Let’s be honest, not everyone is a financial whiz. And the fact that there are a multitude of financial terms doesn’t help. Don’t fear, though, at Steel Valley Investment Group of Raymond James, we have a bit of a cheat sheet on our website to help you out.
Our Glossary of Investment Terms page features financial jargon with simple definitions to help you get a better handle on what your financial planner is talking about.
The page features a large variety of financial terms, but it’s a great place to look for one in particular your are curious about. We’ve highlighted a few of our favorites.
Arbitrage – A technique employed to take advantage of differences in price. If, for example, ABC stock can be bought in New York for $10 a share and sold in London at $10.50, an arbitrageur may simultaneously purchase ABC stock here and sell the same amount in London, making a profit of $.50 a share, less expenses. Arbitrage may also involve the purchase of rights to subscribe to a security, or the purchase of a convertible security - and the sale at or about the same time of the security obtainable through exercise of the rights or of the security obtainable through conversion.
Blue Sky Laws – A popular name for laws various states have enacted to protect the public against securities frauds. The term is believed to have originated when a judge ruled that a particular stock had about the same value as a patch of blue sky.
Convertible – A bond, debenture or preferred share that may be exchanged by the owner for common stock or another security, usually of the same company, in accordance with the terms of the issue.
Depository Trust Company (DTC) – A central securities certificate depository through which members effect security deliveries between each other via computerized bookkeeping entries thereby reducing the physical movement of stock certificates.
Interrogation device – A computer terminal that provides market information - last sale price, quotes, volume, etc. - on a screen or paper tape.
Leverage – The effect on a company when the company has bonds, preferred stock or both outstanding. Example: If the earnings of a company with 1 million common shares increases from $1,000,000 to $1,500,000, earnings per share would go up from $1 to $1.50, or an increase of 50%. But if earnings of a company that had to pay $500,000 in bond interest increased that much, earnings per common share would jump from $0.50 to $1.00 a share, or 100%.
Margin call – A demand upon a customer to put up money or securities with the broker. The call is made when a purchase is made; also if a customer's account declines below a minimum standard set by the exchange or by the firm.
Profit-taking – Selling stock that has appreciated in value since purchase, in order to realize the profit. The term is often used to explain a downturn in the market following a period of rising prices.
Up tick – A term used to designate a transaction made at a price higher than the preceding transaction. Also called a "plus" tick. A "zero-plus" tick is a term used for a transaction at the same price as the preceding trade but higher than the preceding different price. Conversely, a down tick, or "minus" tick, is a term used to designate a transaction made at a price lower than the preceding trade. A plus sign, or a minus sign, is displayed throughout the day next to the last price of each stock at the trading post on the floor of the New York Stock Exchange.
Zero coupon bond – A bond that pays no interest but is priced, at issue, at a discount from its redemption price.
Be sure to visit Steel Valley Investment Group’s Glossary of Investment Terms page for a full listing of terms.
As always, please contact us if you have any questions.