfolio, by reducing the risk of loss.
The highest (intraday) price of a stock over the past 52 weeks, adjusted for
any stock splits.
A corporation that owns enough voting stock in another firm to control
management and operations by influencing or electing its board of directors.
A "call" option is in-the-money if the strike price is less than the market
price of the underlying security. A "put" option is in-the-money if the
strike price is greater than the market price of the underlying security.
For example, an XYZ "call" option with a 52 strike price is in-the-money
when XYZ trades at 52 1/8 or higher. An XYZ "put" option with a 52 strike
price is in-the-money when XYZ is trading at 51 7/8 or lower.
Total amount of dividends that would be paid on a share of stock over the
next 12 months if each dividend were the same amount as the most recent
The yield, based on the most recent quarterly rate times four. To determine
the yield, divide the annual dividend by the price of the stock. The
resulting number is represented as a percentage.
The category describing a company's primary business activity. This usually
is determined by the largest portion of revenue.
INITIAL PUBLIC OFFERING (IPO)
A company's first sale of stock to the public. Securities offered in an IPO
are often but not always those of young, small companies seeking outside
equity capital and a public market for their stock. Investors purchasing
stock in IPOs generally must be prepared to accept very large risks for the
possibility of large gains.
Relevant information about a company that has not yet been made public. It
is illegal for holders of this information to make trades based on it.
Institutional Holdings are those holdings or ownership of a company held by
other companies or institutions.
Value of items available for sale and in the process of being made ready for
Special accounts where you can save and invest, and the taxes are deferred
until money is withdrawn.
After a stock split, the number of shares distributed for each share held
and the date of the distribution.
An order to buy a stock below a specified price or to sell a stock at above
a specified price. For instance, you could tell a broker "Buy me 100 shares
of XYZ Corp at $8 or less" or to "sell 100 shares of XYZ at $10 or better."
LOAD MUTUAL FUND
A mutual fund with shares sold at a price including a sales
charge--typically 4% to 9.3% of the net amount indicated.
Occurs when an individual owns securities. An owner of 100 shares of stock
is said to be "Long the Stock."
LONG POSITION (OPTIONS)
An options position where a person has executed one or more options trades
where the net result is that they are an "owner" or holder of options (i.e.
the number of contracts bought exceeds the number of contracts sold).
LONG TERM ASSETS
Value of property, equipment and other capital assets minus the
depreciation. This is an entry in the bookkeeping records of a company and
does not necessarily reflect the market value of the assets.
LONG TERM DEBT
Value of obligations of over 1 year that require that interest be paid.
LONG TERM DEBT/CAPITALIZATION
Indicator of financial leverage. Shows long term debt as a proportion of
the capital available. Determined by dividing long term debt by the sum of
long term debt, preferred stock and common stockholders' equity.
LONG TERM LIABILITIES
Amount owed for leases, bond repayment and other items due after 1 year.
The lowest (intraday) price of a stock over a certain period of time.
MANAGEMENT/CLOSELY HELD SHARES
Percentage of shares held by persons closely related to a company, as
defined by the Securities and Exchange Commission. Part of these
percentages often is included in Institutional Holdings--making the combined
total of these percentages over 100. There is overlap as institutions
sometimes acquire enough stock to be considered by the SEC to be closely
allied to the company.
MARGIN ACCOUNT (STOCKS)
A leveraged account where stocks can be purchased for a combination of cash
and a loan. The loan in the margin account is collateralized by the stock
and, if the value of the stock drops, the owner will be asked to either put
in more cash, or sell a portion of the stock. This is all federally
MARGIN REQUIREMENT (OPTIONS)
The amount of cash an uncovered (naked) option writer is required to deposit
and maintain to cover his daily position valuation and reasonably
foreseeable intraday price changes.
Also known as Market Capitalization. The dollar value of outstanding
shares. Computed as shares times price.
The period between the 2 latest highs or lows of the S&P 500, showing net
performance of a fund through both an up and a down market. A market cycle
is complete when the S&P is 15% below the highest point or 15% above the
lowest point (ending a down market). The dates of the last market cycle
are: 12/04/87 to 10/11/90 (low to low).
