ALPHA
A measure of selection risk (also known as residual risk) of a mutual fund in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return. For example, an alpha of 0.4 means the fund outperformed the market-based return estimate by 0.4 %. -0.6 means a fund's monthly return was 0.6 % less than would have been predicted from the change in the market alone. 

ALPHA EQUATION
The alpha of a fund is determined as follows:
[ (sum of y) - ((b)(sum of x)) ] / n
where: n =number of observations (36 mos)
b = beta of the fund
x = rate of return for the S&P 500
y = rate of return for the fund

AMERICAN DEPOSITARY RECEIPTS
Certificates issued by a U.S. Depositary Bank, representing foreign shares held by the bank, usually by a branch or correspondent in the country of issue. One ADR may represent a portion of a foreign share, one share or a bundle of shares of a foreign corporation. If the ADR's are "sponsored," the corporation provides financial information and other assistance to the bank and may subsidize the administration of the ADR's. "Unsponsored" ADR's do not receive such assistance. ADR's carry the same currency, political and economic risks as the underlying foreign share; the prices of the two, adjusted for the SDR/ordinary ratio, are kept essentially identical by arbitrage. American Depositary Shares (ADS) are a similar form of certification. 

AMERICAN-STYLE OPTION
An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style. 

ANALYST
Employee of a brokerage or fund management house who studies companies and makes buy and sell recommendations on their stocks. Most specialize in a specific industry. 

ANNUAL REPORT
Yearly record of a publicly held company's financial condition. It includes a description of the firm's operations, its balance sheet and income statement. SEC rules require that it be distributed to all shareholders. A more detailed version is called a 10-K. 

ARBITRAGE
Profiting from differences in the price of a single security that is traded on more than one market. 

ARMS INDEX
Also known as TRading INdex (TRIN):= #advancing issues/#declining issues
Total up volume/total down volume 

An advance/decline market indicator. Less than 1.0 indicates bullish demand, while above 1.0 is bearish. The index often is smoothed with a simple moving average. 

ASSIGNMENT
The receipt of an exercise notice by an options writer that requires him to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price. 

AT THE MONEY
An option is at-the-money if the strike price of the option is equal to the market price of the underlying security. For example, if xyz stock is trading at 54, then the xyz 54 option is at-the-money. 

AUTOREGRESSIVE
Using previous data to predict future data. 

AVERAGE
An arithmetic mean of selected stocks intended to represent the behavior of the market or some component of it. One good example is the widely quoted Dow Jones Industrial Average, which adds the current prices of the 30 DJIA's stocks, and divides the results by a predetermined number, the divisor. 

AVERAGE MATURITY
The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with longer average life. 

BACK OFFICE
Brokerage house clerical operations that support, but do not include, the trading of stocks and other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory compliance. 

BANKER'S ACCEPTANCE
A short-term credit investment created by a non-financial firm and guaranteed by a bank as to payment. Acceptances are traded at discounts from face value in the secondary market. These instruments have been a popular investment for money market funds. 

BASIS
The price an investor pays for a security plus any out-of-pocket expenses. It is used to determine capital gains or losses for tax purposes when the stock is sold. 

BASIS POINTS
Refers to yield on bonds. Each percentage point of yield in bonds equals 100 basis points. If a bond yield changes from 7.25 % to 7.39 %, that's a rise of 14 basis points. 

BEAR
An investor who believes a stock or the overall market will decline. A bear market isa prolonged period of falling stock prices, usually by 20% or more. 

BEAR RAID
A situation in which large traders sell positions with the intention of driving prices down. 

BETA (STOCKS)
Measure of a stock's risk in relation to the market. 0.7 means a stock price is likely to move up or down 70 % of the market change; 1.3 means the stock is likely to move up or down 30 % more than the market. 

BETA EQUATION (STOCKS)
The beta of a stock is determined as follows:
[(n) (sum of (xy)) ]-[(sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[(sum of x) (sum of x)]

where: n = # of observations (24-60 months)
x = rate of return for the S&P 500 Index
y = rate of return for the stock

BETA (MUTUAL FUNDS)
The measure of a fund's risk in relation to the market. 0.7 means the fund's total return is likely to move up or down 70 % of the market change; 1.3 means total return is likely to move up or down 30 % more than the market. 

