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Stocks Glossary

Fri, May 17th, 2024
# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


  • % of Institutional: Shareholders Percentage of common stock held by banks, insurance companies and mutual funds with equity assets over $100 million.
  • 12 Month EPS Change: Change from total operations one year ago.
  • 60 Month Beta: Coefficient that measures the volatility of a stock's returns relative to the market (S&P 500). It is based on a 60-month historical regression of the return on the stock onto the return on the S&P 500.
  • 401(k) Plans: A 401(k) plan is a qualified defined contribution plan offered by employers. It allows employees to have a certain percentage of their salary deducted and invested in the plan. The deduction is pre-tax, so current income tax is reduced. The plan usually has a number of mutual funds where the employee can designate his deduction be applied. In some cases, the employer may match a portion of the employee's contribution. The deposits and earnings are tax deferred until withdrawn in retirement.
  • 403(b) Plans: Similar to 401(k) plans, the 403(b) plans are for religious, educational and other non-profit groups. This plan is also known as a tax-deferred annuity plan since the investments must be annuities.


  • Alpha: A statistical measure of performance adjusted for risk. Alpha reflects the amount by which an ETF outperforms or underperforms based upon its level of risk. Positive alpha means a fund performed greater than its risk would suggest, while negative Alpha means the fund under performed. An ETF of Alpha 1.5 outperformed its index by 1.5% as predicted by its Beta.
  • Amortization: Accounting method in which an asset's cost is spread out.
  • Annual Dividend: Dividend, or portion of a company's profit paid to shareholders, divided by the number of common shares outstanding (usually a weighted average of the number of shares outstanding over the reporting period).
  • Annual Dividend Yield %: Latest Dividend rate divided by the closing price on that latest-dividend date.
  • Annual EPS: The basic EPS from total operations is the bottom line income after all expenses, divided by the weighted average number of common shares outstanding. For example, if a company has $10 million in net income and 10 million in outstanding shares, then its EPS is $1.
  • Annual Report: The SEC requires all publicly traded companies to produce an annual report . The annual report goes to all shareholders and details the financial results for the past fiscal year. It is also an opportunity for management to talk about particular accomplishments. Problems are often buried in the footnotes. An accredited accounting firm audits the results and certifies their accuracy.
  • Arbitrage: The simultaneous purchase and sale of two different, but closely related, securities to take advantage of a disparity in their prices.
  • Asset Allocation: Asset allocation is the process of distributing your investment assets in a manner that is consistent with your investment goals among different classes of investments.
  • At-the-Money: An option whose strike price is nearest the current price of the underlying deliverable.


  • Baby Boomers: The term Baby Boomers describes the 76 million people born between 1946 and 1964. As a group, they have tremendous buying and investing resources. When they reach retirement age, they will put a strain on the social and economic structures of our society.
  • Back-Testing: A strategy is tested or optimized on historical data and then the strategy is applied to new data to see if the results are consistent.
  • Balance Sheet: A balance sheet is an accounting for a company's assets, liabilities, equity, and net worth at a certain point in time. Part of the annual report. The balance sheet tells you what the company is worth. You will often hear people mistakenly refer to the "bottomline" when talking about the balance sheet. There is no bottomline on the balance sheet - you'll find it on the income statement.
  • Balanced Investment Strategy: A balanced investment strategy looks for a blend of income and growth, hoping for the best of both, but counting on at least one being successful if the other falters.
  • Basis Point: A basis point is equal to one hundredth of one percent. In other words, 100 basis points equals one percent.
  • Basket Trades: Large transactions made up of a number of different stocks.
  • Bear Market: A bear market is one where there are significant and long-term declines in market value a shown by falling market indicators, usually for two quarters.
  • Beta: Coefficient that measures the volatility of an ETF's returns relative to the market (the S&P 500). A stock fund of ETF with a higher beta than the S&P 500 will rise or fall to a greater degree. In contrast, a stock fund or ETF with a low beta will rise or fall less.
  • Bid and Ask: Highest price and lowest price that an investor will pay for a tradable.
  • Block Trades: Large transactions of a particular stock sold as a unit.
  • Blow-Off Top: A steep and rapid increase in price followed by a steep and rapid drop in price.
  • Blue Chip Stocks: Blue chip stocks refer to the most prestigious and solid companies on the market. It is thought the term came from the fact that blue chips in poker are the most expensive ones.
  • Book Value: Fiscal year common equity (book value) divided by the fiscal year common shares outstanding; data is taken from the 10-K.
  • Bozu: Literally "bald" or "monk" in Japanese; in candlestick terminology refers to a situation during which a trading cycle opens or closes on a high or low, indicating a victory for the bulls or the bears.
  • Breakout: The point when the market price moves out of the trend channel.
  • Bull Market: A bull market is one characterized by significant and long-term growth in value in the stock market as shown by rising market indicators. In less technical terms, there are more buyers than sellers.
  • Business Cycle: Business Cycles represent the long-term patterns of expansion and contraction in the economy as witnessed by the flow from recession to recovery and back.
  • Buy and Hold: A buy and hold investment strategy suggests advocates buying and holding quality investments for the long term, as opposed to engaging in short-term trading.


