R-S-T
Glossary of Terms Stocks/Options/Fixed Income
Real Estate Investment Trust (REIT)
An organization similar to an investment company in some respects
but concentrating its holdings in real estate investments. The yield is
generally liberal since REIT's are required to distribute as much as 90%
of their income.
record date
The date on which you must be registered as a shareholder of a
company in order to receive a declared dividend or, among other things,
to vote on company affairs.
redemption price
The price at which a bond may be redeemed before maturity, at the
option of the issuing company. Redemption value also applies to the
price the company must pay to call in certain types of preferred stock.
registered bond
A bond that is registered on the books of the issuing company in the
name of the owner. It can be transferred only when endorsed by the
registered owner.
Registered Representative (RR)
Also known as account executive, customers' broker, or similar
title. Describes full-time NYSE member organization sales persons who
have met the NYSE's background and industry knowledge requirements.
Registrar
Usually a trust company or bank charged with the responsibility of
keeping a record of the owners of a corporation's securities and
preventing the issuance of more than the authorized amount.
Regulation T
The federal regulation governing the amount of credit that may be
advanced by brokers and dealers to customers for the purchase of
securities.
rights
When a company wants to raise more funds by issuing additional
securities, it may give its stockholders the opportunity, ahead of
others, to buy the new securities in proportion to the number of shares
each owns. The piece of paper evidencing this privilege is called a
right. Because the additional stock is usually offered to stockholders
below the current market price, rights ordinarily have a market value of
their own and are actively traded. In most cases they must be exercised
within a relatively short period. Failure to exercise or sell rights may
result in monetary loss to the holder.
round lot order
An order to buy or sell in multiples of 100 shares.
S&P 500
A capitalization weighted index of 500 stocks. Standard
and Poor's 500 index represents the price trend movements of
the major common stock of U.S. public companies. It is used
to measure the performance of the entire U.S. domestic stock
market.
secondary market
When stocks or bonds are traded or resold, they are said to be sold
on a secondary market. The majority of all securities transactions take
place on a secondary market.
Securities and Exchange Commission (SEC)
A watch-dog agency created by the U.S. Congress to
monitor the securities industry and enforce punishments of
those that violate the industry's regulations.
Securities Investor Protection Corporation (SIPC)
A safeguard created by Congress for investors 'capital to ensure
that cash and securities on deposit with a brokerage company are insured
up to $500,000 per customer, in the event that the brokerage company
goes out of business.
seller's option
A special transaction that gives the seller the right to deliver the
stock or bond at any time within a specified period, ranging from not
less than two business days to not more than 60 business days.
shares outstanding
The number of authorized shares in a company that are held by
investors, including employees and executives of that company. Un-issued
shares or treasury shares are not included
in this figure.
short covering
Buying stock to return stock previously borrowed to make delivery on
a short sale.
short position
Stock options, or futures contracts sold short and not covered as of
a particular date. On the NYSE, a tabulation is issued once a month
listing all issues on the Exchange in which there was a short position
of 5,000 or more shares and issues in which the short position had
changed by 2,000 or more shares in the preceding month. Short position
also means the total amount of stock an individual has sold short and
has not covered, as of a particular date.
short sale
A transaction by a person who believes a security will decline and
sells it, though the person does not own the security. For instance: You
instruct your broker to sell 100 shares of XYZ. Your broker borrows the
stock so delivery of the 100 shares can be made to the buyer. Your
broker deposits the money value of the shares borrowed with the lender.
Sooner or later you must cover your short sale by buying the same amount
of stock you borrowed for return to the lender. If you are able to buy
XYZ at a lower price than you sold it for, your profit is the difference
between the two prices - not counting commission and taxes. But if you
have to pay more for the stock than the price you received, that is the
amount of your loss. Stock exchange and federal regulations govern and
limit the conditions under which a short sale may be made on a national
securities exchange. Sometimes people will sell short a stock they
already own in order to protect a paper profit. This is known as selling
short against the box.
Sinking Fund
Money regularly set aside by a company to redeem its bonds,
debentures or preferred stock from time to time as specified in the
indenture or charter.
