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 #

Call:

1. The period of time between the opening and closing of some future markets wherein the prices are established through an auction process.

2. An option contract giving the owner the right (but not the obligation) to buy a specified amount of an underlying security at a specified price within a specified time.

Call Option:

An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

Capital:

1. Financial assets or the financial value of assets such as cash.

2. The factories, machinery and equipment owned by a business.

Capital Appreciation:

A rise in the market price of an asset.

Capital Gain:

An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes.

Capitalization:

1. In accounting, it is where costs to acquire an asset are included in the price of the asset.

2. The sum of a corporation’s stock, long-term debt and retained earnings. Also known as “invested capital”.

3. A company’s outstanding shares multiplied by its share price, better known as “market capitalization”.

Capping:

1. The practice of selling large amounts of a commodity or security close to the options expiry date in order to prevent a rise in market price.

2. An attempt to keep a stock’s price low or move its price lower by putting selling pressure on it.

Cash Flow:

1. A revenue or expense stream that changes a cash account over a given period. Cash in-flows usually arise from one of three activities—financing, operations or investing—though they also occur as a result of donations or gifts in the case of personal finance. Cash out-flows result from expenses or investments. This holds true for both business and personal finance.

2. An accounting statement—the statement of cash flows—that shows the amount of cash generated and used by a company in a given period, calculated by adding non-cash charges (such as depreciation) to net income after taxes. Cash flow can be attributed to a specific project, or to a business as a whole. Cash flow can be used as an indication of a company’s financial strength.

Chapter 11:

Named after the U.S. bankruptcy code 11, Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs and assets. It is generally filed by corporations which require time to restructure their debts.

Chapter 11 gives the debtor a fresh start, subject to the debtor’s fulfillment of its obligations under its plan of reorganization.

Cherry Picking:

1. The act of investors choosing investments that have performed well within another portfolio in anticipation that the trend will continue.

2. Relating to bankruptcy proceedings whereby the courts uphold contracts favorable to bankrupt companies, but annul those that are unfavorable.

Churning:

1. An unethical practice employed by some brokers to increase their commissions by excessively trading in a client’s account. This practice violates the NASD Fair Practice Rules. It is also referred to as “churn and burn”, “twisting” and “overtrading”.

2. A period of heavy trading with few sustained price trends and little movement in stock market indexes.

Class A Shares:

A classification of common stock that may be accompanied by more or less voting rights than Class B shares. Although Class A shares are often thought to carry more voting rights than Class B shares, this is not always the case. Companies will often try to disguise the disadvantages associated with owning shares with less voting rights by naming those shares “Class A”, and those with more voting rights “Class B”.

Close Position:

The act of taking the opposite position of the current position thereby getting out of a position in a particular stock or security. Also referred to as “Closing Transaction.”

Closed-End Investment:

When an investment company issues a fixed number of shares in an actively managed portfolio of securities. The shares are traded in the market just like common stock.

Collective Fund:

An investment vehicle that combines tax exempt assets of various individuals and organizations in order to create a well diversified portfolio.

Commodities Exchange:

An entity, usually an incorporated non-profit association, that determines and enforces rules and procedures for the trading of commodities and related investments, such as commodity futures. Commodities exchange also refers to the physical center where trading takes place.

Commoditization:

1. A situation when illiquid financial contracts are changed or modified in a way that promotes trading and results in a more liquid market.

2. Making a product into a commodity.

Commodity Futures Contract:

An agreement to buy or sell a set amount of a commodity at a predetermined price and date. Buyers use these to avoid the risks associated with the price fluctuations of the product or raw material, while sellers try to lock in a price for their products. Like in all financial markets, others use such contracts to gamble on price movements.

Commodity Index:

An index that tracks a basket of commodities to measure their performance. These indexes will often be traded on exchanges, allowing investors to gain easier access to commodities without having to enter the futures market. The value of these indexes fluctuates based on the underlying commodities, and this value can be trade on the exchange much in the same way as stock-index futures.

Common Stock:

A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company’s assets only after bondholders, preferred shareholders and other debt holders have been paid in full.

Composite Index:

A grouping of equities, indexes or other factors combined in a standardized way, providing a useful statistical measure of overall market or sector performance over time. Also known simply as a “composite”.

Compounding:

The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings.

Also known as “compound interest”.

Conduit Theory:

A theory stating that an investment firm passing all capital gains, interest, and dividends onto their customers/shareholders shouldn’t be levied at the corporate level like most regular companies are.

Consumer Price Index (CPI):

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living.

Sometimes referred to as “headline inflation”.

Contingency Order:

An order that is executed only when certain conditions of the security being traded, or another security, have been fulfilled. Such prerequisite conditions range in scope and depth. In a simple case, a contingency order may depend on the potential purchaser’s ability to sell a different security in his or her portfolio to free the funds to make the purchase. In a more complicated situation, an options contingency order’s execution may depend on the share price of the options’ underlying stock.

Contrarian:

An investment style that goes against prevailing market trends by buying assets that are performing poorly and then selling when they perform well.

Conversion Ratio:

The number of common shares received at the time of conversion for each convertible security. It is calculated by using this formula:

Conversion Ratio = (Par Value of Convertible Bond) / (Conversion Price of Equity)

Convertible Adjustable Preferred Stock (CAPS):

or cash after the next period’s dividend rates are announced. The shares received upon conversion are equal in market value to the par value of the preferred.

Convertibles:

Securities, usually bonds or preferred shares, that can be converted into common stock.

Core Holding:

An investment that you plan on keeping in your portfolio for a very long period of time, sometimes permanent.

Core Inflation:

A measure of inflation that excludes certain items which face volatile price movements. Core inflation eliminates products that can have temporary price shocks because these shocks can diverge from the overall trend of inflation and give a false measure of inflation.

Core Inflation is thought to be an indicator of underlying long-term inflation.

Correction:

A reverse movement, usually negative, of at least 10% in a stock, bond, commodity or index. Corrections are generally temporary price declines, interrupting an uptrend in the market or asset.

Covered Call:

An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This is often employed when an investor has a short-term neutral view on the asset and for this reason hold the asset long and simultaneously have a short position via the option to generate income from the option premium.

This is also known as a “buy-write”.

Crossover Fund:

An investment fund that invests in both public and private equity.

Cyclical Stock:

A stock that rises quickly when economic growth is strong and falls rapidly when growth is slowing down.

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 #