unlisted A security which is not traded on an exchange, usually due to an inability to meet listing requirements.

For such securities, broker/dealers negotiate directly with one another over computer networks and by phone, and their activities are monitored by the NASD. OTC stocks are

usually very risky since they are the stocks that are not considered large or stable enough to trade on a major exchange. They also tend to trade infrequently, making the bid-ask spread larger. Also, research about these stocks is more difficult to obtain. also called over-the-counter (OTC back-end value

The price that is paid to shareholders after the buyer already has control over a company in a two tier tender offer. This is an offer to buy a company in which the buyer offers to purchase enough shares in order to gain control of the company at a certain price, and then offers to purchase the remaining shares at a lower price. The amount

that is paid to the remaining shareholders is the last stage of a two tier tender offer.

Keltner channel An advanced technical analysis method, which uses an upper and lower band to indicate a 10-day moving average around

the typical market price. A close around the upper band it is said to signify a bull market, and a close around the lower band is said to signify a bear market. This analysis technique is named for Chester Keltner, although it is uncertain if he was actually the originator of the idea. up-and-in barrier option

A type of barrier option in which the spot price of the underlying is set below the barrier level, and the price of the underlying must close up in order for the option to be exercised. It is named "up-andin" because the right to exercise the option appears if the price of the underlying is above the barrier.

exchange offer An offer made by a company to give one security in return for another security. Most commonly, for various reasons a company will offer to give shares of a certain held company if the shareholders will return shares of another

held company. An exchange offer can also be performed on other securities, such as bonds. net unrealized appreciation NUA. The change (positive or negative) in value that shares held in a tax-deferred account will experience once they are sold. Net unrealized

appreciation does not undergo income tax when it is distributed, so this should be carefully considered by investors who are distributing stock from their retirement plan to another account, which might be subject to income tax underwater

A call option whose strike price is higher than the market price of the underlying security, or a put option whose strike price is lower than the market price of the underlying security. Thus, there is no incentive to exercise the option today. However, the option still has "time value", value based on the fact that the prices of the underlier can change. This "time value"

diminishes as the option approaches maturity.

amount at risk The difference between the value of a permanent life insurance policy and the policy's cash value to date. For example, if a life insurance

policy is worth $250,000 at face value, and the cash value is $50,000, the amount as risk is $200,000. The $200,000 represents the amount that the insurer would have to pay to the policy holder if the insured party dies investment club A group of retail investors who pool some of their money and

make joint investments. Investment clubs attempt to enable individuals to become individual investors by pooling their funds in small groups and collectively deciding how to invest the money. Like-minded investors come together to make investments based upon the input and research of the entire group, often providing a more complete foundation for

subsequent decisions. Of course, members of investment clubs do not need to invest only through the club, so the club can make an excellent addition to a portfolio or it can serve as an excellent introduction to investing as an individual. Clubs can be a benefit to investors of all skill and experience levels. It can be difficult to gain a spot in an existing club without

connections or the opportunity to replace a departing member. Fortunately, starting a new club is as simple as finding a dozen or so people in one geographic area who want to participate. Members should plan to, and may be required to, contribute at least a certain amount to the club's investment budget at certain intervals. Some clubs allow members to exceed the

minimum and others do not. All investments should be researched as carefully as an individual would research them, but, because more people are involved, research can be more thorough and cover more investment opportunities. Average Directional Index

ADX. An indicator used in technical analysis that shows strength of a trend. It smoothes the difference between the negative directional indicator (DI) and positive directional indicator (+DI), and is on a scale of 0 to 100. Index values above 40 indicate that the particular trend is strong, while values less than 20 indicates that a trend is weak and that an

investor should not use a trend following system. The index only shows the strength of the trend, not whether or not it is trending upwards or downwards. saturation A stage in a product's life cycle in which everyone who might want the product already has it.

If a company is in this stage, then it could inidcate that the company is not innovative, or that competitors have been able to provide superior product offerings. Typically, the company will cut down on sales and advertising expenditure if it reaches this stage, and may focus on the development of new products. business owner policy (BOP)

An insurance package designed to cover both property and liability insurance which is in general more reasonably priced than other options. A BOP is typically attractive for small businesses that want to avoid the higher costs of separate insurance policies. Small and medium-sized businesses are usually eligible for this type of

insurance package but large corporations will not meet the eligibility requirements due to the greater risk involved in their business operations. fraption Also known as an interest rate guarantee, this type of option allows an investor to set up a forward rate agreement during an agreed amount of time that

triggers in response to a pre-set strike price. Fraptions are used to protect investors from dramatic declines in interest rates matched bargain A system for trading stocks that matches a buy offer directly with a sell offer, rather than using a market maker. In a market maker system, buyers

and sellers deal with an intermediary (the market maker). This arrangement provides greater liquidity than a matched bargain system mini manipulation Illegal practice that causes the price of a security underlying an option contract to be altered to provide a deceptive depiction of the true market