An order to buy or sell a stock at the going price.
For mutual funds, the amount required to open a new account or to deposit
into an existing account. Some funds are closed to new investors, but allow
deposits to existing accounts.
MONEY MARKET FUND
A mutual fund that specializes in making short-term investments such as
30-day Treasury bills, Banker's Acceptances, Certificates of Deposit and
other short-term instruments.
Used in charts and technical analysis, the average of security or commodity
prices constructed in a period as short as a few days or as long as several
years and showing trends for the latest interval. As each new variable is
included in calculating the average, the last variable of the series is
An investment company that pools investors' money to invest in a variety of
stocks, bonds, or other securities.
MUTUAL FUND TRACKER
A very sophisticated and professional computer program to track and chart
mutual funds. The Mutual Fund Tracker works using technical analysis and a
Mutual Fund Composite Average, in conjunction with other key indices, to
determine when to get into and out of mutual funds. The program compares
three moving averages against each other, and then compares each moving
average to the current price. You can even change the moving averages, used
by the program, to look at different "what if" calculations based on your
investment objectives. Features: easy to understand documentation; graphs;
period and individual reports; select TREND or access actual BUY, SELL, and
HOLD signals; ability to write graph pictures to disk for later review with
The Graph Tracker; optional auto-update of data; data subscriptions; and
more. Write to: Watkins Enterprises, P.O. Box 33280, Suite 195, Austin,
Texas, 78764-0280 for more information.
NET ASSET VALUE (NAV)
The value of a mutual fund's investments.
The company's total earnings after expenses.
Abbreviation for Not Meaningful. Used when a value cannot be calculated
because 1 of more parts of the calculation are unknown or the result would
be a negative value and therefore not meaningful.
NO LOAD MUTUAL FUND
An open-end investment company, shares of which are sold without a sales
charge. There can be other charges, however, such as management fees,
expense fees or 12b-1 fees.
Price and volume fluctuations that can confuse interpretation of market
OBJECTIVE (MUTUAL FUNDS)
The fund's investment strategy category as stated in the prospectus. There
are more than 20 standardized categories. See the Objective section in
Mutual Fund Analyst's "About the Analyst" for a printable list of categories
and their meanings.
The number of outstanding option contracts in the exchange market or in a
particular class or series.
A transaction in which the purchaser's intention is to create or increase a
long position in a given series of options.
A transaction in which the seller's intention is to create or increase a
short position in a given series of options.
Gives the buyer the right, but not the obligation, to buy or sell stock at a
set price on or before a given date. Investors, not companies, issue
options. Investors who purchase call options bet the stock will be worth
more than the price set by the option (the strike price), plus the price
they paid for the option itself. Buyers of put options bet the stock's
price will go down below the price set by the option.
OTHER CURRENT ASSETS
Value of non-cash assets, including prepaid expenses and accounts
receivable, due within 1 year.
OTHER LONG TERM LIABILITIES
Value of leases, future employee benefits, deferred taxes and other
obligations not requiring interest payments that must be paid over a period
of more than 1 year.
A call option is out-of-the-money if the strike price is greater than the
market price of the underlying security. A put option is out-of-the-money
if the strike price is less than the market price of the underlying
An indicator that attempts to define when prices have moved too far and too
fast in either direction and thus are vulnerable to reaction.
Date on which a declared stock dividend or a bond interest payment is
scheduled to be made.
In mutual funds, the ability to transfer shares between funds in the same
family by telephone request. There may be a charge associated with these
Price level established as being significant by market's failure to
penetrate or as being significant when a sudden increase in volume
accompanies the move through the price level.
POINT AND FIGURE CHART
A price-only chart that takes into account only whole integer changes in
price, i.e., a 2-point change. Point and figure charting disregards the
element of time and is solely used to record changes in price.
A security that shows ownership in a corporation and gives the holder a
claim, prior to the claim of common stockholders, on earnings and also
generally on assets in the event of liquidation. Most preferred stock pays
a fixed dividend, stated in a dollar amount or as a percentage of par value.
This stock does not usually carry voting rights.
