DAY ORDER An order to buy or sell stock that automatically expires if it can’t be executed on the day it is entered.
DEBT/EQUITY RATIO Indicator of financial leverage. Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long term debt by common stockholders equity.
DECLARATION DATE The date on which a firm’s directors meet and announce the date and amount of the next dividend.
DEFERRED TAXES A non-cash expense that provides a source of free cash flow. Amount allocated during the period to cover tax liabilities that have not yet been paid.
DEPRECIATION A non-cash expense that provides a source of free cash flow. Amount allocated during the period to amortize the cost of acquiring long term assets over the useful life of the assets.
DERIVATIVE SECURITY A financial security, such as an option, or future, whose value is derived in part from the value and characteristics of another security, the underlying security.
DISTRIBUTIONS Payments from fund or corporate cash flow. May include dividends from earnings, capital gains from sale of portfolio holdings and return of capital. Fund distributions can be made by check or by investing in additional shares. Funds are required to distribute capital gains (if any) to shareholders at least once per year. Some Corporations offer Dividend ReinvestmentPlans (DRP).
DIVIDEND REINVESTMENT PLANS (DRP) Plans offered by many corporations for the reinvestment of dividends, sometimes at a discount from market price, on the dividend payment date. Many DRP’s also allow the investment of additional cash from the shareholder. The DRP is usually administered by the company without charges to the holder.
DIVERGENCE When two or more averages or indices fail to show confirming trends.
DIVIDEND Distribution of a portion of a company’s earnings, cash flow or capital to shareholders, in cash or additional stock.
DIVIDEND YIELD (STOCKS) Indicated Yield represents annual dividends divided by current stock price.
DIVIDEND YIELD (FUNDS) Indicated Yield represents return on a share of a mutual fund held over the past 12 months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but ot redemption charges.
DIVIDENDS PER SHARE Dividends paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted average of shares outstanding over the reporting term.
DIVIDEND REINVESTMENT PLAN Automatic reinvestment of shareholder dividends in more shares of a company’s stock, often without commissions. Some plans provide for the purchase of additional shares at a deiscount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the long term using dollar cost averaging.
DOWNGRADE A classic negative change in ratings for a stock, and or other rated security.
EARNINGS Net income for the company during the period.
EARNINGS PER SHARE (EPS) Also referred to as Primary Earnings Per Share. Net income for the past 12 months divided by the number of common shares outstanding, as reported by a company. The company often uses a weighted average of shares outstanding over reporting term.
EARNINGS YIELD The ratio of Earnings Per Share after allowing for tax and interest payments on fixed interest debt, to the current share price. The inverse of the Price/Earnings ratio. It’s the Total Twelve Months Earnings divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is shown in percentage.
EQUITY The value of the common stockholders equity in a company as listed on the balance sheet.
EQUITY OPTIONS Securities that give the holder the right to buy or sell a specified number of shares of stock, at a specified price for a certain (limited) time period. Typically one option equals 100 shares of stock.
EUROPEAN-STYLE OPTION An option contract that can only be exercised on the expiration date.
EXCHANGE The marketplace in which shares, options and futures on stocks, bonds, commodities and indices are traded.
EX-DIVIDEND DATE The first day of trading when the seller, rather than the buyer, of a stock will be entitled to the most recently announced dividend payment.
EXECUTION The process of completing an order to buy or sell securities. Once a trade is executed, it is reported by a Confirmation Report; settlement (payment and transfer of ownership) occurs between 1 (mutual funds) and 3 (stocks) days after an order is executed.
EXERCISE To implement the right of the holder of an option to buy (in the case of a call) or sell (in the case of a put) the underlying security.
EXPENSE RATIO The percentage of the assets that were spent to run a mutual fund (as of the last annual statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1 (distribution and advertising ) fees. The expense ratio does not include brokerage costs for trading the portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks. These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an Operating Expense Ratio (OER).
EXPIRATION CYCLE An expiration cycle relates to the dates on which options on a particular security expire. A given option will be placed in 1 of 3 cycles, the January cycle, the February cycle, or the March cycle. At any point in time, an option will have contracts with 4 expiration dates outstanding, 2 in near-term months and 2 in far-term months.
EXPIRATION DATE The last day (in the case of American-style) or the only day (in the case of European- style) on which an option may be exercised. For stock options, this date is the Saturday immediately following the 3d Friday of the expiration month; however, brokerage firms may set an earlier deadline for notification of an option holder’s intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday.;
FUND FAMILY The management company that runs and/or sells shares of the fund. Fund families often offer several funds with different investment objectives.
FUNDS FROM OPERATIONS (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations. It is earnings with depreciation and amortization added back. A similar term increasingly used is Funds Available for Distribution (FAD), which is FFO less capital investments in trust property and the amortization of mortgages.
FUTURES CONTRACT Agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon by the buyer and seller. The contracts themselves are often traded on the futures market. A futures contract differs from an option because an option is the right to buy or sell, whereas a futures contract is the promise to actually make a transaction.
GOOD TIL CANCELED Sometimes simply called “GTC”, it means an order to buy or sell stock that is good until you cancel it.
GROWTH RATES Compound annual growth rate for the number of full fiscal years shown. If there is a negative or zero value for the first or last year, the growth is NM (not meaningful).
HEAD & SHOULDERS In technical analysis, a chart formation in which a stock price reaches a peak and declines, rises above its former peak and again declines and rises again but not to the second peak and then again declines. The first and third peaks are shoulders, while the second peak is the formation’s head. Technical analysts generally consider a head and shoulders formation to be a very bearish indication.
HEDGING A strategy designed to reduce investment risk using “call” options, “put” options, “short” selling, or futures contracts. A hedge can help lock in existing profits. Its purpose is to reduce the potential volatility of a portfolio, by reducing the risk of loss.
HIGH PRICE The highest (intraday) price of a stock over the past 52 weeks, adjusted for any stock splits.
HOLDING COMPANY A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.