  • Call Option A contract that gives the buyer of the option the right but not the obligation to take delivery of the underlying security at a specific price within a certain time.
  • Candlestick Charts: A charting method, originally from Japan, in which the high and low are plotted as a single line and are referred to as shadows. The price range between the open and the close is plotted as a narrow rectangle and is referred to as the body. If the close is above the open, the body is white. If the close is below the open, the body is black.
  • Capital Gain: A capital gain Any asset sold for a profit and held less than one year is subject to ordinary income tax by the owner. This is known as a short-term capital gain. An asset held for more than one year and sold for a profit is a long term capital gain and the tax is 20%.
  • Capital Loss: Losses resulting from selling at a loss.
  • Capital Preservation Strategy: A capital preservation strategy values preservation of capital above return. An ultra conservative strategy often used to pass a large "corpus" or body of a trust to the next generation.
  • Cash & Equivalents: Consists of cash and cash-like items such as short-term investments that can be quickly converted to cash.
  • Channel: In charting, a price channel contains prices throughout a trend. There are three basic ways to draw channels: parallel, rounded and channels that connect lows (bear trend) or highs (bull trend).
  • Class A Stock: Class A Stock is the stock issued for public trading from an IPO or if a company issues new stock at a later date.
  • Class B Stock: Class B Stock is a special category of stock usually retained by company founders at the time a company goes public. It carries certain rights not granted to stock available to the public. One of those rights is one share of Class B stock has 10 votes while regular shares have only one vote.
  • Closed Trades: Positions that have been either liquidated or offset.
  • Coincident Indicators: A coincident indicator measures changes in the economy as they are taking place and gives you a picture of the current state of the economy. Personal income is a good example of a coincident indicator.
  • Common Equity: Amount of shareholder's equity attributable to common stock. This figure is taken from the annual or quarterly reports. Common stock equity generally consists of the following items: Common stock (all issues) at par value, Capital surplus or additional paid-in capital, and Retained earnings or earned surplus (net of foreign exchange gains/losses).
  • Common Stock Equity: Common stock (all issues) at par + capital surplus (additional paid-in capital) + retained earnings (earned surplus).
  • Common Stocks: Common stock is the primary unit of ownership in a corporation. Holders of common stock are owners of the corporation with certain rights including voting on major issues concerning the corporation. Shareholders as they are known have liability limited to the value of stock they own.
  • Compounding: Compounding is the mathematical means by which interest is earned on the principal during one period, and then the next period interest is earned on the resulting principal plus interest in the first period. Another way to say this is interest earning interest. Many consider compounding the most powerful wealth-building tool available.
  • Consumer Price Index: The gauge of US inflation.
  • Correction: Any price reaction within the market leading to an adjustment by as much as one-third to two-thirds of the previous gain.
  • Cost Basis: The cost of a given share or group of stock shares.
  • Coupon: Coupon is the interest rate the bond pays. It is called the coupon rate because bonds once came with a book of coupons, which the holder had to clip and send in to receive an interest payment. Bond investors are still referred to sometimes as "coupon clippers." This interest rate does not vary over the life of the bond, although there are some bonds, which have a variable interest rate tied to an external index.
  • Covered Write: Writing a call against a long position in the underlying stock. By receiving a premium, the writer intends to realize additional return on the underlying common stock or gain some element of protection (limited to the amount of the premium less transaction costs) from a decline in the value of that underlying stock.
  • Current Assets: Cash and equivalents + receivables + inventories +other current assets. All these can be converted to cash within a year.
  • Current Liabilities: The sum of all money owed and due within one year.
  • Current Yield: The current yield considers the current market price of the bond, which may be different from the par value and gives you a different return on that basis.
  • CUSIP: The number assigned by the Committee of Uniform Security Identification Procedure that appears on all securities documents. Each security is given a number so that it is easily identifiable.