value of the option. The individual creating the mini manipulation does so as a method of increasing the value of the options and thus increasing the amount of money that will be received for the options. dual-purpose fund A closed-end fund which distinguishes between common

shareholders and preferred shareholders for distribution purposes. Common shareholders receive all distributions from capital gains, while preferred shareholders receive all distributions from dividend and interest income. The class of shares sold to common shareholders is called capital shares, and this group of shareholders generally has a

less stable payment stream. The class of shares sold to preferred shareholders is called income shares, and their income stream is relatively more stable. When a dualpurpose fund is set up, a liquidation date is specified. On the liquidation date, preferred shareholders have the first right to payouts from the fund, but they can only be paid up to

the par value of their shares. Common shareholders have rights to all the remaining capital from the fund. accrued market discount An increase in the market price of a discounted bond resulting from an approaching maturity date, rather than from declining interest rates. The increase occurs because the bond holder will also receive

payout at par upon maturity, so the price of the bond will increase gradually as maturity approaches. counter currency The second currency in a currency pair. In a currency exchange, the exchange rate is quoted as the units of the counter currency in terms of a single unit of a base currency.

For example, in a currency exchange of Japanese Yen for British pounds, the Yen is the counter currency. also called quote currency or terms currency. Ichimoku Kinko Hyo A technical charting technique which generates a series of lines and levels that help an investor determine the movement of an asset. It

indicates support and resistance levels, as well as entry and exit points. Although relatively complicated to learn, this technique is used by many investors. This technique was developed in Japan, and its name literally translated means "one glance balanced chart." free and clear A title that is free of liens and legal questions as to ownership

of the property. A requirement for the sale of real estate. In general, a company that specialize in checking title claims for clients (a title company) will be hired to ensure that a title is clear when a sale of real estate is taking place. also called just title or good title or perfect title or clear title.

premium margin The amount of money needed to close out an option position. Premium margin is designed to cover the credit risk associated with a position. If an investor is shorting a stock, this premium would be the amount of money needed to close the position if the investor were to go into default. Premium margin and risk margin are the two

components comprising the margin requirement super sinker bond Bond with long-term coupons but short maturity, usually a home financing bond. Super sinker bonds are sometimes used when some of the mortgages backing the bond get prepaid, and so the bond is likely to be paid off quite soon.

The bond holder is uncertain as to when exactly the pay-off may occur, but the annual return on these bonds works out quite high over the shortto-medium-term holding period. currency pair The two currencies used in a foreign exchange transaction. The currency pair consists of a base currency and a counter

currency. The value of the currency pair is determined by the rate at which one unit of the base currency is converted into units of the counter currency. For example, a currency pair could be U.S. dollars/Japanese Yen or Swiss Francs/British pounds managing underwriter

The commercial or investment bank which has primary responsibility for organizing a given credit or bond issuance. This bank will find other lending organizations or underwriters to create the syndicate, negotiate terms with the issuer, and assess market conditions. also called syndicate manager, lead manager or lead underwriter.

fraption Also known as an interest rate guarantee, this type of option allows an investor to set up a forward rate agreement during an agreed amount of time that triggers in response to a pre-set strike price. Fraptions are used to protect investors from dramatic declines in interest rates.

Regulation FD SEC regulation adopted in 2000 that eliminated the practice of selective disclosure. The rule requires that when a public company chooses to release any information, it must be done in such a way that the general public has access to it at the same time as institutional investors and

analysts. If information is accidentally released to specific parties, the company must disseminate that information widely within 24 hours. bullet dodging Waiting to grant an employee stock option until after bad news involving the company is made public. Because the strike price on an option is linked to the date on which the option

was issued, waiting until after bad news sends a stock price lower and allows the employee to obtain shares at a lower strike price. Federal Unemployment Tax Act FUTA. A federal law that taxes businesses in order to fund the unemployment benefits set forth by the Social Security Act of 1935. In times of economic

growth, revenues from the tax increase but are used less frequently because unemployment levels are low, creating a cushion of funds. During times of slowing growth and rising unemployment, this cushion can provide benefits to the unemployed. prepayment privilege

A clause in some loans allowing the borrower to pay off the debt prior to its due date without incurring a penalty. This is an advantage for a borrower when interest rates are falling, since he/she can pay off the existing loan and then refinance at a more favorable rate. also called prior redemption privilege

accounting information system (AIS) A system, typically computerbased, used for storing, collecting, and analyzing a company's financial and accounting data. Accounting information systems are generally used by executives to make decisions, develop company strategies, and generate reports for

shareholders, internal personnel, and regulatory agencies. Accounting information systems also streamline accounting cycles and reduce the incidence of accounting errors. whitewash resolution A term used in Europe to refer to a specific portion of the corporation act (called the Companies Act in Europe). This

portion of the act indicates that a specific resolution must be passed before a company being bought out can provide financial assistance to the company which is buying it out. This is to prevent companies from taking advantage of the companies they are buying out. split coupon bond

