52. Glossary of Investment Terms

AMEX: The American Stock Exchange. Formerly referred to as the "Curb".

ARBITRAGE: Buying stock, money, etc., in one market and selling it simultaneously in another at a higher price.

AT THE MARKET: Instruction for the broker to buy or sell a stock as soon as possible at whatever price prevails, i.e., a market order.

AUCTION MARKET: The system of trading securities through brokers on an exchange such as the New York Stock Exchange. Buyers compete with other buyers and sellers for the most advantageous price.

AVERAGING DOWN: The practice of buying stock at regular price intervals when the price is going steadily downward. The theory is that losses can be retrenched when the price rises.

AVERAGING UP: Regular buying when the price is rising.

BEAR MARKET: A declining market (opposite of bull market).

BEAR SQUEEZE: Selling short in a declining market when the investor doesn't own the stocks and has to cover the delivery at a loss.

BELLY-UP: Refers to a company that is in bankruptcy or, for all practical purposes, no longer viable.

BID AND ASKED: Quotations in a nonauction or negotiated market, e.g.,
the over-the-counter market. Bid refers to the highest price at which a buyer wants to buy; asked is the lowest price at which a seller will sell. The difference, or "spread", usually represents the sales commission--especially in an actively traded market such as mutual funds.

BID BOARD: A popular term for the New York Stock Exchange.

BLUE CHIPS: Stocks of quality companies that are considered sound investments.

BOND: An IOU or promissory note of a corporation, usually issued in multiples of $1,000 or $5,000. A bond is evidence of a debt on which the issuing company usually promises to pay the bondholders a specified amount of interest for a specified length of time and the repay the loan on the expiration date. Since a bond represents debt, the bondholder is a creditor of the corporation and not a part-owner as is the shareholder.

BROKER: A salesperson acting as agent in buying or selling securities or bonds for the public.

BUCKET SHOP: Most common meaning is an office where orders are taken
with no intention of performing the actual transaction, the "operator"
gambling on the fact that the stock will go down. Another common usage is
a low-grade brokerage house dealing in questionable securities.

BULL: An advancing market (opposite of bear).

BUY-IN: A broker's order to buy stock at the market to cover a sell
order when the customer has failed to deliver the stock certificates within the required time (five days).

CALL: An option to buy stock in 100-share lots at a given price and a
given time in the future.

CALLABLE: A bond that can be redeemed by the issuing corporation,
under specified conditions, before maturity.

CHURNING: Excessive and unnecessary trading in an account strictly to
generate commissions. It can cause a serious entanglement with federal,
stock exchange, and NASD regulatory authorities.

COMMERCIAL PAPER: Short-term notes issued by corporations to finance
their short-term working capital requirements.

COMMON STOCK: Securities that represent an ownership interest in a
corporation. If a company also has issued preferred stock, the preferred
stockholders have priority over common stockholders for dividends. Common
stockholders assume greater risk, but have greater control and may reap the greater reward in dividends and capital appreciation.

CONSOLIDATE: A "weasel word" meaning almost anything an analyst or
broker wants it to mean. The most accepted usage implies that when a
market or a stock is consolidating, it is seeking a more realistic level in terms of price-earnings multiples, yields, or investor interest. Another meaning is that the market is in the doldrums, i.e., not going up or down and is thin.

CONVERTIBLE: Primarily bonds, debentures, and preferred stock that
can be converted after a certain time and at a set price into common stock at the option of the holder. It can have the advantage of ridding a
company of fixed charges, but equity of stockholders is thereby diluted.

CORNER: To hold all available stock of a company; usually arises when short sellers can't find shares to borrow to fulfill their commitments or shares are withheld for some reason. Surveillance and regulation by the exchanges and the SEC have made it virtually impossible for intentional
corners to exist, although "technical corners", where the amount of stock sold short exceeds the floating supply, are theoretically still possible.
The term is still used even though the practical application rarely exists, unless, say, a company is buying stock for control unknown to the "shorts". Even this is closely watched through periodic reporting requirements, etc.

COUPON BOND: A bond with interest coupons that are clipped as they come due and presented by the holder for payment of interest.

