Glossary of Investment Terms

Glossary of Common Investment Terms

This glossary was complied to help you understand common investment terms. If you have any questions, please call our customer service at 1-561-370-3617. ValueRich representatives are available Monday through Friday, 8:00 a.m. to 5:00 p.m., Eastern Time.

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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

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A

Accrued Interest : Interest accrued on a bond or other fixed income security since the last interest payment was made. At the time of a sale, the buyer of a bond pays the market price plus accrued interest to the seller. Exceptions are bonds that are in default (termed to be 'trading flat'). Accrued interest is calculated by multiplying the coupon rate by the number of days that have elapsed since the last payment.

Aftermarket : The trading that occurs after an initial public offering (IPO) is the aftermarket. The trading volume on the first day that an equity is publicly offered is extremely high. Flipping and aftermarket purchases can cause the volume to unexpectedly rise or drop in the days immediately following an IPO. Investors must be aware of the risks involved with trading in a fast aftermarket.

The aftermarket performance is the appreciation or depreciation of an IPO from the offering price forward. However, to get a more realistic benchmark, some investors prefer to track the aftermarket performance from the first day close because of the high volatility during the first day of trading.

All or None (AON) : A stipulation to either a buy or a sell order which instructs the broker to either fill the order in its entirety of to fill none at all, the customer won't accept a partial execution (only 300 shares out of an order for 1000).

Allocation : The amount of stock granted by the underwriter to an investor in a traditional offering. The allocation may be less than the requested amount if demand for the offering was greater than the number of shares available.

American Depository Receipt (ADR) : Certificate issued by an American bank which represents a foreign stock share held on deposit. The certificate, transfer, and settlement practices for ADRs are identical to those of U.S. securities. U.S. investors often prefer ADRs to direct purchase of foreign shares because of the ready availability of price information, lower transaction costs, and timely dividend distribution. For most practical purposes, trading an ADR is equivalent to trading the foreign stock.

Appreciation : The increase in the value of an asset.

Asked Price : The lowest price that anyone has declared that he will sell his security for at a given time. In over-the-counter stocks, the "ask" is the best quoted price at which a Market Maker is willing to sell a stock.

Asset : Any item of value that an individual or a corporation owns.

Assignment : Notice to an option writer (seller) that the holder (buyer) has exercised his option and the writer will be required to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price. See the explanation of options trading for more complete information on options.

At-the-Money : An option where the strike (exercise) price is exactly equal to the trading price of the underlying security.

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B

Bid Price: The highest price anyone has declared that he wants to pay for a security at a given time.

Blue Sky Laws: State securities laws designed to protect investors which require sellers of new stock issues to register their offerings and provide financial details on each offering. The term is said to have originated from a judge who claimed a that a new stock offering had as much value as a patch of blue sky.

Board of Directors: A group of individuals that are elected by the shareholders of a corporation and empowered to carry out certain tasks spelled out in the corporation's charter. These powers include appointing executive management, issuing additional shares and declaring dividends. In most public companies, the board will usually consist of both inside and outside directors. The inside directors have a significant fiduciary interest in the growth and well-being of the company. Outside directors may have a small stake in the company but are generally members for their business experience and contacts. In the case of an IPO, there may not be outside directors until near or immediately following the IPO.

Book Running Manager: Another name for the managing underwriter. The book running manager's name will generally appear first in the list of underwriters at the bottom of the cover page.

Branch Office: Any location identified by any means to the public as a location in which a securities firm conducts securities business.

Broker: (1) An individual or a firm that charges a fee or commission for executing buy and sell orders submitted by another individual or firm. (2) The role of a brokerage firm when it acts as an agent for a customer and charges the customer for its services.

Broker-Dealer: A securities firm that is acting as either a broker and/or a dealer. Most securities firms act in both capacities.

Buying Power: The dollar value of additional marginable securities a customer may purchase against the existing marginable securities in the account. See the explanation of margin for more complete information on using margin leverage in your investing.

