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Account Type:

There are three account types; cash, margin and short account. When placing an order through our site, you must select the proper Account Type for the position you wish to trade. This site will automatically check for the original position before allowing a closing trade. If your closing trade is not accepted, try changing the account type.

Accrual Method:

Accounting method where income and expenses are recorded when items are booked or billed even though they may not actually have been received or paid. Contrast this with the more common method, cash method, where income and expenses are logged from the time cash is actually spent or received.

Accrued Interest:

Interest earned but not yet paid. When buying a bond, buyer pays seller any interest accrued since the last payment date. When the buyer eventually sells the bond, the new buyer pays any accrued interest.

Acquisition:

The process of one firm or company buying another firm or company.

Adjusted Option:

An option created as the result of a special event (e.g., 3-for-2 stock split, spin-off, merger). Adjustments may be made to certain of the standardized terms of outstanding stock options when certain events occur, such as a stock dividend, stock distribution, stock split, reverse stock split, rights offering, distribution, reorganization, spin-off or merger. An adjusted option may cover more than the usual one hundred shares. For example, after a 3-for-2 stock split, the adjusted option will represent 150 shares. For such options, the premium must be multiplied by a corresponding factor. Example: buying 1 call (covering 150 shares) at 4 would cost $600. In a spin-off each adjusted series might require the receipt or delivery of two stocks. For example, if XYZ "spins-off" subsidiary ABC by distributing to its stockholders 3.5 shares of ABC stock for each share of XYZ stock, outstanding XYZ options might be adjusted to require delivery of 100 shares of XYZ stock plus 350 shares of ABC stock. A comprehensive list of adjusted option contracts can be found at: http://www.cboe.com/tools/splt&mrg.htm. For a more detailed discussion of adjusted options please visit: http://www.cboe.com/resources/odd/chap3.htm.

Advances/Declines:

Advances are the number of issues on the New York Stock Exchange that have risen in price since the previous trading day's closing price. Declines represent those that have fallen in price. Sometimes the advances and declines are expressed as a ratio and plotted as a line graph. A rising A/D line indicates that the market has good breadth (a majority of issues are rising in price) while a falling A/D line would indicate the opposite.

After Tax Real Rate of Return:

The percentage gains on an investment or portfolio after taxes and inflation have been deducted.

Aggressive Growth Funds:

Mutual funds that focus on small-company stocks that have the potential for accelerated earnings.

Allocation:

The process of deciding which investment (choice or combination of choices) best fits your goals, time horizons, and capital availability.

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 returns.

All-or-none Order (AON):

A type of order that requires that the order be executed completely or not at all.

American Depository Receipt (ADR):

Receipt for shares of foreign companies held in American banks. It allows investors to trade foreign stocks without going overseas. See also 'ADS' definition below.

American Depositary Share (ADS):

Represent the ADR and it is ADS that is actually traded. These two terms are often interchanged but technically it is the ADS that is traded. See also 'ADR' definition above.

American-style Option:

An option that can be exercised at any time prior to its expiration date. See also EUROPEAN-STYLE OPTION.

AMEX/ASE (American Stock Exchange):

Marketplace in the U.S. for equities, bonds, options, and derivative securities located in New York City.

Amortization:

An accounting term indicating the appointment of an incurred expense over a period of time, such as the life of an asset.

Annual Report:

Written report to shareholders summarizing the past year's financial results and news items of importance about products, law suits, board members, etc. A company's annual report must be distributed to shareholders under SEC regulations.

Annualized Return:

Projects the year to date returns over a full 12-month calendar year. Most useful for projecting return for money market funds, CDs, and bonds. Return for equities can be misleading if YTD return is high and covers a shorter period of time. See also TOTAL RETURN.

Annuity:

Insurance product that pays an income benefit on a specific date, for a specific time, or for the lifetime of the person(s) receiving the annuity (the annuitant). A fixed annuity guarantees fixed payments with a constant rate of return. A variable annuity's value fluctuates with that of the assets that are backing it. There is no guaranteed rate of return for a variable annuity; the annuitant bears the investment risk and receives the return actually earned on invested assets less any charges assessed.

Annual Percentage Rate (APR):

The total cost of a loan per year, including both interest charges and most or all fees.

Annual Percentage Yield (APY):

The total income an investment earns per year. The APY generally represents the total earnings of a cash account such as a money market fund or savings account, though it forms only part of the returns from stocks and bonds, which can also experience capital growth.

Annual Report:

An audited report of a corporation's year-end financial results and operations filed annually with the SEC. The report contains detailed information related to the company's financial condition, legal liabilities and plans for the upcoming year. Shareholders may obtain a free copy of this report from the corporation.

Arbitrage:

A trading technique that involves the simultaneous purchase and sale of identical assets traded on two different exchanges with the intention of profiting by a difference in price between exchanges.

Arbitration:

A method of settling a dispute by utilizing an impartial individual or individuals. All exchanges and securities associations have adopted a Code of Arbitration through which all disputes between individual members, member firms, employees and firms, and firms and clearing corporations are settled.

Arms Index - Also known as TRading INdex (TRIN):

A market indicator used in technical analysis, calculated as follows: Arms Index = ((# of advancing issues / # of declining issues) / (Total up volume / Total down volume)). A value of less than 1 is considered bullish, greater than 1 bearish.

Ask/Ask Price:

The lowest price at which a dealer or trader is willing to offer a security at a particular time.

Asset:

Anything possessing commercial or exchange value owned by an individual, a business, or an institution.

Asset Allocation:

The process of deciding what types of assets (stocks, bonds, cash, real estate, precious metals, and all other tangible and intangible investments) you want to own, and the percentage of each.

Assigned:

Received notification of an assignment by The Options Clearing Corporation. See also 'ASSIGNMENT' definition below.

Assignment:

Notification by The Options Clearing Corporation to a clearing member firm and to the writer of an option that an owner of the option has exercised the option and that the terms of settlement must be met. Assignments are made on a random basis by The Options Clearing Corporation.

At-the-money Option:

An option with a strike price that is equal to the current market price of the underlying stock.

Automatic Exercise:

A procedure used by The Options Clearing Corporation to exercise in-the-money options at expiration. This procedure protects the owner from losing the intrinsic value of the option because of failure to exercise. Unless instructed not to do so, The Options Clearing Corporation will exercise all expiring equity options that are held in customer accounts if they are in the money by 75 cents (that is, 3/4 of a point) or more.

Average Annual Return:

The cumulative return divided by the number of years of the life of the investment or portfolio, with the compounding effect factored in. In reverse, the average annual return times a given number of years equals the cumulative return for that time frame. AAR is used to compare returns of two or more investments of unequal track records.

Average Cost:

The average price paid for shares purchased at different prices.

Average Daily Volume:

The consolidated trading volume for all exchanges averaged for the last 20 trading days.

Average Proceeds:

The sum of net amounts received from all short open lots divided by the total number of shares short for that security. 'Average proceeds' for short investments is equivalent to 'average cost' for long investments.

Averaging Down:

Purchasing additional stock or options below the original purchase price to reduce average cost.

Away From the Market:

A trade order placed that is either below or above the current trading range.