  • Day Trader: A day trader is someone who engages in aggressive trading using an Internet connection to a broker or a terminal in the broker's office. Day traders may make dozens of trades each day with the hope of making numerous small profits.
  • Dead Cat Bounce: A rebound in a market that sees prices recover and come back up somewhat.
  • Debt /Equity: The debt to equity ratio measures what proportion of equity and debt a company is using to raise money, and is calculated as follows: Debt/Equity Ratio = Total Liabilities/Shareholder’s Equity. Both total liabilities and shareholder’s equity can be taken directly from a company’s balance sheet—yep, it’s that simple. As you can probably deduce, a number greater than one indicates that more debt than equity is currently being used by the company. In a nutshell, the higher the number, the higher the level of debt. But at what level should a red flag should be raised? It is always a good idea, when using any ratio, to make comparisons to other firms in the same industry, or to the industry as a whole. Is it borrowing more than its peers? Or is it in line with the industry average? Good questions to ask yourself.
  • Deep-in-the-Money: A deep-in-the-money call option has the strike price of the option well below the current price of the underlying instrument. A deep-in-the-money put option has the strike price of the option well above the current price of the underlying instrument.
  • Delta: The amount by which the price of an option changes for every dollar move in the underlying instrument.
  • Defined Benefit Plan: A defined benefit plan is a retirement plan offered by an employer. The defined benefit plan states what the ultimate benefit will be in advance. An employee's number of years of service and some average of the last three years salary often determines the benefit.
  • Depreciation/Amortization: Reduction in the value of the asset. Depreciation and Amortization (the depreciation of intangible assets) are considered non-cash expenses.
  • Derivatives: Financial contracts the value of which depend on the value of the underlying instrument commodity, bond, equity, currency or a combination.
  • Discount Broker: Discount brokers facilitate the buying and selling of securities, but don't make product recommendations. They are, for the most part, order takers. Discount brokers charge commissions that are considerably less that full service brokers. Online brokers are discount brokers with some exceptions.
  • Divergence: When two or more averages or indices fail to show confirming trends.
  • Diversification: Diversification is the calculated spreading of your investments over a number of different asset classes. This cushions your portfolio if one part is down, since different asset classes (stocks, bonds, cash, etc.) seldom move in the same direction. In mutual funds, you achieve diversification by the fund owning 50 stocks, instead of a few.
  • Dividend: Dividends are profits paid to shareholders of the company. The board of directors authorizes the payment, usually quarterly. Companies pay most dividends is cash, however some use stock instead. Dividends are taxable income to shareholders. Not all companies pay dividends. Rapidly growing companies may elect to put money back into the business to fund further growth.
  • Dividend Date: The date when the last Dividend was paid.
  • Dividend Payout: Latest fiscal year payout per share divided by the fiscal EPS, expressed as a percentage. The percentage indicates the percent of EPS paid out as a dividend.
  • Dividend Yield: The dividend yield is calculated by dividing the dividend by the current stock price. The yield moves inversely to price, so the higher the per share price - the lower the dividend yield. A high dividend yield may signal an under priced stock, while a low dividend yield may indicate an over priced stock.
  • Doji: A session in which the open and close are the same (or almost the same). Different varieties of doji lines (such as a gravestone or long-legged doji) depend on where the opening and close are in relation to the entire range. Doji lines are among the most important individual candlestick lines. They are also components of important candlestick patterns.
  • Dow: The Dow Jones Industrial Average, also known as the Dow, is the best known and most widely quoted stock index in the popular press. The Dow consists of 30 companies considered leaders in their industries. Together they account for a significant amount of the value of the market. Although not as reflective of the whole market as other indexes, the Dow is watch earnestly.
  • Drawdown: The reduction in account equity as a result of a trade or series of trades.