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C

Call: An option contract under which the holder (buyer) has the right to purchase the number of shares of the underlying security that is covered by the contract at a fixed price for a fixed period of time. The call option buyer pays the call option seller (writer) a fee called a premium. It also obligates the seller (writer), if the buyer exercises, to sell the underlying security that it covered by the contract at a fixed price for a fixed period of time.

Cancel: Instruction given to a broker to stop work on an order previously given. If part of the order has already been executed, a cancel instruction stops work on the remainder of the order.

Capital: Accumulated money or goods used to produce income.

Capital Gain: The gain (selling price minus cost basis) on an asset.

Capital Markets: Markets where debt or equity securities are traded.

Cash Account: A type of brokerage account which requires that transactions must be settled in full (no margin or borrowed monies) by the settlement date. Some types of accounts such as Individual Retirement Accounts and Custodian for Minor accounts must be cash accounts.

Cash Dividend: A cash payment to a company's stockholders out of the company's current earnings or accumulated profits. The dividend must be declared by the board of directors.

Clearing and Settlement: A comparison of the details of a transaction between brokers prior to settlement; final exchange of securities for cash on delivery.

Closing Purchase: A comparison of the details of a transaction between brokers prior to settlement; final exchange of securities for cash on delivery.

Closing Sale: A comparison of the details of a transaction between brokers prior to settlement; final exchange of securities for cash on delivery.

Co-Manager: In most IPOs there is a lead manager that controls the offering and several co-managers. The co-managers appear on the prospectus front cover in order of importance under the lead underwriter.

Commercial Paper: Short-term loans with maturity's ranging from 2 to 270 days that are made to banks and corporations.

Commodity: Bulk goods such as metals, foodstuffs and grains which have their prices determined by competitive bids and offers.

Commodities Exchange Act: Federal Act which regulates futures contracts and options on futures contracts; requires that all such contracts be traded on an organized commodity exchange. The Act is administered by the Commodity Futures Trading Commission (CFTC).

Commodity Futures Trading Commission (CFTC): The federal regulatory agency established by the Commodity Futures Trading Commission Act of 1974 to administer the Commodities Exchange Act. The Commission is composed of five commissioners appointed by the President and subject to Senate approval.

Common Stock: An equity security that represents ownership in a corporation.

Community Property: Form of ownership for assets accumulated by a married couple and belonging to them jointly.

Comparables: In deciding how to price an IPO, investment bankers will often study the valuations of similar companies that are already publicly traded. The comparisons are referred to as comparables.

Concentration: Margin account condition whereby one or two positions are heavily represented. Typically the brokerage firm carrying the account will require a higher level of equity to offset the risk. See the explanation of concentration.

Cost Basis: For tax purposes, the cost of an asset (including commissions and other fees) used to determine the gain or loss.

Coupon Rate: The actual interest rate stated on a bond, typically payable in semi-annual installments.

Covered Call: A short position where the writer is long (i) the underlying security; (ii) a call option with the same or lower exercise price that expires no sooner than the short call, or; (iii) an escrow receipt or guarantee letter from a bank.

Covered Put: A short position, covered option where the writer is long (i) a put with the same or higher exercise price that expires no sooner that the short put, or; (ii) a bank guarantee letter stating the aggregate exercise price is on deposit.

Credit Balance: The amount of cash left over in either a cash or margin account (or a combined balance of the two) after all securities have been paid for. See the explanation of margin for more complete information on using margin leverage in your investing.

Current Yield: The interest rate relationship stated as a percent of the annual interest received to the actual market price of the bond.

Cusip Number: A unique 9-digit number code for a given class of security (i.e.: Microsoft common stock or Acorn International Fund). CUSIP stands for the Committee on Uniformed Security Identification Procedures.

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D

Day Order: An order to buy or sell which, if not executed, expires at the end of the trading day it was entered.

Day Trading: In the current volatile market, there are investors who have created an industry around buying and selling stocks on a very short-term basis. Usually the transactions are completed within one day. There are small brokerage firms that specialize in offering terminals and real-time quotes to individuals who choose to day trade.

Dealer: A securities firm plays the role of a dealer when it acts as a principal in a particular trade. A firm is acting as a dealer when it buys or sells a security for its own account and at its own risk and then charges the customer a markup or markdown.

