Welcome to Firstrade's stock trading terms glossary. Do all the research you want. Use this glossary to look up any financial term.
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A measure of how closely a fund's performance is correlated to a market index, such as the S&P 500. It is calculated by comparing monthly returns over the past three years to those of a benchmark. A higher value for r-square represents a higher correlation to the performance of the overall market.
The difference between the high and low trading price during a given period.
Rate of Return
The percentage gain or loss within a specific time period, assuming that all distributions are reinvested at the current rate of return.
The alphabetical evaluation of a bond's investment quality.
A stock or bond quote that shows a security's most recent ask and bid prices.
The gain or loss that is realized after converting the security into cash.
A date established by a corporation's board of directors, marking when a shareholder must own shares in order to receive a dividend.
The retiring of a debt instrument by repaying the principal balance to the investors.
Redemption (Mutual Fund)
The withdrawal of assets from a mutual fund.
The date on which a fixed-income security is due to be repaid by the issuer at face value.
The fee applied when assets are withdrawn from a mutual fund before a specified time period, usually 60 to 90 days after the initial investment in the fund.
A notice that the issuer of a security is calling or redeeming the issue.
The preliminary prospectus. The name comes from the advisory printed on the cover of the prospectus in red ink.
The retiring of a debt instrument using proceeds from the issuance of a new debt instrument.
A bond with owner's name appears on the certificate.
The record of security ownership on the issuer's central ledger.
Registered to Principal Only
A feature of a bond whose ownership is registered with the issuer's central ledger. Interest payments are made only when coupons are clipped-off and cashed in.
A member of an exchange responsible for adding liquidity to the marketplace through the purchase and sell of assigned securities from his own inventory.
A commercial bank or trust company that maintains a registry of share owners and the number of shares held.
Carefully prepared documents, including a prospectus, filed with the Securities and Exchange Commission explaining an impending issue and pertinent data about the issuer.
Reg T Excess
The amount by which the loan value exceeds the debit balance in a margin account.
Settlement on the second business day following the date of the trade.
The SEC regulation that governs the issue of new securities.
Regulation T (Reg T)
The SEC regulation that governs the lending of money by brokerages to its clients.
The opportunity to reinvest interest and principal paid by income securities.
The rate of interest that can be earned by reinvesting the interest payments.
The risk that securities might not be able to pay higher rates when prevailing interest rates rise, or retain previous rates when the prevailing rates decline.
A comparison between a stock's price movement over the past year and the movement of the S&P 500 in the same time period. A value above 1 represents strong relative strength, while a value below 1 represents relative weakness.
Resistance (Resistance Level)
The inability of a stock to rise above a certain price.
A margin account in which the debit balance exceeds the loan value, as defined by Regulation T.
Unregistered securities with limited transferability, usually acquired in a private placement.
The portion of earnings not paid out as dividends, but are instead retained by the firm for reinvestments.
A price movement in the opposite direction of the previous trend.
The money earned by investments over a period of time.
Return on Assets (ROA)
A measure of a company's profitability, calculated by dividing the net income from the past fiscal year earnings by total assets, not taking into account the company's liabilities.
Return on Equity (ROE)
An indicator of a company's profitability, calculated by dividing net income from the past fiscal year by shareholders' equity, showing how efficiently the company uses shareholder's money.
The total amount a company makes selling its products and/or services.
Revenue Anticipation Note (RAN)
A short-term debt instrument issued by municipalities, to be paid off by anticipated future revenue.
A municipal bond whose issuer's ability to pay interest and principal is based on the revenue earned from the specific project financed by the bond.
Reverse Stock Split
A plan instituted by a corporation to proportionally reduce the number of shares outstanding while maintaining the value of shares held by shareholders. This can boost the price of the stock higher, make it more attractive to risk-adverse investors.
A certificate showing an existing stockholder has the privilege of purchasing new securities in proportion to the number of shares already owned before the general public, thereby maintaining his ownership percentage in the company.
A simultaneous purchase and sale of different securities in anticipation of a merger or tender offer.
An offer to existing shareholders, giving them the opportunity purchase additional shares in the company.
An offer to existing shareholders, giving them rights to buy newly issued shares at a discount from the price at which shares will later be offered to the public.
The inherent possibility that an investment will lose value.
The property between the risk and return of investments. Higher risk is usually justified by higher returns, while a less risky investment will have a relatively lower rate.
See Return on Assets.
Prior to a company's security offering, bankers and company management travel to present their company to potential investors with the purpose of generating interest in the issue to set a favorable price.
See Return on Equity.
A standard trading unit. In common stocks, 100 shares make up a round lot. For bonds, a round lot in the over-the-counter market is five bonds.
The SEC rule that governs the sale of control and restricted securities.
Rules of Fair Practice
FINRA rules which govern the dealings of member firms with the public.
Russell 2000 Index
An index tracking the performance of 2,000 small-cap stocks.