BETA EQUATION (MUTUAL FUNDS)
The beta of a fund is determined as follows:
[(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]

where: n = # of observations (36 months)
x = rate of return for the S&P 500 Index
y = rate of return for the fund

BLOW-OFF TOP
A steep and rapid increase in price followed by a steep and rapid drop in price. This is an indicator seen in charts and used in technical analysis of stock price and market trends. 

BREAKOUT
A rise in a security's price above a resistance level (commonly its previous high price) or drop below a level of support (commonly the former lowest price.) A breakout is taken to signify a continuing move in the same direction. Can be used by technical analysts as a buy or sell indication. 

BULL
An investor who thinks the market will rise. 

BULL MARKET
A market which is on a consistent upward trend. 

BUYOUT
Purchase of a controlling interest (or percent of shares) of a company's stock. A leveraged buyout is done with borrowed money. 

CALL OPTION
An option contract that gives the holder of the option the right (but not the obligation) to purchase, and obligates the writer to sell, a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract. 

CAPITAL EXPENDITURES
Amount used during a particular period to acquire or improve long term assets such as property, plant, or equipment. 

CAPITAL GAIN
When a stock is sold for a profit, it's the difference between the net sales price of securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss. 

CAPITAL LOSS
The difference between the net cost of a security and the net sale price, if that security is sold at a loss. 

CASH DIVIDEND
A dividend paid in cash to a company's shareholders. The amount is normally based on profitability and is taxable as income. A cash distribution may include capital gains and return of capital in addition to the dividend. 

CASH AND EQUIVALENTS
The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and Bankers' Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within ninety days. 

CASH FLOW
In investments, it represents earnings before depreciation amortization and non-cash charges. Sometimes called cash earnoings. Cash Flow from operations (called Funds From Operations (FFO) by real estate and other investment trusts, is important because it indicates the ability to pay dividends. 

CHANGES IN FINANCIAL POSITION
Sources of funds internally provided from operations which alter a company's cash flow position: depreciation, deferred taxes, other sources, and capital expenditures. 

CHURNING
Excessive trading of a client's account in order to increase the broker's commissions. 

CLOSING PURCHASE
A transaction in which the purchaser's intention is to reduce or eliminate a short position in a stock, or in a given series of options. 

CLOSING SALE
A transaction in which the seller's intention is to reduce or eliminate his long position in a stock, or a given series of options. 

COMISSION
Te fee paid to a broker to execute a trade, based on number of shares, bonds, options and/or their dollar value. In 1975, deregulation led to the creation of discount brokers, who charge lower commissions than full service brokers. Full service brokers offer advice and usually have a full staff of analysts who follow specific industries. Discount brokers simply execute a client's order--and usually do not offer an opinion on a stock. 

COMMON STOCK/OTHER EQUITY
Value of outstanding common shares at par, plus accumulated retained earnings. Also called shareholders' equity. 

CONFIDENCE INDICATOR
A measure of investors' faith in the economy and the securities market. A low or deteriorating level of confidence is considered by many technical analysts as a bearish sign. 

CONFIDENCE LEVEL
The degree of assurance that a specified failure rate is not exceeded. 

CONFIRMATION
The written statement that follows any "trade" in the securities markets. Confirmation is issued immediately after a trade is executed. It spells out settlement date, terms, commission, etc. 

CONVERGENCE
The movement of the price of a futures contract toward the price of the underlying cash commodity. At the start, the contract price is higher because of the time value. But as the contract nears expiration, the futures price and the cash price converge. 

CORNER A MARKET
To purchase enough of the available supply of a commodity or stock in order to manipulate its price. 

COUPON RATE
In bonds, notes or other fixed income securities, the stated percentage rate of nterest, usually paid twice a year. 

COVERED CALL
A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. Covered calls generally limit the risk the writer takes because the stock does not have to be bought at the market price, if the holder of that option decides to exercise it. 

COVERED PUT
A put option position in which the option riter also is short the corresponding stock or has deposited, in a cash account, cash or cash equivalents equal to the exercise of the option. This limits the option writer's risk because money or stock is already set aside. In the event that the holder of the put option decides to exercise the option, the writer's risk is more limited than it would be on an uncovered or naked put option. 