COVER: Buying a security previously sold short.

CUMULATIVE PREFERRED: Stock with a provision that if a dividend is not paid at a given time, that dividend must be paid before anything is paid on common stock.

DAY ORDER: Instruction to buy or sell a stock only on a particular day. The order expires after that day.

DEALER: An individual or firm in the securities business who acts as a principal, buying and selling for his or her or its own account rather than as an agent of the customers.

DEBENTURE: A promissory note backed by the general credit rating of the corporation rather than by a mortgage or lien on any specific property.

DEPLETION: Using up limited natural assets, such as oil and coal.

DILUTION: New stock of the same type is issued, depressing the earnings per share or the same stock issued to the public is set aside for a business venturer in payment for his or her services as entrepreneur. Also occurs when stock set aside for conversion privileges comes into being on conversion, thus diluting outstanding stockholders' stock.

DISCOUNT: The amount by which a preferred stock or bond may sell below its par value.

DISCRETIONARY ACCOUNT: An account for which a broker is given carte blanche to buy or sell without express permission for each trade. Frowned on by some firms because of the danger of "churning". Limited powers of
attorney may be preferable.

DIVERSIFICATION: Buying different types of securities to help absorb the risk of a decline in only one or two securities.
DOG: A low-priced stock that doesn't move up in price as it was supposed to.

DOLLAR-COST AVERAGING: Periodically investing a fixed-dollar amount in stock over a period of time so that purchases are made when prices are high as well as low. It has the effect of lowering the average cost to the investor over the years, since more shares will be bought when prices are
low.

DOUBLE-UP: Keeping the same number of shares by buying when the stock goes down and selling an equal number with a higher basis after 30 days. Results in a deductible loss.

DOW THEORY: A method of determining the start or end of a bull or bear market based on the Dow-Jones Industrial Averages.

EQUITY: Value of a security after deduction of all prior debts.

EX-DIVIDENT: the buyer of stock that sells ex-dividend doesn't receive the recent dividend distribution, since the buyer is not a recorded stockholder. For instance, if a company declared a dividend for stockholders of record as of April 1, five business days are allowed for delivery on the stock. Thus the stock will sell ex-dividend from March 28
through April 1, since stockholders of record on March 27 will be paid the dividend. Many newspapers report ex-dividends: the price of the stock is reduced by the amount of the dividend.

FACE VALUE: The value of a bond that appears on the face of the bond unless the value is otherwise specified by the issuing company.

FACTORING: Financing security transactions by the hypothecation of other stocks or bonds or by the purchased stocks or bonds themselves. Some banks and other institutions specialize in stock factoring. These usually
charge an interest rate slightly higher than the current rate.

FAIL: Failure to deliver stock within the required time (five days).

FALL OUT OF BED: A go-go or transient glamour stock starts to sell off, creating more supply than demand at a given price, thus depressing the price.

FANCY: A highly priced stock that has a tendency toward erratic price fluctuations over a wide spread.

FLAT: A bond traded without any accrued interest or one in default of interest.

FLOOR: The huge trading area where stocks and bonds are bought and sold on the New York Stock Exchange.

G.T.C. ORDERS: "Good till canceled" orders. Also called "open" orders.

GROWTH STOCK: Stock of a company with prospects for future growth in size, earnings, and per-share value.

HEDGE: Usually applied to commodity trading where futures are bought and sold to counterbalance an existing position and so avoid or minimize a risk of loss.

HOLDING COMPANY: One that owns control of other companies and which usually does not carry on any operations itself.

HOT ISSUE: A new offering of stock to the public that for some reason has achieved persistence fame, either by being "touted" by brokers or by being in an industry that is considered as having "glamour"; e.g., electronics in the late '50s and early '60s and ecology stocks in the late '60s. The investor thinks the price of stock will rise dramatically soon after issuance at the offering price. The small allotments allowed to individual brokers usually go to prized customers. The price range of
these issues is usually $2 to $5.

HUNG UP: An investor has suffered a loss.

HYPOTHECATE: To pledge securities as collateral for a loan.