Debit Balance: The total amount owed to the brokerage firm including any loans, interest charges, commissions, etc.

Debt Security: Tradable evidence of borrowing that must be repaid, stating the amount, a specific rate of interest (or discount from the maturity price).

Depository Trust Company (DTC): The DTC is a central repository where stocks and bonds are held and transferred. The DTC is owned by brokerage houses on Wall Street and the New York Stock Exchange.

Derivative: A financial contract whose value depends upon the value of an underlying instrument or asset (typically a commodity, bond, equity or currency, or a combination of these). Three classes of financial products fall under the heading of derivatives: derivative securities; exchange-traded derivatives; and over-the-counter (OTC) derivatives.

Dividend: A distribution of the earnings of a corporation Dividends may be in the form of cash, stock or property (other securities owned by the corporation). A dividend can only be paid by declaration of the board of directors of the corporation.

• Ex-Dividend Date: Four business days before the record date. On the ex-dividend date the purchase of stock no longer carries with it the right to receive the dividend previously declared.
• Record Date: Stockholders owning the stock on the record date are entitled to receive a dividend. In order to be listed as an owner on the corporate books on the record date, the investor must have bought the stock before the ex-dividend date.
• Payment Date: The day on which a stockholder of record will receive his or her dividend.

Do Not Reduce (DNR): Stipulation to order that instructs the broker not to decrease the limit price on buy-limit and sell-stop orders on the record date of a cash dividend.

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E

Electronic Data Gathering, Analysis, & Retrieval (EDGAR): An electronic system implemented by the SEC that is used by companies to transmit all documents required to be filed with the SEC in relation to corporate offerings and ongoing disclosure obligations. EDGAR became fully operational mid-1995.

Equity: When used in the context of a corporation, it refers to the ownership interest of common and preferred shareholders in a corporation.

When used in the context of a brokerage account, it refers to the market value of securities (long market value minus short market value) minus any debit balance and plus any credit balance. See the explanation of margin for more complete information on using margin leverage in your investing.

Exchange: Any organization, association or group of persons that maintains or provides a marketplace in which securities can be bought and sold.

Exercise: The right of the buyer (holder) to buy the underlying security in the case of a call, or sell the security in the case of a put.

Exercise Price: Also known as the strike price. The price that the owner (purchaser) of an option can buy (if calls are owned) or sell (if puts are owned) the underlying security by exercising his option. See the explanation of options trading for more complete information on options.

Expiration Date: The date on which an option expires. If an option has not been exercised prior to expiration, it expires worthless and the buyer no longer has any rights. See the explanation of options trading for more complete information on options.

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F

Fallen Angel: In some cases, high quality companies are undervalued because of market conditions or lack of research coverage. Savvy investors often seek out such companies and invest in them based on their fundamentals and not only on the market's valuation.

Fast Market: An influx of orders or other unusual condition which impedes the market. During fast market conditions, real time quotes may not be accurate, rather indicative of what has already occurred. Additionally, trade executions may be delayed.

Federal Call (Reg. T Call): A demand for the deposit of cash or marginable securities to have proper collateral for the cost of the transaction. See the explanation of margin for more complete information on using margin leverage in your investing.

Federal Reserve System: The central bank system for the United States, commonly known as the Fed. Its chief responsibility is to regulate the flow of money and credit. The Board of Governors of the Federal Reserve System is a seven member group appointed by the President (subject to the approval of Congress) to oversee operations of the Federal Reserve System.

Fill or Kill (FOK): An order stipulation instructing the broker to present the order in the marketplace and either fill it in its entirety or kill it if it cannot be filled immediately at its stipulated price limit.

Final Prospectus: After an IPO is priced, the company is required to print a final prospectus which contains the information presented to the public in the preliminary prospectus. The final prospectus is distributed to all of the buyers of the IPO.

First Day Close: The first day close is the closing price on the first day a stock is publicly traded. In a fast market, the first day close may be several times higher than the offering price. However, the price can drop down just as fast as investors take profits and "flip" the stock.