Specialist
A market professional who manages the two-way auction
market trading in the specific securities he or she has been
assigned. He or she works for a specialist firm, which is an
independent company in the business of trading listed
securities.
split
The division of the outstanding shares of a corporation into either
a larger or smaller number of shares, without any immediate impact in
individual shareholder equity. For example, a 3-for-1 forward split by a
company with 1 million shares outstanding results in 3 million shares
outstanding. Each holder of 100 shares before the split would have 300
shares worth less, although the proportionate equity in the company
would stay the same. A reverse split would reduce the number of shares
outstanding and each share would be worth more.
stock dividend
A dividend paid in securities rather than cash. The dividend may be
additional shares of the issuing company, or in shares of another
company (usually a subsidiary) held by the company.
stock split
When a company increases the number of shares outstanding by
splitting existing shares. A 2-for-1 split means every stockholder gets
two new shares for each one they own, and a 3-for-2 split means they get
three shares for every two they own. The price of an individual share
falls, but stockholders do not lose money because they are being given
the equivalent number of new shares.
In a reverse stock split, a company reduces the number of the shares
outstanding by consolidating existing shares. A 1-for-5 reverse split
for example, means that for each five shares owned one receives a single
new share instead. The price of the new shares is five times higher, but
only to reflect the shortened supply. If a company's stock is trading at
a very low price, this process makes the company look more attractive to
investors
stop limit order
An order to buy or sell at a specified price or better (called a
stop-limit price), but only after a given stop price has been
reached or passed. It is a combination of a stop
order and a limit order.
stop order
An order to buy or sell at the market price or limited to a
specified price, triggered once a security has traded at a stop price
set by the customer. In the Hybrid MarketSM, Stop Market and
Stop Limit Order processing will be automated.
strike price
The price at which the owner of an option may buy or sell the
underlying security
syndicate
A group of investment bankers who together underwrite and distribute
a new issue of securities or a large block of an outstanding issue.
tender offer
A public offer to buy shares from existing stockholders
of a company, usually made by another company attempting an
acquisition. So-called because
stockholders are asked to "tender" (surrender) their
holdings for a premium above the current market price.
third market
Securities listed on a stock exchange that are also traded in the
over-the-counter market by broker/dealers.
tick
The tick is the direction in which the price of a stock
moved on its last sale. An up-tick means the last trade was
at a higher price than the one before it and a down-tick
means the last sale price was lower than the one before it.
A zero-plus tick means the transaction was at the same price
as the one before, but still higher than the nearest
preceding different price. The tick becomes especially
important when large market movements trigger the
implementation of certain circuit breakers meant to
stabilize the market.
ticker symbol
A three or four letter abbreviation used to identify a security
whether on the floor, a TV screen, or a newspaper page. Ticker symbols
are part of the lore of Wall Street. They were originally developed in
the 1800s by telegraph operators to save bandwidth. One-letter symbols
were therefore assigned to the most active stocks. Railroads were the
dominant issues at the time, so they retain a majority of the one-letter
designations.
Ticker symbols today are assigned on a first-come, first-served
basis. Each marketplace -- the NYSE, the American Stock Exchange, and
others -- allocates symbols for companies within its purview, working
closely to avoid duplication. A symbol used for one company cannot be
used for any other, even in a different marketplace.
time value
The portion of an option's price or
premium that is attributable to
the amount of time remaining until it expires. The longer an
option has until it expires, the more opportunities its
price has to fall in-the-money.
Time value is in addition to intrinsic value, which is the
amount by which the option is in-the-money.
transfer agent
A transfer agent keeps a record of the name of each registered
shareowner, his/her address, the number of shares owned, and sees that
the certificates presented for transfer are properly cancelled and new
certificates issued in the name of the new owner.
Treasuries
Debt obligations of the U.S. government. Treasuries are among the
safest investments, since the full faith and credit of the government
secure them. The interest of Treasuries is exempt from state and local
taxes but is subject to federal income tax. There are three types of
treasuries: Treasury Bills, with maturities of one year or less;
Treasury Notes, with maturities ranging from one to 10 years; and
Treasury Bonds, long-term instruments with maturities of 10 years or
more.
triple witching hour
The last trading hour on the third Friday of March, June, September
and December when options and futures on stock indexes expire
concurrently.