  • Early Entry: A large price movement in one direction within the first 15 minutes after the open of the daily session.
  • Earnings Estimate: The estimated earnings projected for a company for a fiscal year.
  • Earnings Per Share (EPS): Earnings Per Share (EPS) is calculated by dividing a company's net revenues by the outstanding shares. This gives you a number you can use to compare the earnings of companies since it is unlikely any two companies will have the same number of shares outstanding.
  • Economic Indicators: Economic indicators are key measurements of the economy, such as unemployment, wages, and prices, etc. that gauge the health of the economy. They can have a positive or negative influence on stock prices.
  • Entry: The point at which a trader gets into a position in the market.
  • Equity Base Evaluations: Equity Based Evaluation relates the company's equity to the stock price. This method uses price-to-book ratios and return on equity to find this relationship.
  • Evening Star Pattern: The bearish counterpart of the morning star pattern; a top reversal, it should be acted on if it arises after an uptrend.
  • Ex-Date: The major exchanges require for business days prior to the Record Date for recording ownership changes. The day that begins this four-day period is the Ex-Date.
  • Execution: Execution refers to the actual consummation of a buy or sell order given to your stock broker. A good execution is at the target price and in quick order.
  • Exit: The point at which a trader closes out of a trade.


  • Fast Market: A declaration that market conditions in the futures pit are so disorderly temporarily to the extent that floor brokers are not held responsible for the execution of orders.
  • Federal Reserve Board: The Federal Reserve Board, also know as the "Fed," controls the nation's interests rates by setting the key rates. Alan Greenspan has headed the Fed for many years. When he sneezes the market gets a cold, is an old Wall Street saying. Any change in interest rates will have a dramatic effect on the markets if it was not anticipated. Raising and lowering interest rates is analogous to turning up or down the heat while cooking.
  • First Traded Price: The price at which the ETF first traded.
  • Fiscal Year: A fiscal year is the accounting year for a company. It may or may not correspond with a calendar year. Most companies operate on a calendar/fiscal year, but not all.
  • Float: The number of shares currently available for trading.
  • Fundamental Analysis: Fundamental analysis is a method for evaluating a stock on the basis of observing key ratios and understanding the underlying business.


  • Gamma: The degree by which the delta changes with respect to changes in the underlying instrument's price.
  • Gap: A day in which the daily range is completely above or below the previous day's daily range.
  • Greeks: Jargon; a loose term encapsulating a set of risk variables used by options traders.
  • Growth Investment Strategy: A growth investment strategy identifies companies with significant growth potential and is willing to ride out frequent price fluctuations that are common to growth stocks.
  • Growth Stock: A growth stock is defined as a stock that usually pays no dividends, but puts profits back into the company to finance new growth. Investors buy growth stock for its potential price appreciation as the company grows. The market frequently punishes growth stocks that don't grow.


  • Harami: In candlestick terminology, a small real body contained within a relatively long real body.
  • Head and Shoulders: When the middle price peak of a given tradable is higher than those around it.
  • Hook Day: A trading day in which the open is above/below the previous day's high/low and the close is below/above the previous day's close with narrow range.


