Chapter 3

  1. Bid
    Highest price an investor is willing to pay.
  2. Ask
    Lowest price an investor is willing to pay.
  3. Bid-Ask Spread
    Gap between the bid and ask prices that represents a cost to the investor.
  4. Ticker Symbol
    Unique stock identifier with one to five letters
  5. Bid Size
    Number of shares sought by current buyers.
  6. Ask Size
    Number of shares offered by current sellers
  7. Market Depth
    Number of active buyers and sellers.
  8. Market Order
    Instruction to buy or sell at current market price.
  9. Limit Order
    Instruction to buy or sell at a specific price.
  10. Stop Order
    Market order to buy or sell a certain quantity of a security if a specific price is reached or passed.
  11. Stopped Out
    Position that is liquidated by the execution of a stop order.
  12. Stop-Loss Order
    Stop order to sell a long position at a specific price that is below the current market price.
  13. Buy Stop Order
    Buy order that is to be held until the market price rises to a specified stop price.
  14. Stop-Limit Order
    Order to buy or sell a certain quantity of a security at a specified price or better, but only after a specified price has been reached.
  15. Day Order
    Instruction to biuy or sell during the present trading session.
  16. Open Order
    A limit order that has yet to be executed.
  17. Good 'till Canceled Order
    A limit order that is open until executed or canceled by the investor.
  18. All or None
    Buy or sell instruction that must be filled exactly or not at all.
  19. Fill or Kill
    All-or-None order that must be immediately filled or canceled.
  20. Block Transaction
    Transaction of at least 10,000 shares usually matched outside the auction process and then cleared through the exchange.
  21. Illusion of Knowledge
    Illusion that more information creates more knowledge and better predictions.
  22. Illusion of Control
    Belief that people have influence over the outcome of uncontrollable events.
  23. Margin Account
    Account that holds securities purchased with a combination of cash and borrowed funds.
  24. Margin Debt
    Amount borrowed to buy or maintain a security investment.
  25. Margin Cell
    Broker's demand for additional collateral when the equity has declined below the maintenance margin level.
  26. Broker Call Rate
    Interest rate charged to investors using margin debt.
  27. Short Sale
    Sale of borrowed stock used to profit from falling stock price.
  28. Cover the Short
    Return borrowed shares.
  29. Short Interest
    Number of shares sold short.
  30. Short Interest Ratio
    Short interest expressed in terms of an average day's trading volume.
  31. Short Squeeze
    Pressure of short sellers through margin calls caused by rapidly appreciating stock prices.
  32. Bid Test
    SEC criterion that allows a short sale to occur if the current bid price is higher than the previous bid price.
  33. Dollar Cost Average
    Strategy of investing a fixed dollar amount in a security at regular intervals.
  34. Initial Public Offer (IPO)
    Newly issued common stock in the primary market.
  35. Season Issue
    Issuance of a security to raise additional capital for which there is already and existing public market.
  36. Secondary Offering
    Public sale of previously issued securities held by large investors, corporations, or institutional investors.
  37. Private Placement
    Sale to a small group of investors, generally under exemption of SEC and state securities registration requirements.
  38. Offering Circular
    Document filed with the SEC that describes a private placement.
  39. Investment Bank
    Financial firm that helps other firms raise capital by selling securities to investors in the primary market.
  40. Underwriter
    Investment bank that endorses and sponsors a company's new securities.
  41. Road Show
    Series of investment banker presentations to promote company securities being sold.
  42. Firm-Commitment Underwriting
    Security offering in which the investment banker underwrites or purchases the entire issue from the corporation and reoffers the securities to the general public.
  43. Best-Offer Underwriting
    Security offering in which the investment banker simply agrees to make its best effort at selling the agreed on amount of debt and equity securities.
  44. All or None Offering
    Security offering in which a complete sale is required.
  45. Underwriting Syndicate
    Group of underwriters who agree to participate in selling an issue.
  46. Syndicate Manager
    Lead investment bank in a syndicate.
  47. Underwriter's Allotment
    Investment banker's allocation of the new shares.
  48. Dealer's Agreement
    Contractual obligation of syndicate member.s
  49. Tombstone Ad
    Advertisement announcing details of an upcoming security offering.
  50. Registration Statement
    SEC document that describes an offering.
  51. Filing Date
    Date the investment bank submits a registration statement with the SEC.
  52. Cooling Off Period
    Period of time during which the SEC is examining the registration materials and the investment bankers are conducting market activities.
  53. Preliminary Prospectus
    Preliminary statement of offering characteristics.
  54. Red Herring
    Nickname for the preliminary prospectus.
  55. Effective Date
    Date securities are offered to institutional investors and the general public.
  56. Deficiency Letter
    Disapproval notice issued by the SEC.
  57. Due Diligence
    Required analysis of the security issuer by the underwriter.
  58. Final Prospectus
    Final statement of offering.
  59. Flip
    IPO purchase in the primary market quickly followed by a sale on the stock exchange.
Card Set
Chapter 3
chapter 3