LEAPS:

(Long-Term Equity Anticipation Securities) An options contract that expires more than nine months in advance and can last as long as two years. Normal options tend to last no longer than nine months.

Large Cap:

Companies with a market capitalization between $10 billion and $200 billion.

Leading Indicator:

A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but are not always accurate.

Leverage:

1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

2. The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.

Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would’ve been if the investment had not been leveraged—leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value.

Limit Order:

to limit the length of time an order can be outstanding before being canceled.

Limited Partnership:

Two or more partners formed to conduct a business jointly, and in which one or more of the partners is liable only to the extent of the amount of money they have invested. Limited partners do not receive dividends, but enjoy direct access to the flow of income and expenses.

Liquidate:

1. To convert assets into cash or equivalents by selling them on the open market.

2. When an entity chooses or is forced by a legal judgment or contract to turn assets into a “liquid” form (cash).

Liquidity:

1. The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity.

2. The ability to convert an asset to cash quickly. Also known as “marketability”.

Load:

A fee or commission charged to an investor when buying or redeeming shares in a mutual fund. The fee may be charged at the time the investor buys into the mutual fund (called a front-end load) or when the investor redeems his/her mutual fund shares (called a back-end load).

Long-Term Assets:

1. Reported on the balance sheet, it’s the value of a company’s property, equipment and other capital assets, less depreciation.

2. A stock, bond or other asset that you plan on holding in your portfolio for a lengthy period of time.