  • Implied Alpha: The excess return expected from a stock to justify its current weighing in the portfolio.
  • Income: Amount of a company's total sales (revenue) remaining after subtracting all of its costs, in a given period of time.
  • In Play: A stock that is the focus of a public bidding contest, as in a takeover or bear raid.
  • In-the-Money: A call option whose strike price is lower than the stock or future's price, or a put option whose strike price is higher than the underlying stock or future's price. For example, when a commodity price is $500, a call option with a strike price of $400 is considered in-the-money.
  • Income Dividends: Payments to mutual fund shareholders consisting of dividends, interest and short-term capital gains earned on the fund's portfolio securities after deduction of operating expenses.
  • Income Investment Strategy: An income investment strategy identifies sources of immediate income whether through income stocks or bonds.
  • Implied Volatility: The volatility computed using the actual market prices of an option contract and one of a number of pricing models. For example, if the market price of an option rises without a change in the price of the underlying stock or future, implied volatility will have risen.
  • Income Statement: An income statement is a financial document listing income and expenses of a company that reveals how much was made or lost. It is part of the annual report and where you will find the proverbial "bottomline."
  • Inflation: Inflation is too much money chasing too few goods. The result is a sharp rise in prices without any extra value added making money worth less. Inflation leads to rising interest rates and a cooling of the economy. If the economy slows down too quickly and too far, it may slip into a recession or even a depression.
  • Initial Public Offering: The first time a company issues stock for sale to the public is known as the initial public offering or IPO. The company is said to be "going public" when this happens. The offering is highly regulated and often surrounded by a lot of media attention. Hot technology stocks in the late 1990s often saw immediate price increases of 300% or more and just as often a corresponding collapse.
  • Inside Day: A day in which the daily price range is completely within the previous day's daily price range.
  • Intangibles: Assets neither physical nor financial in nature, but still having value to the company. Intangibles are a listed net of accumulated amortization.
  • Interest Coverage: With debt come interest payments. With this being said, a ratio that helps an investor determine just how successful a company has been meeting its interest payments would come in handy. Introducing the interest coverage ratio, which is calculated as follows: Interest Coverage Ratio = EBIT/Interest Expense where EBIT is short for earnings before interest. The earnings, tax and interest figures are found on the income statement, while the depreciation and amortization figures can usually be located in the notes to operating profit or on the cash flow statement. It is typically recommended that companies maintain an interest coverage ratio of 1.5 or greater. This usually signifies that a company is producing enough cash to meet its interest obligations.


  • January Effect: The tendency for securities prices to recover in January after tax-related selling is completed before the year-end.


  • Kagi: One of three types of Japanese candlestick charts that does not have time on the horizontal axis.


  • Lagging Indicators: A lagging indicator is a measure that only changes after the economy has changed. It is of little use in looking ahead. However, they are helpful in confirming a trend. Unemployment is the most popular lagging indicator, because it shows whether companies anticipate things getting better or worse. If companies believe things are bad and getting worse, unemployment will rise. If they are more optimistic, then unemployment will fall.
  • Last Quarter EPS: The earnings per share for the last fiscal year.
  • Last Quarter Net Income: Amount of a company's total sales (revenue) remaining after subtracting all of its costs in a given period of time.
  • Last Quarter Sales: Quarter revenues attributed to sales, data taken from the 10-K.
  • Latest Dividend: Distribution of earnings paid out to shareholders. With mutual funds and ETF's, dividend can be a result of capital gains, interest income, or dividends paid to the fund itself by securities within the portfolio. Dividends are often paid quarterly, but the frequency can be less and is determined by fund management.
  • Leading Indicator: A leading indicator is an economic measure that changes before the economy does. Changes in leading indicators may predict the course the economy is to take in the future, although not with great accuracy.
  • Some of the leading indicators are new unemployment claims, building permits, inventory changes, and money supply.
  • Limit Move: A change in price that exceeds the limits set by the exchange on which the contract is traded.
  • Limit Order: An order to buy or sell when a price is fixed.
  • Load: Commission and fees taken out of investment capital; that is, the situation in which a front-loaded mutual fund takes commission and fees out of investment capital before the money is put to work.
  • Long and Short: Somewhat the equivalent of "buy and sell," however with an investing twists. If enter an order to "go long 100 shares of IBM," it means you want to buy IBM. Likewise, to "short IBM" is to sell the stock. Long also describes your position in a stock. For example, your brokerage statement might show you were "long 100 IBM," which means you own 100 shares of IBM. Your account could also show you were "short 100 IBM," which means you sold 100 shares of IBM short. (See short selling).


