Stock+Market+Vocabulary

Below is a list of vocabulary words that will help you understand basic stock market terminology. Use these when you are reading the financial section of the paper or doing research on the internet.

= Definitions  =

Everything a company or person owns, including money, securities, equipment and real estate. Assets include everything that is owed to the company or person. Assets are listed on a company's balance sheet or an individual's net worth statement.
 * Assets**

A market in which stock prices are falling.
 * Bear Market**

**Bid**

The highest price a buyer is willing to pay for a stock. When combined with the ask price information, it forms the basis of a stock quote.

**Bid Size**

The aggregate size in board lots of the most recent bid to buy a particular security.

Stocks of leading and nationally known companies that offer a record of continuous dividend payments and other strong investment qualities.
 * Blue Chip Stocks**

Promissory notes issued by a corporation or government to its lenders, usually with a specified amount of interest for a specified length of time.
 * Bonds**

A market in which stock prices are rising.
 * Bull Market**

**Capital**

To an economist, capital means machinery, factories and inventory required to produce other products. To investors, capital means their cash plus the financial assets they have invested in securities, their home and other fixed assets.

**Capital Gain or Loss**

Profit or loss resulting from the sale of certain assets classified under the federal income tax legislation as capital assets. This includes stocks and other investments such as investment property.

**Capital Gains Distribution**

A taxable distribution out of taxable gains realized by the issuer. It is generally paid to security holders of trusts, partnerships, and funds. Like all distributions, it may be paid in securities or cash. The amount, payable date, and record date are established by the issuer. The exchange that the issue is listed on sets the ex-dividend/distribution (ex-d) date for entitlement.

**Cash**

A special term attached to an equity order that requires the trade to be settled either the same day or the following business day for cash.

**Cash Dividend / Distribution**

A dividend/distribution that is paid in cash.

The physical document that shows ownership of a bond, stock or other security.
 * Certificate**

The fee charged by an investment advisor or broker for buying or selling securities as an agent on behalf of a client.
 * Commission**

**Common Shares or Common Stock**

Securities that represent part ownership in a company and generally carry voting privileges. Common shareholders may be paid dividends, but only after preferred shareholders are paid. Common shareholders are last in line after creditors, debt holders and preferred shareholders to claim any of a company's assets in the event of liquidation.

A form of business organization created under provincial or federal laws that has a legal identity separate from its owners. The shareholders are the corporation's owners and are liable for the debts of the corporation only up to the amount of their investment. This is known as limited liability.
 * Corporation or Company**

**Daily Price Limit**

The maximum price advance or decline permitted for a futures contract in one trading session compared to the previous day's settlement price.

**Day Order**

An order that is valid only for the day it is entered. If the order is still outstanding when the market closes, it will be purged overnight.

The combined desire, ability and willingness on the part of consumers to buy goods or services. Demand is determined by income and by price, which are, in part, determined by supply.
 * Demand**

**Diversification**

Limiting investment risk by purchasing different types of securities from different companies representing different sectors of the economy.

**Dividend**

The portion of the issuer's equity paid directly to shareholders. It is generally paid on common or preferred shares. The issuer or its representative provides the amount, frequency (monthly, quarterly, semi-annually, or annually), payable date, and record date. The exchange that the issue is listed on sets the ex-dividend/distribution (ex-d) date for entitlement. An issuer is under no legal obligation to pay either preferred or common dividend

Equal to the indicated annual dividend rate per share divided by the security's price. For example, if the indicated dividend rate is $1.00 and the closing price is $50.00, $1 divided by $50.00 equals 2%.
 * Dividend Yield**

**Dollar Cost Averaging**

Investing a fixed amount of dollars in a specific security at regular set intervals over a period of time. Dollar cost averaging results in a lower average cost per share, compared with purchasing a constant number of shares at set intervals. The investor buys more shares when the price is low and buys fewer shares when the price is high.

**Dow Jones Industrial Average (DJIA)**

An average made up of 30 actively traded stocks. The DJIA is calculated by adding the prices of each of the 30 stocks and dividing by a divisor. The DJIA is one of the most widely quoted stock market averages in the media.

The cash denomination of the individual debt instrument. It is the amount of money that the holder of a debt instrument receives back from the issuer on the debt instrument's maturity date. Face value is also referred to as par value or principal.
 * Face Value**

**Equities**

Common and preferred stocks, which represent a share in the ownership of a company.