CURRENT ASSETS
Value of cash, accounts receivable, inventories, marketable securities and other assets that could be converted to cash in less than 1 year. 

CURRENT LIABILITIES
Amount owed for salaries, interest, accounts ayable and other debts due within 1 year. 

CURRENT RATIO
Indicator of short-term debt paying ability. Determined by dividing current assets by current liabilities. The higher the ratio, the more liquid the company. 

CURRENT YIELD
For bonds or notes, the coupon rate divided by the market price of the bond. 

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. 

DECILE RANK
Performance over time, rated on a scale of 1-10. 1 indicates that a mutual fund's return was in the top 10 % of funds being compared, while 3 means the return was in the top 30 %. Objective Rank compares all funds in the same investment strategy category. All Rank compares all funds. 

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. 

DETREND
To remove the general drift, tendency or bent of a set of statistical data as related to time. 

DIFFERENCE FROM S&P
A mutual fund's return minus the change in the Standard & Poors 500 Index for the same time period. A notation of -5.00 means the fund return was 5 percentage points less than the gain in the S&P, while 0.00 means that the fund and the S&P had the same return. 

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 reivestment 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. Principal US stock exchanges are: New York Stock Exchange (NYSE), American Stock Exchange (AMEX) and the National Association of Securities Dealers (NASDAQ) 

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. This date set by the NYSE (and generally followed on other US exchanges) is currently two business days before the record date. A stock that has gone ex-dividend is marked with an x in newspaper listings on that date. 

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 in the U.S. between 1 (mutual funds) and 5 (stocks) days after an order is executed. Settlement times for exchange listed stocks are in the process of being reduced to three days in the U.S. 

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. Brokerages usually set a limit of 30-60 days, at which the GTC expires if not restated. 

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. 

INDICATED DIVIDEND
Total amount of dividends that would be paid on a share of stock over the next 12 months if each dividend were the same amount as the most recent dividend. Usually represent by the letter e in stock tables 

INDICATED YIELD
The yield, based on the most recent quarterly rate times four. To determine the yield, divide the annual dividend by the price of the stock. The resulting number is represented as a percentage. 

INDUSTRY
The category describing a company's primary business activity. This usually is determined by the largest portion of revenue. 

INITIAL PUBLIC OFFERING (IPO)
A company's first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in IPOs generally must be prepared to accept very large risks for the possibility of large gains. IPO's by investment companies (closed end funds) usually contain underwriting fees which represent a load to buyers. 

INSIDER INFORMATION
Relevant information about a company that has not yet been made public. It is illegal for holders of this information to make trades based on it, however received. 

IN-THE-MONEY
A "call" option is in-the-money if the strike price is less than the market price of the underlying security. A "put" option is in-the-money if the strike price is greater than the market price of the underlying security. For example, an xyz "call" option with a 52 strike price is in-the-money when xyz trades at 52 1/8 or higher. An xyz "put" option with a 52 strike price is in-the-money when xyz is trading at 51 7/8 or lower. 

INVENTORY
For companies: Raw materials, items available for sale or in the process of being made ready for sale. They can be individually valued by several different means, including cost or current market value, and collectively by FIFO, LIFO or other techniques. The lower value of alternatives is usually used to preclude overstating earnings and assets. For security firms: securities bought and held by a broker or dealer for resale. 

INVENTORY TURNOVER
The ratio of annual sales to inventory. Low turnover is an unhealthy sign, indicating excess stocks and/or poor sales. 

INVESTMENT TRUST
A closed-end fund regulated by the Investment Company Act of 1940. These funds have a fixed number of shares which are traded on the secondary markets similarly to corporate stocks. The market price may exceed the net asset value per share, in which case it is considered at a "premium." When the market price falls below the NAV/share, it is at a "discount." Many closed end funds are of a specialized nature, with the portfolio representing a particular industry, country, etc. These funds are usually listed on US and foreign exchanges. 

IRA/KEOGH ACCOUNTS
Special accounts where you can save and invest, and the taxes are deferred until money is withdrawn. These plans are subject to frequent changes in law with respect to the deductibility of contributions. Withdrawals of tax deferred contributuons are taxed as income, including the capital gains from such accounts. 

LAST SPLIT
After a stock split, the number of shares distributed for each share held and the date of the distribution. 