INSTITUTIONAL INVESTOR: An organization whose primary purpose is to invest its own assets or those held in trust by it for others. Includes pension funds, investment companies, insurance companies, universities, and banks.

IN STRONG HANDS: Stock owned by investors rather than speculators; usually applied to stock in periods shortly after a recent offering.

IN WEAK HANDS: Shares purchased by speculators.

ISSUE: Any of a company's securities or the act of distributing such securities.

LAMB: A newcomer to stock or bond market trading. Signifies a "patsy" theoretically ready for "slaughter".

LEVERAGE: Using a small amount of capital to do the work of much
larger amounts, e.g., borrowing on margin or buying puts and calls in 100-share lots (the option price doesn't vary; but each time the stock moves up a point, the multiple is 100 after accounting for commissions).

LIMITED ORDER: Instruction to buy or sell at a limited price, e.g., "buy at 20" means buy at $20 or less; a limited order to "sell at 20" means sell at $20 or more.

LISTED STOCK: Stock listed on an exchange as opposed to unlisted stock traded over the counter.

LOCKED IN: The position of an investor with a low-basis stock who is hesitant to unload because of the large capital gain tax. It is a situation to be reckoned with, especially when liquidity for some emergency is an important factor.

LONG: Owning a stock outright.

MARGIN: The amount of down payment required for a stock. The broker,or, more correctly, his or her firm, providing credit for the rest. The amounts required more regulated by Federal Reserve Board and have varied in recent years from 50% to 90% of the stock's trading price.

MARGIN CALL: A demand for a customer to put up money when the price of an investor's stock goes down and the broker requires more margin to assure repayment of the original loan to stay within the legal limits. The additional funds are requested via the telephone or a telegram.

MELON: A company's earnings prior to declaring a dividend that is a record or close to record.

MORTGAGE BOND: A bond secured by a mortgage on a property. The value of the property may or may not equal the value of the bonds issued against
it.

MUNICIPAL BOND: A bond issued by a state, county, city, town or village, or state agencies or authorities. In general, interest paid on municipal bonds is exempt from federal income taxes and state and local income taxes within the state of issue.

NASD: The National Association of Securities Dealers Inc. An
association of brokers and dealers in the over-the-counter securities
business.

NASDAQ: National Association of Security Dealer Automated Quotations. An automated method of quoting prices of securities traded over the
counter.

NEW ISSUE: Stock of company that goes public for the first time.

NYSE: New York Stock Exchange.

ODD LOT: A trade in units of less than 100 shares (round lot).

ODD-LOT THEORY: Doing the opposite of what small-lot traders are doing; i.e., if there are many odd lots in a stock, it is time to sell.

ODD-LOTTER: Small trader.

OPTION: A right to buy (call) or sell (put) a fixed amount of a given stock at a specified price within a specified period of time. Individuals may buy or sell options and are thereby obliged to buy or deliver the stock at the specified price.

OTC: Over-the-counter stocks or those not listed on an exchange.

OVERBOUGHT: Refers to excessive buying that has pushed the price of a stock higher than justified.

OVERSOLD: Excessive selling has driven the price of a stock lower than justified.

PAR: The value or dollar amount assigned to a share of stock or a bond by an issuing company. Face amount or value.

PINK SHEETS: Daily sheets used by a National Quotations Bureau, Inc., for OTC stock.

PREFERRED STOCK: A class of stock with a claim on the company's earnings that takes precedence over a common stock claim.

PRICE-EARNINGS RATIO: The market price per share divided by the earnings per share.

PRIME RATE: The interest rate that banks charge their best and safest customers from a credit standpoint.

PROSPECTUS: An official information document relating to a security The SEC requires that it conform to certain standards and be delivered to buyers of a new offering in the security.

PUT: An option to sell a stock (usually in 100-share units) at a given price.

PYRAMIDING: Making use of the increase in the value of any security holdings as collateral for further purchase.

Q'ED OR GOING TO Q: A company either in or about to go into bank- ruptcy.

RAIDER: An individual or corporation trying to gain control of another corporation against its will. A common method is the "tender" or "blanket" offer to buy stock at a certain price, usually slightly higher than the market price adjusted for brokers' commissions.

