Panic Selling:

Wide-scale selling of an investment, causing a sharp decline in price. In most instances of panic selling, investors just want to get out of the investment, with little regard for the price at which they sell.

Parabolic Indicator:

A technical analysis strategy that uses a trailing stop and reverse method called “SAR,” or stop-and-reversal, to determine good exit and entry points.

Passive Investing:

An investment strategy involving limited ongoing buying and selling actions. Passive investors will purchase investments with the intention of long-term appreciation and limited maintenance.

Penalty Bid:

A bid intended to facilitate a securities offering by stabilizing its price during the distribution period. This bid is typically entered by the managing underwriter on behalf of a syndicate.

Pension Fund:

A fund established by an employer to facilitate and organize the investment of employees’ retirement funds contributed by the employer and employees. The pension fund is a common asset pool meant to generate stable growth over the long term, and provide pensions for employees when they reach the end of their working years and commence retirement.

Performance Bond:

A bond issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract.

Performance Shares:

In the case of stock compensation, shares of company stock given to managers only if certain company wide performance criteria are met, such as earnings per share targets.

Piggy Back Registration:

When an underwriter allows existing holdings of a company’s shares to be sold in conjunction with an offering of new public shares.

Pivot Point:

A technical indicator derived by calculating the numerical average of a particular stock’s high, low and closing prices.

Position:

The amount of a security either owned (which constitutes a long position) or borrowed (which constitutes a short position) by an individual or by a dealer. In other words, it’s a trade an investor currently holds open.

Preferred Stock:

A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.

The precise details as to the structure of preferred stock is specific to each corporation. However, the best way to think of preferred stock is as a financial instrument that has characteristics of both debt (fixed dividends) and equity (potential appreciation). Also known as “preferred shares”.

Premium:

1. The total cost of an option.

2. The difference between the higher price paid for a fixed-income security and the security’s face amount at issue.

3. The specified amount of payment required periodically by an insurer to provide coverage under a given insurance plan for a defined period of time. The premium is paid by the insured party to the insurer, and primarily compensates the insurer for bearing the risk of a payout should the insurance agreement’s coverage be required.

Price-Earnings Ratio (P/E Ratio):

A valuation ratio of a company’s current share price compared to its per-share earnings.

P/E Ratio = (Market Value per Share) / (Earnings per Share (EPS))

For example, if a company is currently trading at $43 a share and earnings over the last 12 months were $1.95 per share, the P/E ratio for the stock would be 22.05 ($43/$1.95).

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings expected in the next four quarters (projected or forward P/E). A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.

Principal:

1. The amount borrowed or the amount still owed on a loan, separate from interest.

2. The original amount invested, separate from earnings.

3. The face value of a bond.

4. The owner of a private company.

5. The main party to a transaction, acting as either a buyer or seller for his/her own account and risk.

Producer Price Index:

A family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller.

Profit & Loss Statement (P&L):

A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time—usually a fiscal quarter or year. These records provide information that shows the ability of a company to generate profit by increasing revenue and reducing costs. The P&L statement is also known as a “statement of profit and loss”, an “income statement” or an “income and expense statement”.

Profit Margin:

A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings.

Protected Fund:

A type of mutual fund that guarantees an investor at least the initial investment, plus any capital gains, if it is held for the contractual term. The idea behind this type of fund is that you will be exposed to market returns because the fund is able to invest in the stock market, but you will have the safety of the guaranteed principal.

Public Company:

A company that has issued securities through an initial public offering and which are traded on at least one stock exchange or over-the-counter market.

Public Offering:

The sale of equity shares or other financial instruments by an organization to the public in order to raise funds for business expansion and investment. Public offerings of corporate securities in the U.S. must be registered with and approved by the SEC and are normally conducted by an investment underwriter.

Pullback:

A falling back of a price from its peak. This type of price movement might be seen as a brief reversal of the prevailing upward trend, signaling a slight pause in upward momentum.

Purchase Price:

The price that an investor pays for a security. This price is important as it is the main component in calculating the returns achieved by the investor.

Essentially, it can be thought of as the price that is paid for anything that is bought.

Put Option:

An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.