  • Management Fee: The charge (usually based on a percentage of assets under management) for managing the fund.
  • Managed Assets: Total managed assets include both the assets attributed to the purchase of a stock by common shareholders and those attributable to the purchase of stock by preferred shareholders.
  • Margin Call: If your account falls below minimum maintenance, your broker will issue a margin call for you to either deposit more more or sell securities to correct the situation. In extreme cases, your broker may sell securities without contacting you first.
  • Maintenance Margin: Investors are required to keep a minimum amount of equity in their accounts. The major exchanges require the level be maintained at least at 25%, however many brokers require much higher levels.
  • Minimum Margin: Minimum margin is the initial amount deposited in a margin account before margin trading can begin. That amount may vary from $2,000 and up.
  • Margin: Margin is a way to finance your stock purchases. Your broker will lend you up to 50% of the purchase price. For example, if you had $5,000 to invest, you could buy $10,000 worth of stock. You pay interest on the loan and repay it when you sell the stock. If the price of the stock falls below 75% of the original price, your broker will require you to deposit more money in your account or sell the stock a pay back the loan.
  • Market Cap: The market "cap," capitalization or market value of a stock is simply the market value of all outstanding shares. It is computed by multiplying the market price by the number of outstanding shares. For example, a publicly held company with 10 million shares outstanding that trade at $10 each would have a market capitalization of $100 million.
  • Market Order: A market order to buy or sell placed with your broker requests the best price at that moment. Brokers fill market orders first before other pending orders.
  • Market Timing: Market timing is the attempt to know when market lows and highs are going to occur. It is the short-term pursuit of buy low and sell high and almost always fails over the long run.
  • Maturity: Maturity refers to the length of time before the par value is returned to the bondholder. It may be as short as a few months, 50 years, or more. At maturity, the bondholder receives the par value of the bond.
  • Mid Cap Stock: A mid cap stock is any company with a market capitalization of $1 to $8 billion.
  • Most Recent Earnings: The amount of latest Earnings Per Share (EPS) paid out to shareholders.


  • NASD: The NASD or National Association of Securities Dealers is a self-regulatory body of securities brokers and is supervised by the SEC. The NASD licenses and examines brokers and handles consumer complaints.
  • NASDAQ: The NASDAQ, which used to be known as the over-the-counter market, is the relative new kid on the block of stock exchanges. Trades are executed over an electronic network of brokers. Many of the companies listed here are fairly young and this is the home of many of today's survivors of the high tech boom of the 1990s.
  • Net Asset Value: The per share price of an ETF or stock. The true Net Asset Value (NAV) is not always reflected in the share price of the security because it may trade at a premium or discount to the NAV. The calculation of NAV is the fund's total net assets divided by the number of shares outstanding, minus fees and expenses.
  • Net Fixed Assets: Assets of a company of a relatively permanent nature and not intended for resale, such as property, plant and equipment (PP&E). Cost minus the accumulated depreciation and amortization.
  • Nominal Yield: This is the coupon or interest rate. Nothing else is factored in to this number. It is actually not very helpful.
  • NYSE: The New York Stock Exchange or NYSE is oldest and most prestigious of all stock exchanges. The NYSE is home to many of the "blue chip" companies. Its Wall Street address makes it the heart of America's financial district.


  • Online Brokers: Online brokers allow investors to buy and sell securities over the Internet without ever talking to a human. Online brokers often offer the least expensive commissions.
  • Operating Income: Also called operating profit or EBIT (earning before interest and taxes), this is a measure of a company's earning power from ongoing operations, equal to earnings before deduction of interest payments and income taxes.
  • Options: Options give the owner the right, but not the obligation, to purchase or sell a specific number of shares of a stock at a specific price. Options are bought and sold on the open market. They can also be part of an employee compensation plan where the employer grants options based on performance or other conditions.
  • Other Assets: Includes any items that are not assigned to categories under total money market investments in the income statement.
  • Other Liabilities: Includes all other liabilities not assigned to non-interest bearing deposits or interest-bearing deposits.