A bond which pays no coupons, is sold at a deep discount to its face value, and matures at its face value. A zero-coupon bond has the important advantage of being free of reinvestment risk, though the downside is that there is no opportunity to enjoy the effects of a rise in market interest rates. Also, such bonds tend to be very sensitive to changes in interest rates, since

there are no coupon payments to reduce the impact of interest rate changes. In addition, markets for zero coupon bonds are relatively illiquid. The imputed interest on a split coupon bond is taxable as it accrues, even though there is no cash flow. also called accrual bond or zero-coupon bond. mean reversion

1. The theory that a given value will continue to return to an average value over time, despite fluctuations above and below the average value. This theory can be applied to any measurable value, including interest rates and the return on a certain investment. 2. A purchasing strategy based on the above theory, which

assumes that prices will return to an average value. This strategy encourages purchasing underperforming securities, under the premise that the market will eventually rebound, and the value of the security will increase. SIMPLE Savings Incentive Match Plan for Employees. A retirement

plan sponsored by companies with fewer than 100 employees which is attractive for employers because it avoids some of the administrative fees and paperwork of plans such as a 401(k) plan. A SIMPLE plan may be structured as either a 401(k) or an IRA. gamble

To engage in any activity in which money is put at risk for the purpose of making a profit, and which is characterized by some or most of the following (in approximately descending order of importance): little or no research has been conducted; the odds are unfavorable; the behavior is risk-seeking; an unsystematic approach is being taken;

emotions such as greed and fear play a role; the activity is a discrete event or series of discrete events not done as part of a long-term plan; the activity is significantly motivated by entertainment or compulsion; ownership of something tangible is not involved; no net economic effect results.

forex hedge Tactic used by a forex trader to protect a current position from undesirable changes in exchange rates. For example, if a trader predicted that the dollar may take a turn for the worst, he/she may implement a forex hedge to protect the investment W formation

A technical analysis term used to describe a chart on which the price of a security has made two approximately equal bottoms over a period of time. Technical analysts try to buy at one of the bottoms in anticipation of a rise (which would make the shape of a "W" on the chart). also called double bottom. opposite of double top.

consolidated tape A ticker tape which includes quotes for both NYSE and AMEX stocks. The consolidated tape is split into two different reporting systems. One reports the trading prices and volumes on the New York Stock Exchange, and also trading prices and volume from other exchanges of stocks that are

listed on the New York Stock Exchange. The other reports the trading prices and volumes on the American Stock Exchange, and on the trading volume and prices of AMEXlisted stock in other exchanges and the over-the-counter market. standard accounting practice

A set of rules that a company must follow when reporting information on its financial statement. The standard accounting practice guidelines allow companies to be compared to each other because they have followed the same rules. The standard methods in the U.S. are referred to as Generally Accepted Accounting Principles.

rate differential swap A swap in which the two payments are tied to two currencies in two different interest rate indexes, but in which the payments are exchanged in one base currency. For example, a rate differential swap might have payments denominated in U.S. dollars, but could have one set

tied to the Japanese LIBOR and another to the U.S. LIBOR. The Japanese LIBOR payments will still be made in dollars. The rate differential swap allows investors to profit from changes in the interest rates of the two indexes. also called cross-index basis swap, crossrate swap, differential swap, interest rate index swap, LIBOR differential swap.

covered warrant A right (but not an obligation) to buy or sell a set amount of stock, bonds or other securities from a financial institution at a specific price and date. Unlike a regular warrant, which is issued by a company and allows a holder to buy or sell that company's securities, a covered warrant is issued by a financial

institution and can apply to outside securities. For example, a bank might issue a covered warrant on shares of Microsoft. The warrant is "covered" because the issuing organization owns at least some of the underlying securities. OPRA

Options Prices Reporting Authority. A subscription service that disseminates inside quotations and last sale data for options. Securities Investor Protection Corporation SIPC. A non-profit membership corporation established by Congress which insures securities and cash in customer accounts up to $500,000 (up to $100,000 on cash) in the

event of brokerage bankruptcy. The SIPC is funded by all of its member securities broker/dealers. While it insures the account in the event that a brokerage runs out of funds to cover its claims, it does not insure against investment losses.

seasonal credit rate Credit rate which applies to loans of short duration

provided to small lending institutions by a Central Bank for the purpose of providing liquidity. Banks requesting this type of credit experience seasonal fluctuations in the amount of funds they need, and are often found in transitional communities based on farming and tourism.

currency trading

The act of buying and selling world currencies. Currency trading is most often engaged in by banks and other institutions, for the purposes of international trade. Individual investors may engage in currency trading as well, attempting to benefit from variations in the exchange rates of the currencies average strike option

A type of stock option used on Asian exchanges. The strike price in this type of option is based on the average asset price during a certain period of time, defined by a range of dates called the "fixings." This type of option is less volatile than traditional options, which have a predetermined strike price. commodity block currency

A currency of a country that maintains an economy strongly related to the price fluctuations of a certain commodity. An example of this currency is the strong tie between Canada's economy and its tie to the price of oil which affects the price of the Canadian dollar