Frequency refers to the given time period on an intraday, daily, weekly, monthly, quarterly or yearly perspective. Typically, choosing a weekly or monthly perspective when looking at several years of data makes it easier to identify long-term trends. Daily charts are useful for active traders and short-term time period charts.
 * Frequency**

The "Daily", "1-Minute", "5-Minute", "15-Minute" and "Hourly" frequency are used for intraday charts and the remaining choices are applicable to end-of-day charts. This term refers to a TSX Group Historical Performance charting feature.

The shares of companies that have enjoyed better-than-average growth over recent years and are expected to continue their climb.
 * Growth Stock**

A security with a solid record of dividend payments and which offers a dividend yield higher than the average common stock.
 * Income Stock**

**Index**

A statistical measure of the state of the stock market, based on the performance of stocks. Examples are the S&P/TSX Composite Index and the S&P/TSX Venture Composite Index.

**Intrinsic Value**

The difference between the current market value of the underlying interest and the strike price of an option. In-the-money is a term used when the intrinsic value is positive.

**Investment**

The purchase or ownership of a security in order to earn income, capital or both. Investments may also include artwork, antiques and real estate.

Any of a company's securities or the act of distributing the securities. Issued shares refer to the portion of a company's shares that have been issued for sale. A company does not have to issue the total number of its authorized shares.
 * Issue**

**Last Sale Price**

For a Market On Close (MOC)-eligible security, the last sale price equals the calculated closing price. If the MOC closing price acceptance parameters are exceeded, it equals the last board lot sale price of the security on the exchange in the regular trading session.

For any other listed security, the last sale price equals the last board lot sale price of the security on the exchange, in the regular trading session. **Last Trading Day**

The last day on which a futures or option contract may be traded. **Liabilities**

The debts and obligations of a company or an individual. Current liabilities are debts due and payable within one year. Long-term liabilities are those payable after one year. Liabilities are found on a company's balance sheet or an individual's net worth statement. **Limit Order**

An order to buy or sell stock at a specified price. The order can be executed only at the specified price or better. A limit order sets the maximum price the client is willing to pay as a buyer, and the minimum price they are willing to accept as a seller. **Liquidating Order**

An order to close out an existing open futures or options contract. A liquidating order involves the sale of a contract that has been purchased or purchase of a contract that has been sold.

**Liquidity**

This refers to how easily securities can be bought or sold in the market. A security is liquid when there are enough units outstanding for large transactions to occur without a substantial change in price. Liquidity is one of the most important characteristics of a good market. Liquidity also refers to how easily investors can convert their securities into cash and to a corporation's cash position, which is how much the value of the corporation's current assets exceeds current liabilities.

**Margin Account**

A client account that uses credit from the investment dealer to buy a security. A client needs to deposit a margin amount with the balance advanced by the investment dealer against collateral such as investments. The investment dealer can make a margin call, which means the client must deposit more money or securities if the value of the account falls below a certain level. If the client does not meet the margin call, the dealer can sell the securities in the margin account at a possible loss to cover the balance owed. The investment dealer also charges the client interest on the money borrowed to buy the securities.

**Market**

The place where buyers and sellers meet to exchange goods and services. It also represents the actual or potential demand for a product or service.

**Market Capitalization**

The number of issued and outstanding securities listed for trading for an individual issue multiplied by the board lot trading price. Should a trading price not be available, a bid price, a price on another market, or if applicable, the price for an issue of the same issuer which the first issue is convertible into, may be used. Total market capitalization for a market is obtained by adding together all individual issue market capitalizations (warrants and rights excluded). Escrowed shares are excluded from TSX Venture market capitalization.

An order to buy or sell stock immediately at the best current price.
 * Market Order**

Part of the capital market established to buy and sell short-term financial obligations. These include federal government treasury bills, short-term Government of Canada bonds, commercial paper, bankers' acceptances and guaranteed investment certificates. Longer-term securities are also traded in the money market when their term shortens to three years.
 * Money Market**

A fund managed by an expert who invests in stocks, bonds, options, money market instruments or other securities. Mutual fund units can be purchased through brokers or, in some cases, directly from the mutual fund company.
 * Mutual Fund**

**Net Change**

The difference between the previous day's closing price and the last traded price. **Net Worth**

The difference between a company's or individual's total assets and its total liabilities. Also known as shareholders' equity for a company. **New Issue**

A stock or bond issue sold by a company for the first time. Proceeds may be used to retire the company's outstanding securities, or be used for a new plant, equipment or additional working capital. New debt issues are also offered by governments.