LIMIT ORDER
An order to buy a stock at or below a specified price or to sell a stock at or above a specified price. For instance, you could tell a broker "Buy me 100 shares of xyz Corp at $8 or less" or to "sell 100 shares of xyz at $10 or better." 

LOAD FUND
A mutual fund with shares sold at a price including a sales charge--typically 4 % to 8% of the net amount indicated. Some "no-load" funds have distribution fees permitted by article 12b1 of the Investment Company Act; these are typically 0.25%. A "true no-load" fund has neither a sales charge not 12b1 fee. A load implies that the fund purchaser receives some investment advice or other service worthy of the charge. 

LONG POSITION
Occurs when an individual owns securities. An owner of 1000 shares of stock is said to be "Long the Stock." 

LONG POSITION (OPTIONS)
An options position where a person has executed one or more options trades where the net result is that they are an "owner" or holder of options (i.e. the number of contracts bought exceeds the number of contracts sold). 

LONG TERM ASSETS
Value of property, equipment and other capital assets minus the depreciation. This is an entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect the market value of the assets. 

LONG TERM DEBT
Value of obligations of over 1 year that require that interest be paid. 

LONG TERM DEBT/CAPITALIZATION
Indicator of financial leverage. Shows long term debt as a proportion of the capital available. Determined by dividing long term debt by the sum of long term debt, preferred stock and common stockholders' equity. 

LONG TERM LIABILITIES
Amount owed for leases, bond repayment and other items due after 1 year. 

LOW PRICE
The lowest (intraday) price of a stock over a certain period of time. 

MANAGEMENT/CLOSELY HELD SHARES
Percentage of shares held by persons closely related to a company, as defined by the Securities and Exchange Commission. Part of these percentages often is included in Institutional Holdings--making the combined total of these percentages over 100. There is overlap as institutions sometimes acquire enough stock to be considered by the SEC to be closely allied to the company. 

MARGIN ACCOUNT (STOCKS)
A leverageable account in which stocks can be purchased for a combination of cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin rules are federally regulated, but margin requirements and interest may vary among broker/dealers. 

MARGIN REQUIREMENT (OPTIONS)
The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position valuation and reasonably foreseeable intra- day price changes. 

MARKET CAPITALIZATION 
The total dollar value of all outstanding shares. Computed as shares times current market price. It is a measure of corporate size. 

MARKET CYCLE
The period between the 2 latest highs or lows of the S&P 500, showing net performance of a fund through both an up and a down market. A market cycle is complete when the S&P is 15 % below the highest point or 15 % above the lowest point (ending a down market). The dates of the last market cycle are: 12/04/87 to 10/11/90 (low to low). 

MARKET ORDER
An order to buy or sell a stock at the going price. 

MINIMUM PURCHASES
For mutual funds, the amount required to open a new account (Minimum Initial Purchase) or to deposit into an existing account (Minimum Additional Purchase). These minima may be lowered for buyers participating in an automatic purchase plan 

MONEY MARKET FUND
A mutual fund that invests only in short term securities, such as bankers' acceptances, commercial paper, repurchase agreements and government bills. The net asset value per share is maintained at $1.00. Such funds are not federally insured, although the portfolio may consist of guaranteed securities and/or the fund may have private insurance protection. 

MOVING AVERAGE
Used in charts and technical analysis, the average of security or commodity prices constructed in a period as short as a few days or as long as several years and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted. 

MUTUAL FUND
An open end investment company that pools investors' money to invest in a variety of stocks, bonds, or other securities. A mutual fund issues and redeems shares to meet demand, and the redemption value per share is the net asset value per share, less in some cases a redemption fee which represents a rear-end load. A closed end fund, often incorrectly called a mutual fund, is instead an investment trust. Both are investment companies regulated by the Investment Company Act of 1940. 

NET ASSET VALUE (NAV)
The value of a fund's investments. For a mutual fund, the net asset value per share usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end fund, the market price may vary significantly from the net asset value. 

NET INCOME
The company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses 

NOISE
Price and volume fluctuations that can confuse interpretation of market direction. 

NO LOAD MUTUAL FUND 
An open-end investment company, shares of which are sold without a sales charge. There can be other distribution charges, however, such as Article 12b-1 fees. A true "no load" fund will have neither a sales charge nor a distribution fee. 