Fiscal Policy: The federal tax and spending policies set by Congress and/or the President.

Flipping: To buy and sell an equity within a short period of time to take profits is called flipping. Some investors buy IPO shares near the offering price and immediately sell their stake as the price jumps in the aftermarket. The practice of flipping may be discouraged by the underwriters though penalties and waiting periods.

Float: The float is the number of shares held by the general public. The higher the float (public vs. outstanding) the less volatile the stock is considered. If the stock has a small float, a single, large transaction is likely to affect its price.

Foreign: A non U.S. Company with securities trading in the U.S.

Forward Contract: A cash market transaction in which a future delivery date is specified. Forward contracts differ from futures contracts in that the terms of forward contracts are not standardized and are not traded in contract markets.

Futures Contract: A standardized, exchange-traded contract to make or take delivery of a particular type and grade of commodity at an agreed upon place and point in the future. Futures contracts are transferable between parties.

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G

Good Delivery: Designation meaning a certificate has the necessary endorsements and meets all requirements so that title can be transferred by delivery on the settlement date to the buying broker.

Good Til Canceled (GTC): An order to buy or sell which remains in effect until it is either executed or canceled. For GTC orders executed over several days, a commission is charged based on each day's activity. Customer's are responsible for monitoring GTC orders to avoid duplication.

Green Shoe: The underwriting agreement for an IPO may include this clause which stipulates that the issuer will sell additional shares if there is exceptionally high public demand.

Gross Spread: The difference between an IPO's offering price and what the underwriter pays to the issuing company. This is a percentage of the offering price which covers the underwriters costs of an offering.

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H

Held: A situation where a security is temporarily not available for trading (e.g. Market Makers in OTC stocks or the Exchange in listed stocks are not allowed to display quotes).

Hot Issue: If the price for an IPO increases in the first day of trading, it is considered a hot issue. Owners and employees of broker-dealers and other industry insiders are prohibited from participating in hot issues. A prohibited owner or employee is generally allowed to begin trading in the aftermarket.

House Maintenance Requirement: Internally set and enforced rules of individual brokerages regarding customer's margin accounts. See the explanation of margin for more complete information on using margin leverage in your investing.

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I

Index: A statistic to measure market performance. A popular index is the Standard & Poor's 500, which incorporates a broad base of 500 stocks, including 400 industrial companies, 20 transportation companies, 40 utilities, and widely considered the benchmark for large stock investors. Some of the stocks in the index have a greater influence on the direction of the market than other stocks do, so the S&P 500 is calculated by giving a greater weight to some stocks.

Index Arbitrage: Trading in order to profit by temporary differences between the value of stocks in an index and the price of the future contract for a derivative index.

Index Options: Calls and Puts on indexes of stocks. Broad-based indexes cover a wide range of companies, narrow-based indexes consist of stocks in one industry or sector of the economy. Owning an option provides investors with the opportunity to buy or sell, but they aren't committed to do so. See the explanation of options trading for more complete information on options.

Initial Public Offering (IPO): An IPO is the first public issuance of stock by a company. After the initial offering, the stock begins trading to the general public and the price may fluctuate up or down based on the supply and demand for the shares.

Insiders: In general, employees of a company that have knowledge that is not known to the public are considered insiders. Management, directors, and significant stockholders fall in this category, as well as others with knowledge of the operations of a company. The SEC restricts the time periods and manner in which insiders can trade stocks.

In-the-Money: For a call option, the market price of the underlying security is higher than the exercise price. For a put option, the market price of the underlying security is lower than the exercise price.

Individual Retirement Account (IRA): Personal retirement account for employed persons. Contributions may be deductible against income earned that year. Interest and profits accumulate tax-deferred until the funds are withdrawn at age 59 1/2 or later. Early withdrawals are subject to a 10% penalty. IRA ROLLOVER provision of the law enables persons receiving lump-sum payments from their company's pension or profit sharing plan because of retirement or other termination of employment to ROLL OVER the amount into an IRA account. Once rolled over, the account continues to accumulate tax-deferred until withdrawal.