  • P/E Ratio: Latest closing price divided by the earnings-per-share based on the Latest 12 Month EPS Change (LTM) of earnings. Companies with negative earnings receive an "NE." (Price of Stock/Earnings)
  • Par Value: Par value, also known a face or principal value, is how much the bondholder will receive at maturity. A $1,000 par value bond will be worth $1,000 when it matures.
  • Penny Stocks: Penny stocks are a special category of low priced, usually $1 or less, stocks often issued by highly speculative companies. They are frequently the focus of stock scams and manipulations.
  • Position: Position describes your current holdings. If you owned 100 shares of IBM, your position would be "long 100 IBM."
  • Preferred Stock: As the name implies, preferred stock is a different class of stock with additional rights not granted to common stock owners. Among these rights is first call on dividends. Investors buy preferred stock for its dividend income.
  • Price/Book: Closing price of the stock on the last trading day of the fiscal year divided by the fiscal year book value per share. Book value is the same figure as common stock equity from the 10-Q or 10-K.
  • Price/Earnings: Latest closing price divided by the earnings-per-share based on the last twelve months (LTM) of earnings. Companies with negative earnings receive an "NE."
  • Price/Sales: Latest closing price of the stock divided by the last twelve months (LTM) revenue/sales per share.
  • Price Earnings Ration: The price/earnings ratio (P/E) is a way to show how a company's earnings relate to the stock price. The P/E is calculated by dividing the current price of the stock by the annual earnings per share. The higher the P/E the more earnings growth investors are expecting and the higher premium they are willing to pay for that anticipated growth.
  • Profit Margin: Profit margin after cost of goods sold. Fiscal year revenues minus fiscal year cost of goods sold divided by the revenues.
  • Prospectus: A prospectus is a legal document that potential shareholders of an initial public offering of a stock must have before they can invest. It lists complete financial details of the company as well as the associated risks of the investment. A prospectus is also required for mutual funds and any regulated security.


  • Qualified Retirement Plan: Qualified retirement plans are authorized by the Internal Revenue Service and must adhere to certain rules and regulations. Participants in the plans, often sponsored by an employer, may accumulate money in their accounts on a tax-deferred basis. A 401(k) plan is an example, but an IRA is also a qualified retirement plan.


  • Range: The difference between the high and low price during one trading day.
  • Recession: Recession is marked by a declining standard of living and rising prices. Officially, a recession is marked by a decline in the nation's gross national product for two consecutive quarters.
  • Return on Assets: Fiscal year earnings from total operations (not including extraordinary items) dividend by the total assets, expressed as a percentage. Data taken from the 10-K.
  • Return on Equity: Last twelve months (LTM) earnings from total operations (not including extraordinary items) divided by the Most Recent Quarter Common Stock Equity.
  • Revenue: Income received from normal business activities.
  • Risk: Risk measures the probability that an investment will not earn the anticipated return.
  • Risk Tolerance: Risk tolerance is how much risk you are willing to take to achieve an investment goal. The higher your risk tolerance, the more risk you are willing to take.
  • Round Lot: A round lot is the standard transaction unit in stocks and is 100 shares. Any order not divisible by 100 is considered an odd lot and may trigger an additional fee from your broker.