The price of an option contract, determined on the exchange, which the buyer
of the option pays to the option writer for the rights to the option
Compares a stock's market value to the value of total assets less total
liabilities (book). Determined by dividing current price by common
stockholders' equity per share (book value), adjusted for stock splits.
Also called Market-to-Book.
Shows the "multiple" of earnings at which a stock sells. Determined by
dividing current price by current earnings per share (adjusted for stock
splits). Earnings per share for the P/E ratio is determined by dividing
earnings for past 12 months by the number of common shares outstanding.
Higher "multiple" means investors have higher expectations for future
growth, and have bid up the stock's price.
The ratio represents the sum of the market value (price multiplied by the
number of shares) divided by the sum of the earnings of that company. A
A negative P/E is considered undefined and is shown as NM (not meaningful).
The industry average represents the sum of the market value (price
multiplied by the number of shares) for all companies within the same
industry divided by the sum of the earnings for those companies.
Determined by dividing stock's current price by revenue per share (adjusted
for stock splits). Revenue per share for the P/S ratio is determined by
dividing revenue for past 12 months by number of shares outstanding.
The industry average is the sum of market value (price multiplied by the
number of shares) for all companies within the same industry divided by sum
of revenue for those firms.
Price of a share of common stock on the date shown. Highs and lows are
based on the highest and lowest trading price of the stock and may reflect
an intraday (as opposed to end-of-day) price. To find the current price or
quote check your local newspaper.
The first buyer of a newly issued security buys that security in the primary
market. All subsequent trading of those securities is done in the secondary
Indicator of profitability. Determined by dividing net income by revenue
for the same 12-month period. Result is shown as a percentage. The
industry average represents the sum of earnings for all companies within the
same industry divided by the sum of the revenue for those companies.
Trades based on signals from computer programs, usually entered directly
from the trader's computer to the market's computer system and executed
Formal written document to sell securities that describes the plan for a
proposed business enterprise, or the facts concerning an existing one, that
an investor needs to make an informed decision. Prospectuses are also used
by mutual funds, describing the holdings, background of managers, fund
objectives, a financial statement and other essential data.
Document intended to provide shareholders with information necessary to vote
in an informed manner on matters to be brought up at a stockholders'
meeting. Includes information on closely held shares. Shareholders can and
often do give management their proxy--and the right to vote their shares.
An option contract that gives the holder the right to sell (or "put"), and
places upon the writer the obligation to purchase, a specified number of
shares of the underlying stock at the given strike price on or before the
expiration date of the contract.
Indicator of a company's financial strength (or weakness). Calculated by
taking current assets less inventories, divided by current liabilities.
Also called Acid Test. The industry average represents the sum of the
current assets less inventories for all companies within the same industry,
divided by the sum of the current liabilities for those companies.
The difference between the high and low price during a given period.
RATE OF RETURN
The percentage gain or loss for a mutual fund in a specific time period.
This number assumes that all distributions are reinvested at the current
rate of return. Annualized return is a compounded yearly rate.
Date by which a shareholder must officially own shares in order to be
entitled to a dividend. For example, a firm might declare a dividend on
November 1st, payable December 1st, to holders of record, November 15th.
Once a trade is executed an investor "owns" the stock, but is not "owner of
record" until the settlement, which typically takes 5 business days. After
the record date, a stock is said to be EX-DIVIDEND.
The maximum commission charged by a mutual fund when redeeming shares. For
example, a 2% redemption charge (also called a "back end load") on the sale
of shares valued at $1000 will result in payment of $980 (or 98% of the
value) to the investor. This charge may decrease as shares are held for
longer time periods.
A stock's price movement over the past year as compared to a market index
(the S&P 500). Value below 1.0 means the stock shows relative weakness in
price movement (underperformed the market); a value above 1.0 means the
stock shows relative strength over the 1-year period.
Equation for Relative Strength:
[current stock price/year-ago stock price]
[current S&P 500/year-ago S&P 500]
A price movement in the opposite direction of the previous trend.
RETURN ON ASSETS (ROA)
Indicator of profitability. Determined by dividing net income for the past
12 months by total assets. Result is shown as a percentage. The industry
average ROA represents the sum of the earnings for all companies, within the
same industry, divided by the sum of the total assets for those companies.