Initial Margin: Amount of cash or eligible securities required to be deposited with a broker before engaging in margin transactions. The minimum equity to establish a margin account is currently $2,000, and 50% of the price of a new purchase must be in customer equity. See the explanation of margin for more complete information on using margin leverage in your investing.

Inside Market: The highest bid and the lowest offer prices among all competing Market Makers in a NASDAQ security, i.e., the best bid and offer (ask) prices.

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J

Joint Tenants with Rights of Survivorship: Form of ownership where two or more account holders agree that, upon the death of one account holder, ownership of the remaining account assets passes to the remaining account holders. This transfer of assets avoids probate, but estate taxes may be due.

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K

No current terms.

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L

Last-Sale Reporting: An electronic entry by FINRA members detailing the price and number of shares involved in a securities transaction. The trade reported must be submitted to the FINRA within 90 seconds of the execution of the trade.

Lead Manager: The lead manager is the underwriter that has ultimate control of the offering, including the number of shares allocated to each co-manager, the roadshow process, and the price of the deal. Other underwriters are called co-managers. The names of the managers appear on the front page of the prospectus.

LEAP: Long-Term Equity Anticipation Security. LEAPs are long term equity options and normally expire in two to five years.

Limit Order: An order to buy or sell a stated quantity of a security at a specified price or at a better price.

Lock Up Period: The lead underwriter will generally restrict insiders from selling their shares for a certain period of time. In many cases, that period is 180 days but it could be less.

Long: Indicates ownership. "I'm long 100 Cisco" indicates the speaker owns 100 shares of Cisco.

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M

Maintenance Call: A demand for the deposit of additional cash or securities due to the account being below the firm's required maintenance levels. See the explanation of margin for more complete information on using margin leverage in your investing.

Margin Account: Brokerage account allowing customers to buy securities with money borrowed from the broker. Sales of margin accounts are governed by REGULATION T of the Federal Reserve Board, the National Association of Securities Dealers (FINRA), and by brokerage firm house rules. A signed MARGIN AGREEMENT is a prerequisite to establishing a margin account.

Market Capitalization: The product of a company's stock price per outstanding share. The market cap can greatly exceed the float, or number of shares in circulation, if many of the outstanding shares are not publicly held.

Market Makers: The FINRA member firms that buy and sell NASDAQ securities, at prices they display in NASDAQ, for their own account. There are currently over 500 firms that act as NASDAQ Market Makers. One of the major differences between the NASDAQ Stock Market and other major markets in the U.S. is NASDAQ's structure of competing Market Makers. Each Market Maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the Market Maker will immediately purchase for or sell from its own inventory, or seek the other side of the trade until it is executed, often in a matter of seconds.

Market Order: An order to buy or sell a stated amount of a security at the best price available at the time the order is received in the trading marketplace.

Market Value: The market value is the current price per share multiplied by the number of shares outstanding.

Material News: News released by a publicly traded company that might possibly be expected to affect the value of a company's securities or influence investor's decisions. Material news includes information regarding corporate events of an unusual and non-recurring nature, news of tender offers, unusually good or bad earnings reports, and a stock split or stock dividend. (See also "Trading Halt".)

Municipal Bond: A debt security issued by a state, a municipality, or another subdivision (such as a school, hospital, sewer or other taxing district), to raise money to finance capital expenditures.

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N

Naked Option: Option position that is not hedged from market risk, i.e.: an option position that is not offset by an equal and opposite position in the underlying security. See the explanation of options trading for more complete information on options.

NASDAQ National Market Securities: The NASDAQ National Market consists of over 3,000 companies that have a national or international shareholder base, have applied for listing, meet stringent financial requirements and agree to specific corporate governance standards. To list initially, companies are required to have significant net tangible assets or operating income, a minimum public float of 500,000 shares, at least 400 shareholders, and a bid price of at least $5.

NASDAQ Small Cap Market Securities: The NASDAQ Small Cap Market consists of over 1,400 companies that want the sponsorship of Market Makers, have applied for listing and meet specific financial requirements. Once a company is approved and listed on this market, Market Makers are able to quote and trade the company's securities through a sophisticated electronic trading and surveillance system.