**New Issuer Listing**

Occurs concurrently with the posting of the new issuer's securities for trading. The preconditions for listing include the acceptance by the Exchange that all listing requirements and conditions have been satisfied. The effective listing date is the date when the listed securities open for trading.

An order that remains in the system for more than a day
 * Open Order**

A security's nominal face value.
 * Par Value**

**Penny Stock**

Low-priced speculative issues of stock selling at less than $1.00 a share. **Portfolio**

Holdings of securities by an individual or institution. A portfolio may include various types of securities representing different companies and industry sectors.

**Position Limit**

The maximum number of futures or options contracts any individual or group of people acting together may hold at one time.

A common stock's last closing market price per share divided by the latest reported 12-month earnings per share. This ratio shows you how many times the actual or anticipated annual earnings a stock is trading at.
 * Price-Earnings (P/E) Ratio**

**Rally**

A brisk rise in the general price level of the market or price of a stock. **Real Estate Investment Trust (REIT)**

Typically, a closed-end investment fund that trades on an exchange and uses the pooled capital of many investors to purchase and manage income properties. Equity REITs primarily own commercial real estate, such as shopping centres, apartments, and industrial buildings. By taking advantage of the trust structure, REITs offer tax advantages (beyond traditional common equity investments) to investors and provide a liquid way to invest in real estate, which otherwise is an illiquid market.

**Securities**

Transferable certificates of ownership of investment products such as notes, bonds, stocks, futures contracts and options. **Securities and Exchange Commission (SEC)**

The federal regulatory body for interstate securities transactions in the United States. **Securities Commission**

Each province has a securities commission or administrator that oversees the provincial securities act. This act is a set of laws and regulations that set down the rules under which securities may be issued or traded in that province.

**Share Certificate**

A paper certificate that represents the number of shares an investor owns.

**Short Selling**

The selling of a security that the seller does not own (naked or uncovered short) or has borrowed (covered short). Short selling is a trading strategy. Short sellers assume the risk that they will be able to buy the stock at a lower price, cover the outstanding short, and realize a profit from the difference.

**Split Shares**

Capital and preferred shares issued by a split-share corporation. A split-share corporation holds common shares of one or more companies. The corporation then issues two classes of shares - capital shares and preferred shares. The objective is to generate fixed, cumulative, preferential dividends for the holders of preferred shares and to enable the holders of the capital shares to participate in any capital appreciation (or depreciation) in the underlying common shares.

**Stock Dividend/Distribution**

A dividend/distribution paid in securities of the same issue or a different issue of the same issuer or another issuer. A stock dividend/distribution can be used as a means to list a new issuer. The issuer or its representative provides the amount, payable date, and record date. The exchange that the issue is listed on sets the ex-dividend/distribution (ex-d) date for entitlement.

**Stock Index Futures**

Futures contracts which have a stock index as the underlying interest.

**Stock Price Index**

A statistical measure of the state of the stock market, based on the performance of certain stocks. Examples include the S&P/TSX Composite Index and the S&P/TSX Venture Composite Index. **Stock Price Index Value (SPIV)**

The number that is usually quoted as the value of an index. SPIV is based on the aggregate, float quoted market value of the index constituents and is calculated for all S&P/TSX indices. SPIV is calculated at the end of the trading session for all S&P/TSX indices and throughout the trading session for certain S&P/TSX indices. **Stock Split**

A corporate action that increases the number of securities issued and outstanding, without the issuer receiving any consideration for the issue. Approval by security holders is required in many jurisdictions. Each security holder gets more securities, in direct proportion to the amount of securities they own on the record date; thus, their percentage ownership of the issuer does not change. For example, a two-for-one stock split involves the issuance of two new securities for every old security.

**Stock Symbol**

A one-character to three-character, alphabetic root symbol, which represents an issuer listed on Toronto Stock Exchange or TSX Venture Exchange.

A security not listed on a stock exchange, but traded on the over-the-counter market.
 * Unlisted**

This is the measure of the return on an investment and is shown as a percentage. A stock yield is calculated by dividing the annual dividend by the stock's current market price. For example, a stock selling at $50 and with an annual dividend of $5 per share yields 10%. A bond yield is a more complicated calculation, involving annual interest payments, plus amortizing the difference between its current market price and par value over the life of the bond.
 * Yield**