NM
Abbreviation for Not Meaningful. 

OBJECTIVE (MUTUAL FUNDS)
The fund's investment strategy category as stated in the prospectus. There are more than 20 standardized categories. 

OPENING PURCHASE
A transaction in which the purchaser's intention is to create or increase a long position in a given series of options. 

OPENING SALE
A transaction in which the seller's intention is to create or increase a short position in a given series of options. 

OPEN INTEREST
The number of outstanding option contracts in the exchange market or in a particular class or series. 

OPTION
Gives the buyer the right, but not the obligation, to buy or sell stock at a set price on or before a given date. Investors, not companies, issue options. Investors who purchase call options bet the stock will be worth more than the price set by the option (the strike price), plus the price they paid for the option itself. Buyers of put options bet the stock's price will go down below the price set by the option. 

OTHER CURRENT ASSETS
Value of non-cash assets, including prepaid expenses and accounts receivable, due within 1 year. 

OTHER LONG TERM LIABILITIES
value of leases, future employee benefits, deferred taxes and other obligations not requiring interest payments that must be paid over a period of more than 1 year. 

OTHER SOURCES
Amount of funds generated during the period from operations by sources other than depreciation or deferred taxes. Part of Free Cash Flow calculation. 

OUT OF THE MONEY
A call option is out-of-the-money if the strike price is greater than the market price of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of the underlying security. 

OVERBOUGHT\OVERSOLD INDICATOR
An indicator that attempts to define when prices have moved too far and too fast in either direction and thus are vulnerable to reaction. 

PAYMENT DATE
Date on which a declared stock dividend or a bond interest payment is scheduled to be made. 

PHONE SWITCHING
In mutual funds, the ability to transfer shares between funds in the same family by telephone request. There may be a charge associated with these transfers. Phone switching is also possible among different fund families if the funds are held in street name by a particpating broker/dealer. 

PIVOT
Price level established as being significant by market's failure to penetrate or as being significant when a sudden increase in volume accompanies the move through the price level. 

POINT AND FIGURE CHART
A price-only chart that takes into account only whole integer changes in price, i.e., a 2-point change. Point and figure charting disregards the element of time and is solely used to record changes in price. 

PREFERRED STOCK
A security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most preferred stock pays a fixed dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights. 

PREMIUM
The price of an option contract, determined on the exchange, which the buyer of the option pays to the option writer for the rights to the option contract. 

PRICES
Price of a share of common stock on the date shown. Highs and lows are based on the highest and lowest intraday trading price. 

PRICE/BOOK RATIO
Compares a stock's market value to the value of total assets less total liabilities (book). Determined by dividing current price by common stockholders' equity per share (book value), adjusted for stock splits. Also called Market-to-Book. 

PRICE/EARNINGS RATIO
Shows the "multiple" of earnings at which a stock sells. Determined by dividing current price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is determined by dividing earnings for past 12 months by the number of common shares outstanding. Higher "multiple" means investors have higher expectations for future growth, and have bid up the stock's price. 

P/E RATIO EQUATION
Assume XYZ Co sells for $25.50 per share and has earned $2.55 per share this year 
$25.50 = 10 times $2.55 
XYZ stock sells for 10 times earnings. 

PRICE/SALES RATIO
Determined by dividing stock's current price by revenue per share (adjusted for stock splits). Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares outstanding. 

PRIMARY MARKET
The first buyer of a newly issued security buys that security in the primary market. All subsequent trading of those securities is done in the secondary market. 

PROFIT MARGIN
Indicator of profitability. Determined by dividing net income by revenue for the same 12-month period. Result is shown as a percentage. 

PROGRAM TRADING
Trades based on signals from computer programs, usually entered directly from the trader's computer to the market's computer system and executed automatically. 

PROSPECTUS
Formal written document to sell securities that describes the plan for a proposed business enterprise, or the facts concerning an existing one, that an investor needs to make an informed decision. Prospectuses are used by Mutual Funds to describe the fund objectives, risks and other essential information. 

PROXY
Document intended to provide shareholders with information necessary to vote in an informed manner on matters to be brought up at a stockholders' meeting. Includes information on closely held shares. Shareholders can and often do give management their proxy, representing the right and responsibility to vote their shares as specified in the proxy statement. 