  • Sales: Cumulative revenues, i.e. data taken from the 10-Q's.
  • SEC: The Securities and Exchange Commission (SEC) is the chief regulatory body over the stock markets and companies that are publicly traded.
  • Selling Short: Short selling is where you sell a stock you do not own in anticipation that the price is going to fall. Your broker will "borrow" the stock from another client. You sell the stock and put the money in your account. If you are correct, you buy back the stock at the lower price and pocket the profit. The original owner then gets the stock back. This all perfectly legal.
  • Shares Outstanding: Common shares outstanding as reported by the company on the 10-Q or 10-K.
  • Short-Term Debt: Represents the amount of borrowings (principal and interest) that must be paid in the near future.
  • SIPC: SIPC (Securities Investor Protection Corporation) is a private, government sponsored agency that provides insurance to protect your assets at a brokerage firm in the event the brokerage fails. Coverage is up to $500,000 per account. The insurance does not protect against trading losses.
  • Small Cap Stock: A small cap stock is any company with a market capitalization of $1 billion or less.
  • Split: A split occurs when a company wants to change its stock price. If things are going well for the company, the stock price generally goes down by a ratio meant to keep the market cap constant. The number of outstanding shares would go up in this case. For example, a 2/1 split would double the number of outstanding shares and halve the stock price. A reverse split generally occurs when things are going poorly. In this case, the stock price goes up and the number of outstanding shares goes down, the market cap, again, remaining constant.
  • Standard Deviation: In order to calculate the number of standard deviations that a stock moves in the latest session, we use the following formula: Today's price movement in terms of number of 20-day standard deviations = ln (latest close / previous close) / ((20-day historical volatility / 100) / square root of 252))
  • In this formula we are simply comparing the latest price change to the standard deviation of the price returns over the last 20 sessions. We are using the "price return" for the daily change because this is how historical volatility is calculated. A "price return" is simply the natural log of the latest close divided by the previous close. Historical volatility is the measure that we use for the comparison in the denominator of our equation because historical volatility is simply defined as the standard deviation of the price returns, factored up to an annualized number. Since historical volatility is typically expressed as an annualized number, we need to reduce it to a daily figure for our daily "What’s Hot" calculation by dividing it by the square root of 252 (i.e., the approximate number of trading days in a year).
  • Let's look at an example. A123 Systems (ticker: AONE) on the close of Friday, May 14, 2010 had the following input figures: 5/10/2010 close was $11.46, 5/09/2010 close was $10.33, and the 20-day historical volatility on 5/10/2010 was 66.69%. Let calculate how many standard deviations A123 Systems moved on 5/10/2010:
  • Ln (11.46/10.33) / ((66.69/100)/square root of 252) = 2.47
  • This indicates that A123 Systems on May 14, 2010 moved by 2.47 standard deviations, which is an unusually large move. According to the normal distribution curve, we would expect a move of more than two standard deviations less than 5% of the time, indicating how unusually large A123 Systems’s price change was on May 14.
  • Stock Screener: A stock screener is a software tool, usually Internet-based, that allows investors to define a set of criteria for his or her investment in a stock. The screen then finds all stocks that match the criteria.


  • Technical Analysis: Technical analysis is a form of stock evaluation that relies on stock data, such as price movement, volume, open interest to predict future price trends. Technical analysis is not concerned with the business, but focuses strictly on the data, using charts and graphics to spot trends and certain buy and sell points.
  • Total Assets: Total current assets + total non-current assets = the summation of all asset items on the balance sheet.
  • Total Liabilities: Total current liabilities + total non-current liabilities. Sum of all liability items on the balance sheet.
  • Trade: Trade refers to the buying or selling of stocks, bonds, mutual funds, and other financial instruments. Depending on the usage, it can mean a single transaction, or refer to the total market (trading was heavy).




  • Value Stock: A value stock is one that is under priced by the market for reasons that have nothing to do with the business itself. Often a stock's only sin is not being a part of the current hot sector.


  • Warrant: Warrants give the holder the right, but not the obligation, to purchase a specific number of shares of a stock at a specified price. Warrants are often issued along with new stock as an incentive to investors.
  • Wealth Builder: Wealth builders are concepts founded in fact and reason that provide for the accumulation of wealth. Compounding of interest is the best known and most powerful of all wealth building concepts.




  • Year to Date Return: The gain or loss for the year-to-date, beginning at the start of the calendar year.
  • Yield: Yield is the annual return of a stock or bond or any investment expressed as a percentage.
  • Yield to Maturity: Yield to Maturity is the most complicated, but the most useful calculation. It considers the current market price, the coupon rate, the time to maturity and assumes that interest payments are reinvested at the bond's coupon rate. It is a very complicated calculation best done with a computer program or programmable business calculator. However, when you hear the media talking about a bond's "yield" it is usually this number they are talking about.


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