credit default swap a form of insurance to cover losses on securities in which a buyer makes a payment to a seller, who must pay the buyer if the financial instrument, such as a bond or loan, goes into default, which could occur in a bankruptcy.
cyclical stock a stock that rises or falls in accordance with the strength or weakness of the economy.
day order a purchase or sell order given to a broker that is good for only one day.
debt instrument a collective term for any formal IOU, such as a bond.
dividend earnings distributed to shareholders, usually paid quarterly.
dog a poorly performing stock.
dollar-cost averaging investing a set amount of money on a regular schedule, regardless of share prices or market conditions, a strategy which ultimately results in more shares purchased at lower cost, increasing long-term profits.
Dow-Jones industrial average the daily price average of 30 selected blue chip stocks, used as a market indicator or barometer.
Dun Bradstreet a firm that obtains credit information on various companies and publishes same in reports and a ratings directory.
exchange traded fund (ETF) a basket of securities that serves as an alternative to mutual funds. ETFs are traded on the American Stock Exchange just as individual stock is; unlike mutual funds, ETFs may be purchased on margin or sold short. They must, however, be purchased through a broker.
Fannie Mae nickname for the Federal National Mortgage Association, a corporation that buys mortgages from lenders and sells them to investors.
Fed, the the Federal Reserve System and the Federal Reserve Bank.
fill or kill a purchase or sell order that will be canceled unless it is executed immediately to take advantage of brief price changes.
flag market a market in which prices are neither rising nor falling.
floor the trading floor of the New York Stock Exchange.
floor broker a person who executes buy and sell orders on the floor of an exchange.
floor trader a person who executes orders on the floor of an exchange on his or her own behalf.
foreign crowd members of the New York Stock Exchange who trade in foreign bonds.
401K an employee retirement plan, through which a portion of one's pay is put aside, matched by the employer, and saved tax-deferred until withdrawal.
fourth market institutional investors who trade securities in large volume between one another to save on broker commissions.
Freddie Mac nickname for the Federal Home Loan Mortgage Corporation (FHLMC) and the mortgage- backed securities it packages and sells.
freeriding the buying and selling of securities quickly on margin and without paying any cash, a violation of fair credit use.
friendly takeover a takeover of one company by another that is welcome and unopposed.
front-end load a sales charge paid when mutual fund shares are purchased.
fungible securities, bearer instruments, or commodities that are interchangeable in value.
futures commodities such as metals, grains, foods.
futures market a commodity exchange, such as the New York Coffee, Sugar and Cocoa Exchange or the Minneapolis Grain Exchange.
gilt-edged security any high-quality stock or bond.
Ginnie Mae nickname for the Government National Mortgage Association (GNMA) and the securities it guarantees.
going public the process of a private company offering shares to the public and subsequently becoming a publicly held company.
gold bond a bond through which interest is paid according to the price of gold.
goldbug an analyst or investor who specializes in gold.
graveyard market a bear market.
greenmail a payment made by a company takeover candidate to the potential acquiring company to prevent the takeover, a form of legal blackmail.
gun jumping trading securities on information that has not yet reached the public.
hard money strong, secure currency of an economically stable country. Also, gold.
hedge any means of protecting one's investments against losses.
hemline theory the theory that stock prices rise and fall with the hemlines of women's dresses and skirts.
homerun a highly profitable gain in a stock in a brief period of time.
hot issue a newly issued stock that proves extremely popular with investors.
hung up of a stock or bond that has dropped below its purchase price, that cannot be sold without a loss.
in-and-out trader a trader who takes advantage of sharp price movements by buying and then reselling a security in the same day.
Individual Retirement Account (IRA) a plan that allows a taxpayer to put away $2,000 of income per year tax-deferred until withdrawal at retirement.
inside information privileged information concerning a corporation that has not been made public and is therefore illegal to trade on.
insider in a corporation, one who is privy to such information as an impending takeover attempt, a future earnings report, or other development affecting stock prices. Insiders would include top executives, directors, and large shareholders.
institutional investor banks, insurance companies, mutual funds, and others who trade in large blocks of securities.
IPO initial public offering. A company's first sale of stock to the public.
IRA see Individual Retirement Account.
junk bond a high-risk, high-yield bond with a credit rating of BB or less, often used to finance takeovers.
Keogh plan a retirement plan in which a self- employed person can put away up to 20 percent of earnings and deduct them from his income for tax deferral.
killer bees law firms, PR firms, investment bankers, and others involved in warding off a company takeover attempt.
lamb an inexperienced or naive investor.
leg a long-lasting trend in the market. A trend on its second or third leg is a very long trend.
leveraged buyout the takeover of a company with the use of borrowed money.
leveraged stock a stock bought with credit.
liquidity the ease or speed with which an investment can be converted into cash.
load a mutual fund sales or service charge.
long of an investment posture, holding on to securities in the belief they will rise in value.
long bond a bond that takes more than 10 years to mature.
manipulation the buying and selling of large blocks of securities to give the illusion of activity and to influence other investors into buying or selling.
margin the amount of money an investor must have on deposit with a broker in order to purchase securities on credit, specifically at least 50 percent of the purchase price.
margin account an account held by a broker, which allows a client to buy securities on credit.
melon slang for a large dividend.
meltdown the stock market crash of October 1987.
money market fund a mutual fund that invests in short-term corporate and government debt.