RECORDER DATE: The date on which a shareholder must be registered on the books of a company to be entitled to vote on company affairs or to a dividend.

RED HERRING: The prospectus disseminated between the filing date with the SEC and the effective date of a new issue of securities. The name evolved from the red ink legend stating that the securities may not be sold until the SEC declares the registration effective. The SEC prefers the term "preliminary prospectus".

REGISTERED BOND: A bond that is registered in the name of the owner on the books of the issuing company.

REGULATION T: The Federal Reserve Board regulation that controls the extension of credit by brokers doing business through national securities exchanges and dealing in selected over-the-counter securities both as to amount (current margin requirement for stock is 65%) and time (credit on general accounts may be extended from the ordinary five-day settlement period on application to the national exchange in extraordinary circumstances). The requirements are subject to continual review and amendment.

ROUND-LOT: Units of trade, usually 100 shares.

SECONDARY DISTRIBUTION: Sale of a large block of stock on behalf of a large stockholder or group of stockholders, where the size of the offering makes it too much for an exchange to absorb without adverse price reaction. Consequently it is traded to the public at a predetermined price much like an initial offering, and is subject to SEC regulation procedures.

SELLING SHORT: Selling stock the seller doesn't own in the hope that the price will go down so that the stock can be bought at a lower price to cover the sale. The stock is usually borrowed from a broker. Selling short against the box is the sale of stock that the seller is long in but
has no intention of delivering, preferring to borrow the stock from the broker. This is done to protect against a temporary weakness for the stock in the market and can always be covered with the seller's long position if the stock goes up.

SETTLEMENT DATE: The time within which a stock must be paid for or delivered; currently it is 5 full business days.

SLAUGHTER: Selling stocks when they are in a temporary decline.

SPECIAL SITUATIONS: Securities that should go up due to facts that are relatively unknown to the general public; e.g., company about to be involved in a proxy battle or a mining company that has made a significant ore discovery.

SPECIALIST: A member of an exchange responsible for maintaining an orderly market in one or a small group of securities.

SPECULATION: A short-term investment in a high-risk security with the expectation of quick profits.

SPREAD: Ordinarily applies to the difference in the bid and asked price but also used in the case of the simultaneous purchase of a put and a cal, or a "straddle". In the case of mutual funds, denotes the amount of
the underwriter's commission or sales commission.

STOP-LOSS ORDER: Instruction to broker to sell a stock when it declines to a certain price to limit losses.

STOP ORDER: Instruction to buy or sell that becomes a market order when the security reaches or sells through the price specified by the
customer.

STREET NAME: Securities held in a brokers' firm name for a customer's account rather than in the customer's name. Somewhat risky, especially when there are "back-office" problems, but often simplifies transactions in stock frequently traded.

TAKE A BATH: Sustain a serious loss.

THIN MARKET: Relatively few bids and asked in the OTC market.

TOPPING OR TOPPY: A stock that appears to be ready for a decline having reached its peak.

UNDERWRITER: The person who stands between the corporation issuing new securities and the public. Usually, a group of underwriters buys the new issue of stocks or bonds from the corporation and then forms a syndicate to sell the securities to individuals and institutions.

UNLISTED STOCK: One traded on OTC or not listed on a national exchange.

UP-TICK: The next one-eighth of a point higher at which a trade is made. Certain transactions, such as mutual fund purchases, must be made on the up-tick.

WASH SALES: Purchase of the same stock within 30 days after selling Won't qualify for a loss.

WHIPSAW: Short sale of a stock at the lowest point and over at the highest, or vice versa, or continually going in and out of the market.

WIRE HOUSE: Member firm of a stock exchange with many branch offices linked together by a communications system. Also refers to brokerage houses that are able to make instantaneous recommendations all over the
country.

YIELD: The cash dividend expressed percentage wise (dividend divided by investment). A stock selling at $20 and paying an annual dividend of $1 is said to have a yield 1 x 100 = 5%.
20

YO-YO: An extremely volatile, high-priced stock that moves up and down for no apparent reason.