Net Change: The difference between today's last trade and the previous day's last trade.

Net Road Show: When a company is planning an IPO, it will often perform a "road show" to encourage potential investors to participate in the IPO. Now that the internet has become such a widely used investment tool, underwriters are posting upcoming IPO deals online and presenting multimedia "net" road shows to institutional and accredited investors.

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O

Odd Lot: An amount of stock less than the customary 100 share unit.

Offer Price: The price that the IPO is first sold to the public at. The lead manager has ultimate control over setting the offer price. The offer price is not necessarily the price that the stock will begin trading at.

Offer Range: The offer range is the price range that the company expects the IPO to price within. This will be listed on the front page of the preliminary prospectus. The range may change before the IPO if demand or market conditions change.

Opening Purchase: A transaction in which a customer creates a long position.

Opening Sale: A transaction in which a customer creates a short position

Open Order: An order to buy or sell a security that remains in effect until it is either canceled by the customer or executed.

Operating Margin: The key measure of profitability and performance is a company's operating margin. The operating margin is determined by subtracting the operating expenses from the total revenues and then dividing that result by the total revenue. One time gains and losses, interest expenses, interest income, other income, and taxes are excluded from the operating margin.

Option: The right to buy (a call option) or sell (a put option) a fixed amount of a given stock at a specified price within a specified time. Options are also traded on indexes, foreign currencies and debt instruments. A signed and approved OPTION AGREEMENT is a prerequisite to trading options.

Option Premium: The amount per share paid by an option buyer to the seller. An option premium that is quoted at 2 1/8 means an option buyer would pay $212.50 for an option contract controlling 100 shares.

Out-of-the-Money: For a call option, the market price of the underlying security is lower than the exercise price. For a put option, the market price of the underlying security is higher than the exercise price.

Over-the-counter (OTC): Marketplace for securities that are not listed on an exchange. OTC trading is regulated largely by the FINRA, a self-regulatory group. OTC securities are traded by many registered dealers rather than through an exchange specialist. Other OTC markets include those for government and municipal bonds.

Overallotment Provision: Another term for the green shoe clause, which is a part of the underwriting agreement that allows the underwriters to buy additional shares at the offering price to cover an overallotment for a period of time after the IPO.

Oversubscribed: When there are more orders for an IPO than shares available, it is oversubscribed. Oversubscription to a new issue generally means there will be an increase in the stock price in the aftermarket.

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P

Penalty Bid: In efforts to discourage investors from selling their IPO shares immediately after the offering, some brokers will impose a penalty for "flipping" the stock. It is important for an investor to know if there a penalty for selling and what the time restrictions are before making the decision to buy an IPO. WRH+Co does not impose penalty bids.

Penny Stocks: Low priced stocks trading in the over-the-counter market. Typically refers to shares trading below one dollar a share.

Postponed: If an IPO doesn't attract sufficient buyers to be considered successful by the issuers, it may be postponed until market conditions seem more favorable.

Preliminary Prospectus: The first offering document printed by the company with some of the details of an IPO. The price range and number of shares to be issued is usually included in the preliminary prospectus but the terms may be changed before the final prospectus is distributed. Some lettering on the front cover is printed in red so many people refer to it as the "red herring." During presentations to potential investors, company representatives are limited to discussing only information that is contained in the current prospectus.

Premium: The amount paid by the buyer of an option to the seller for the right to call or put the underlying security for a fixed period of time.

Previous Day's Close: The previous day's last reported trade.

Price Range: At the filing for an IPO with the Securities and Exchange Commission (SEC), companies will generally state a range that they except the IPO to price at. The range is often within $2 or $3 and may be changed at any time before the IPO is finalized. If there is high interest in the IPO the issuer may adjust the range upwards to maximize the monies raised in the IPO.

Principal: When a brokerage firm sells securities from their own inventory for a markup they are acting as a principal.