RETURN ON EQUITY (ROE)
Indicator of profitability. Determined by dividing net income for the past
12 months by common stockholders' equity (adjusted for stock splits).
Result is shown as a percentage. The industry average ROE represents the
sum of the earnings for all companies, within the same industry, divided by
the sum of the stockholders' equity for those companies.
REVERSE STOCK SPLIT
A proportionate decrease in the number of shares, but not the value of
shares of stock held by shareholders. Shareholders maintain the same
percentage of equity as before the split. For example, a 1-for-3 split
would result in stockholders owning 1 share for every 3 shares owned before
the split. A firm generally institutes a reverse split in order to boost
its stock's market price because it thinks the price is too low to woo
Offering of common stock to existing shareholders who hold rights that
entitle them to buy newly issued shares at a discount from the price at
which shares will later be offered to the public.
The maximum commission charged by a mutual fund when purchasing shares. A
4% sales charge (also called a load) on a $1000 purchase will buy $960 worth
of fund shares. No Load funds do not carry sales charges, but may have
management fees, expenses and 12b-1 fees.
The Securities and Exchange Commission, the primary federal regulatory
agency of the securities industry.
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.
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 August 1st, you purchase
1000 shares of XYZ at $7 per share. You've made $1000 by selling short.
All option contracts of the same class that also have the same unit of
trade, expiration date, and exercise price.
The date on which payment is made to settle a trade. Settlement is
generally made 1-5 business days after a trade is executed. In stocks,
settlement is generally 5 business days after the trade.
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 (for example, the number of contracts sold exceeds the
number of contracts bought.)
SHORT POSITION (STOCKS)
Occurs when a person sells stocks s/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.
Technique is used when an investor believes the stock price is going down.
Selling a security that the seller does not own but is committed to buying
eventually. It is used to capitalize on an expected decline in price.
Abbreviation for Standard Industrial Classification. Each 4-digit code
represents a unique business activity.
The difference between estimated transaction costs and actual transaction
costs. The difference is usually composed of a price difference and
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.
An order to sell a stock when the price falls to a specified level.
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.
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.
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 sales and other revenue for the period shown.
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.
The date on which a trade occurs. Trades generally settle (are paid for)
1-5 business days after a trade date. With stocks, settlement is generally
5 business days after the trade.
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.
A measure of a mutual fund manager's trading activity during the previous
year. This is 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.
The classification of an option contract as either a put or a 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.
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.
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.
VOLATILITY (MUTUAL FUNDS)
A measure of risk based on standard deviation in fund performance over 3
years. Scale is 1-9; higher rating indicates higher risk.
Standard Deviation Rating Standard Deviation Rating
up to 7.99 1 20.00-22.99 6
8.00-10.99 2 23.00-25.99 7
11.00-13.99 3 26.00-28.99 8
14.00-16.99 4 29.00 and up 9
WALL STREET TRACKER
A very sophisticated and professional computer program to track and chart
stocks. The Wall Street Tracker works using technical analysis and market
momentum to determine when to buy, sell, or hold stocks. The program
compares three moving averages, and then compares each moving average to the
current price. You can even change the moving averages, used by the program,
to look at different "what if" results based on your criteria. Features:
easy menu navigation; easy selection of graphs; period and individual
reports; access actual BUY, SELL, and HOLD signals; select TREND signals;
optional auto-update of data; easy to understand documentation; data file
subscriptions; plus much more. Write to: Watkins Enterprises, P.O. Box
33280, Suite 195, Austin, Texas, 78764-0280 for more information.
A double bottom where the price or indicator chart has the appearance of a W.
A promise by a company to sell stock for a fixed price at a later date. For
example, if XYZ intends to issue new stock next year, it can issue $1
warrants agreeing to sell you the stock at $8 a share when it is issued.
When the warrants are due, investors then buy the stock at $8 a share. They
pay a total of $9 ($1 for the warrant plus $8 a share) for the stock.
An asset which has a limited life and tends to decrease in value over time.
The ability to establish automatic periodic mutual fund redemptions and have
proceeds mailed directly to the investor.
The seller of an option contract.
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
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.