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Wall Street Dictionary


Stock Market Glossary of Investor Terms

 

BondA debt instrument, normally paying a fixed interest rate or "coupon."
BrokerageA company that has the right to buy or sell stock on your behalf on a stock exchange.
CallsGenerally, an option to buy 100 shares of stock at a future date and at a set price.
CDOCollateralized Debt Obligation. A bundle of debt obligations secured by (usually) non-mortgage assets (loans). The buying/selling of complex CDOs contributed to the liquidity crisis of 2007-NN. Risk became hard to assess and financial institutions were hesitant to buy them.
CouponOld bond payment tickets. Part of a paper bond would be cut, then brought to a transfer agent and paid. Today, slang for the interest rate on a bond.
DividendAn amount paid each year by companies to its shareholders as an incentive to own its stock.
EquitiesStocks; you own equity in a company.
ETFExchange Traded Fund. A mutual fund that trades on a stock market. Non-ETF mutual funds are priced at their Net Asset Value at the end of the day.
FuturesContracts to buy a commodity or other financial instruments at a future date and at a set price.
IPOInitial Public Offering. When a company goes public and sells stock for the first time.
LongTo buy a stock (as opposed to shorting it).
M and AMerger and Acquisitions. A term often used when companies are buying other companies.
MarginThe interest rate charged when you buy stocks on credit.
Mutual FundA company that pools the money of many investors and buys stocks or bonds with this money. Risk is reduced when many stocks or bonds are bought.
NASDAQNational Association of Securities Dealers. An electronic stock exchange.
OptionsContracts to buy stocks or other financial instruments at a future date and at a set price. Normally, a call option (long), or put option (short).
P/E RatioThe price of a stock divided by earnings per share. It is used to compare with other companies in the same industry.
PutsGenerally, an option to sell 100 shares of stock (short) at a future date and at a set price.
ShortTo sell as stock you don't own (borrow the shares from someone else).
SIVStructured Investment Vehicle. A fund that borrows (issues debt) at short term interest rates, and invests the proceeds in long term debt that yields a higher interest rate. That is, a fund that borrows short term and invests long term. The risk is: (1) the value of the long term debt falls below the short term debt and causes insolvency, and (2) the interest received from the long term debt is less than the interest payments that are due on the short term debt, causing a liquidity crisis, forcing the fund to sell long term debt to cover the short term interest. SIVs liquidity issues greatly contributed to the crisis of 2007-09.
SymbolAn abbreviation of a company name. All stocks, bonds, and mutual funds have symbols. Ticker Symbol, may also be used.
Ticker TapeBefore computers, stock prices were telegraphed around the country onto a piece of paper tape. It still exists electronically, and is just known as The Tape.
X-Dividend DateThe date a stock's dividend is deducted from its price, usually 3 days before the record date. You must own the stock before the X date and retain it until after the record date to receive the dividend.
Yield CurveA graph of interest rates. Rates are on the vertical axis, and time is on the horizontal. It usually rises from left to right (longer term, higher rate).

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