Proceeds: The amount of money that a company raises in the IPO is called the proceeds. In the prospectus there is a section called "Use of Proceeds" which describes how the company intends to spend the money raised. An investor should decide if the use of the proceeds will be beneficial to the future growth of the company before making the investment.

Put: An option contract under which the holder (buyer) has the right to sell the number of shares of the underlying security that is covered by the contract at a fixed price for a fixed period of time. The put option buyer pays the put option seller (writer) a fee called a premium. It also obligates the seller, if the buyer exercises, to purchase the underlying security that is covered by the contract at a fixed price for a fixed period of time.

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Q

Quiet Filing: If a company isn't ready to announce their IPO to potential investors they will begin the SEC filing process in a quiet filing. When the details are firmed up, they will print and distribute the preliminary prospectus and begin the roadshow to announce the upcoming IPO to investors.

Quiet Period: Immediately following an IPO, the underwriters are restricted from issuing research reports for up to 25 days. After the end of the quiet period, there may be an increase in trading on the stock if the research reports contain new information that is important to investors.

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 R

Recapitalization: Changing the capital structure of a company.

Red Herring: Some lettering on the front cover of the preliminary prospectus is printed in red so many people refer to it as the "red herring." During presentations to potential investors, company representatives are limited to discussing only information that is contained in the current prospectus.

Registration Statement: In order to receive approval from the SEC to conduct an IPO, a company must file a registration statement. The registration statement details pertinent operational and financial information about the company, the management, and the offering.

Reverse LBO: The term leveraged buyout (LBO) is used when a company is acquired using debt. A reverse LBO is when a company offers shares of stock to reduce their debt load. This strategy will only work if there are public investors willing to invest.

Road Show: When a company is planning an IPO, it will often perform a "road show" to encourage potential investors to participate in the IPO. Due to the popularity of the internet, underwriters are posting upcoming IPO deals online and presenting multimedia "net" road shows to institutional and accredited investors in addition to traditional "in person" roadshows.

Roll Up: An IPO of several independent companies in the same industry that merge into a single company at the time of the offering.

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 S

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 T

Tenants in Common: Form of ownership whereby two or more persons hold title in such a way that when one of them dies, the deceased's interest passes to his or her heirs and not the surviving tenants.

Trading Authorization: Document granting power-of-attorney rights to an agent of the account holder(s).

Trading Halt: The temporary suspension of trading in a security, usually for 30 minutes, while material news from the issuer is being disseminated over the news wires. A trading halt gives all investors equal opportunity to evaluate news and make buy, sell, or hold decisions on that basis. A trading halt may also be imposed for purely regulatory reasons, either by the listing Exchange, the NASDAQ Stock Market, or the SEC.

Transfer Agent: A transfer agent keeps a record of the name of each registered share owner, his or her address, the number of shares owned, and sees that certificates presented for the transfer are properly canceled and new certificates issued in the name of the new owner.

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U

Uptick: Transaction executed at price higher than the preceding transaction in that security. Short sales may only be executed on upticks (also known as plus ticks) or zero- plus ticks (same price as previous transaction but higher than the last transaction at a different price).

Uncovered Call: A short position where the writer does not hold any long positions listed above.

Uncovered Put: A short position where the writer does not hold any of the above.

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 V

No current terms.

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 W

When Issued: Stands for 'when, as and if issued.' Term refers to a transaction made conditionally because a security, although authorized, has not yet been issued.

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X

No current terms.

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Y

Yield to Call: Yield on a bond using the assumption that the bond will be redeemed by the issuer on the next available call date. The same calculations are used to calculate yield to call as yield to maturity except that the principal value used is the call price and the call date is used in place of the maturity date.

Yield to Maturity: Yield calculation which takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.

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Z

Zero-Coupon Bond: Bond that makes no periodic interest payments but instead is sold at a deep discount from its face value. The owner of the bond receives his return by the gradual appreciation of the security until maturity at face value. Under U.S. tax law, the imputed interest is taxed as it accrues, although the investor received no cash. For this reason, the principal appeal of zero coupon bonds is for IRA and other tax sheltered retirement accounts. Tax-free municipal zero-coupon bonds are also traded.

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