Stock Market Terms

New York Stock Exchange

A marketplace in which shares, options and futures on stocks, bonds, commodities, and indexes are traded. More than 2,000 common and preferred stocks are traded. Founded in 1792, the it is the oldest exchange in the United States, and the largest. It is located on Wall Street in New York City.

Stockbroker

A person registered with the CFTC who is employed by and solicits business for a commission house or futures commission merchant. It is a regulated professional individual who buys and sells shares and other securities for both retail and institutional clients, through a stock exchange or over the counter, in return for a fee or commission.

Dividend

A portion of a company's profit paid to common and preferred shareholders. Ex. A stock selling for $20 a share with an annual ________ of $1 a share yields the investor 5%.

Dow-Jones Industrial Average

A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that trade on the New York Stock Exchange. It is a barometer of how shares of the largest US companies are performing. There are hundreds of investment indexes around the world for stocks, bonds, currencies, and commodities.

NASDAQ (National Association of Securities Dealers Automated Quotations)

An electronic quotation system that provides price quotations to market participants about the more actively traded common stock issues in the OTC market. About 4000 common stock issues are included in this system.

Call

An option that gives the holder the right to buy the underlying asset.

Bull Market

Any market in which prices are in an upward trend.

Bear Market

Any market in which prices exhibit a declining trend. For a prolonged period, usually falling by 20% or more.

Offer

Indicates a willingness to sell at a given price. Related: Bid.

Stockholder

It is an individual or institution (including a corporation) that legally owns a share of stock in a public or private corporation.

Private Stock

It is issued by a private company. It is hard to get into a private company so unless you know someone, you probably won't have the opportunity to invest. Information about the company and access to the stock is not subject to the rules of the SEC so the company is not obligated to share financial information. Private companies control the number of shares, who can buy them, when and if you can sell them and at what price.

Buying on Margin

It refers to the initial or down payment made to the broker for the asset being purchased.The purchase of an asset by paying the margin and borrowing the balance from a bank or broker.

Corporation

A legal entity that is separate and distinct from its owners. It is allowed to own assets, incur liabilities, and sell securities, among other things.

Securities and Exchange Commission (SEC)

A Federal agency that has responsibility for regulating the various stock exchanges. (It also oversees the securities industry and promotes full disclosure in order to protect the investing public against malpractice in the securities markets.)

Portfolio

A collection of investments, real and/or financial.

Stock Certificate

A document representing the number of stock of a corporation owned by a stockholder.

Quote

Bid price of a security or commodity (Highest bid and lowest offer [asked] price currently available on a security or a commodity.)

Rate of Return

Calculated as the (value now minus value at time of purchase) divided by value at time of purchase. For equities, we often include dividends with the value now.

Ticker Tape

Computerized device that relays to investors around the world the stock symbol and the latest price and volume on securities as they are traded.

Risk

Degree of uncertainty of return on an asset. Often defined as the standard deviation of the return on total investment. In context of asset pricing theory.

Prospectus

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. They are used by mutual funds to describe fund objectives, risks, and other essential information.

Earnings

Net income for the company during a period.

Speculator

One who attempts to anticipate price changes and, through buying and selling contracts, aims to make profits. This person does not use the market in connection with the production, processing, marketing, or handling of a product. See: Trader.

Stocks

Ownership of a corporation indicated by shares, which represent a piece of the corporation's assets and earnings.

Securities

Paper certificates or electronic records evidencing ownership of equity (stocks) or debt obligations (bonds).

Profit

Revenue minus cost. The amount one makes on a transaction.

Selling Short

Selling a stock not actually owned. 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, the investor 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 Aug. 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by using this method.

Partnership

Shared ownership among two or more individuals, some of whom may, but do not necessarily, have limited liability with respect to obligations of the group.

American Stock Exchange

Stock exchange with the third highest volume of trading in the US. Located at 86 Trinity Place in downtown Manhattan. The bulk of trading on this consists of index options (computer technology index, institutional index, major market index) and shares of small to medium-sized companies are predominant. Recently merged with Nasdaq See. curb

Preferred Stock

Stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights. (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 that is paid prior to the common stock dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights. It has characteristics of both common stock and debt. )

Go Public

The act or process of a company selling stock in itself when it moves from private ownership to public trade.

Market Price

The amount of money that a willing buyer pays to acquire something from a willing seller, when a buyer and seller are independent and when such an exchange is motivated by only commercial consideration.

Interest

The price paid for borrowing money. It is expressed as a percentage rate over a period of time and reflects the rate of exchange of present consumption for future consumption. Also, a share or title in property.

Opportunity Cost

The difference in the actual performance of a particular investment and some other desired investment adjusted for fixed costs and execution costs. It often refers to the most valuable alternative that is given up.

Commission

The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or their dollar value.

Common Stock

The most basic form of ownership, including voting rights on major issues, in a company Securities that represent equity ownership in a company. They let an investor vote on such matters as the election of directors. They also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security. Units of ownership of a public corporation with junior status to the claims of secured/unsecured creditors, bondholders and preferred shareholders in the event of liquidation.

Investor

The owner of an asset.

Yield

The percentage return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note.

Bid

The price a potential buyer is willing to pay for stocks, bonds, and other investments.

Bond

They are debt and are issued for a period of more than one year. The US government, local governments, water districts, companies and many other types of institutions sell these. When an investor buys bonds, he or she is lending money. The seller this agrees to repay the principal amount of the loan at a specified time. Interest-bearing bonds pay interest periodically.

Floor brokers

They are people who buy and sell stocks on the stock exchange Member of an exchange who is an employee of a member firm and executes orders, as agent, on the floor of the exchange for clients.

Mutual Funds

They are pools of money that are managed by an investment company. They offer investors a variety of goals, depending on the fund and its investment charter.