PUT OPTION
An option contract that gives the holder the right to sell (or "put"), and places upon the writer the obligation to purchase, a specified number of shares of the underlying stock at the given strike price on or before the expiration date of the contract. 

QUICK RATIO
Indicator of a company's financial strength (or weakness). Calculated by taking current assets less inventories, divided by current liabilities. Also called Acid Test. 

RANGE
The difference between the high and low price during a given period. 

RETURN
The percentage gain or loss for a mutual fund in a specific time period. This number assumes that all distributions are reinvested. 

RECORD DATE
Date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov 1, payable Dec 1 to holders of record Nov 15. Once a trade is executed an investor becomes the "owner of record" on settlement, which currently takes 5 business days for securities, and one business day for mutual funds. Stocks trade ex-dividend the fourth day before the record date, since the seller will still be the owner of record and is thus entitled to the dividend. 

REDEMPTION CHARGE
The commission charged by a mutual fund when redeeming shares. For example, a 2 % redemption charge (also called a "back end load") on the sale of shares valued at $1000 will result in payment of $980 (or 98 % of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods. 

RELATIVE STRENGTH
A stock's price movement over the past year as compared to a market index (the S&P 500). Value below 1.0 means the stock shows relative weakness in price movement (underperformed the market); a value above 1.0 means the stock shows relative strength over the 1-year period. Equation for Relative Strength: [current stock price/year-ago stock price] [current S&P 500/year-ago S&P 500] 

RETRACEMENT
A price movement in the opposite direction of the previous trend. 

RETURN ON ASSETS (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months by total assets. Result is shown as a percentage. 

RETURN ON EQUITY (ROE)
Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholders' equity (adjusted for stock splits). Result is shown as a percentage. 

REVERSE STOCK SPLIT
A proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. A firm generally institutes a reverse split to boost its stock's market price and attract investors. 

RIGHTS OFFERING
Issuance of "rights" to current shareholders allowing them to purchase additional shares, usually at a discount to market price. Shareholders who do not exercise these rights are usually diluted by the offering. Rights are often transferrable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed end funds, which cannot otherwise issue additional common stock. 

SALES CHARGE
The fee charged by a mutual fund when purchasing shares, usually payable as a commission to amarketing agent, such as a financial advisor, who is thus compensated for his assistance to a purchaser. It epresents the difference, if any, between the share purchase price and the share net asset value. 

SEC
The Securities and Exchange Commission, the primary federal regulatory agency of the securities industry. 

SECONDARY MARKET
A market that provides for the purchase or sale of previously owned securities. Most trading is done in the secondary market. The New York Stock Exchange, as well as all other stock exchanges, the bond markets, etc., are secondary markets. 

SELLING SHORT
If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, s/he must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short. 

SERIES
Options: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price.Stocks: shares which have common characteristics, such as rights to ownership and voting, dividends, par value, etc. In the case of many foreign shares, one series may be owned only by citizens of the country in which the stock is registered. 

SETTLEMENT DATE
The date on which payment is made to settle a trade. For stocks traded on US exchanges, settlement is currently 5 business days after the trade, but this will be reduced to 3 days in 1995. For mutual funds, settlement usually occurs in the U.S. the day following the trade. In some regional markets, foreign shares may require months to settle. 

SHARES
Certificates or book entries representing ownership in a corporation or similar entity 

SHARE REPURCHASE
Program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders. 

SHORT POSITION (OPTIONS)
A position wherein a person's interest in a particular series of options is as a net writer (ie, the number of contracts sold exceeds the number of contracts bought). 

SHORT POSITION (STOCKS)
Occurs when a person sells stocks s/he does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought to close out the transaction. Technique is used when an investor believes the stock price is going down. 

SHORT SALE
Selling a security that the seller does not own but is committed to repurchasing eventually. It is used to capitalize on an expected decline in the security's price. 

SLIPPAGE
The difference between estimated transaction costs and actual transaction costs. The difference is usually composed of revisions to price difference or spread and commission costs. 

SIC
Abbreviation for Standard Industrial Classification. Each 4-digit code represents a unique business activity. 

STOCK DIVIDEND
Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold. 

STOP (-LOSS) ORDER
An order to sell a stock when the price falls to a specified level. 

STRIKE PRICE
The stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract. 

10-K
Annual report required by the SEC each year. Provides a comprehensive overview of a company's state of business. Must be filed within 90 days after fiscal year end. A 10Q report is filed quarterly. 

TICK INDICATOR
A market indicator based on the number of stocks whose last trade was an uptick or a downtick. Used as an indicator of market sentiment or psychology to try to predict the market's trend. 

TIME VALUE
The portion of the premium that is based on the amount of time remaining until the expiration date of the option contract, and that the underlying components that determine the value of the option may change during that time. Time value is generally equal to the difference between the premium and the intrinsic value. 

TOTAL REVENUE
Total sales and other revenue for the period shown. Known as "turnover" in the UK. 

TRADE
A verbal (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later. 

TRADE DATE
The date on which a trade occurs. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks, settlement is generally 5 business days after the trade. 

TRADING RANGE
The difference between the high and low prices traded during a period of time; with commodities, the high/low price limit established by the exchange for a specific commodity for any one day's trading. 

TURNOVER 
Mutual Funds: A measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover ratio of 25 % means that the value of trades represented one-fourth of the assets of the fund. Finance: The number of times a given asset, such as inventory, is replaced during the accounting period, usually a year. Corporate: The ratio of annual sales to net worth, representing the extent to which a company can growth without outside capital. Markets: The volume of shares traded as a percent of total shares listed during a specified period, usually a day or a year. Great Britain: Total revenue 

12B-1 FEES
The percent of a mutual fund's assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund's prospectus. The SEC has recently proposed that 12b1 fees in excess of 0.25% be classed as a load. A true "no load" fund has neither a sales charge nor 12b1 fee. 

TYPE 
The classification of an option contract as either a put or a call. 

UNCOVERED CALL
A short call option position in which the writer does not own shares of underlying stock represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer would be forced to buy the stock at market price. 

UNCOVERED PUT
A short put option position in which the writer does not have a corresponding short stock position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited. 

UNDERLYING SECURITY
Options: the security subject to being purchased or sold upon exercise of an option contract. For example, IBM stock is the underlying security to IBM options. Depositary receipts: The class, series and number of the foreign shares represented by the depaositary receipt. 

VOLATILITY
A measure of risk based on standard deviation in fund performance over 3 years. Scale is 1-9; higher rating indicates higher risk. 

 Std Deviation  Rating   Std Deviation  Rating


  up to 7.99      1      20.00-22.99      6


  8.00-10.99      2      23.00-25.99      7


 11.00-13.99      3      26.00-28.99      8


 14.00-16.99      4      29.00 and up     9


 17.00-19.99      5 

WALLFLOWER
Stock that has fallen out of favor with investors; tends to have a low P/E. 

WANTED FOR CASH
A statement displayed on market tickers which indicates that a bidder will pay cash for same day settlement of a block of a specified security. 

WARRANT
A security entitling the holder to buy a proportionate amount of stock at some specified future date at a specified price, usually one higher than current market. This "warrant" is then traded as a security, the price of which reflects the value of the underlying stock. Warrants are usually issued as a "sweetener" bundled with another class of security to enhance the marketability of the latter, 

WASTING ASSET
An asset which has a limited life and thus, decreases in value (depreciates) over time. Also applied to consumed assets, such as gas, and termed "depletion." 

WATCH LIST
A list of securities selected for special surveillance by a brokerage, exchange or regulatory organization; firms on the list are often takeover targets, companies planning to issue new securities or stocks showing unusual activity. 

WITHDRAWAL PLAN
The ability to establish automatic periodic mutual fund redemptions and have proceeds mailed directly to the investor. 

WRITER
The seller of an option contract. 

W-TYPE BOTTOM
A double bottom where the price or indicator chart has the appearance of a W. 

YIELD
The percentage rate of return paid on a stock in the form of dividends, or the rate of interest paid on a bond or note. 

YIELD TO CALL
The percentage rate of a bond or note, if your were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. Generally bonds are callable over several years and normally are called at a slight premium. The calculation of yield to call is based on the coupon rate, length of time to the call and the market price. 

YIELD TO MATURITY
The percentage rate of return paid on a bond, note or other fixed income security if you buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at the same rate.