Investment Glossary

Welcome to Firstrade’s stock trading terms glossary. Do all the research you want. Use this glossary to look up the definition of any financial term.
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To not to exercise or sell an option. An investor usually chooses abandonment when the option is out-of-the-money on the expiration date.

Above Par

The current price above face value. This generally occurs when the coupon paid on the bond is higher than the market interest rate for similar securities. If the investor purchased the bond above par, he/she will suffer a capital loss upon the Bond's maturity since it will only be redeemed at face value.

Accounts Payable

The company's current liability owned to creditors for goods and services obtained during the normal course of business.

Accounts Receivable

Current assets owed to the company for services or goods sold on credit.

Accreted Interest

The difference between par value of a zero coupon security and its original purchase price. Also known as original issue discount.

Accrual Bond

A bond which is sold at a deep discount to its face value, and pays no coupons. Accrual bonds tend to be illiquid, and very sensitive to changes in interest rates. Although there is no actual cash flow of interest, the imputed interest on an accrual bond is taxable as it accrues under U.S. tax laws.

Accrued Interest

The amount of interest the buyer owes the seller on transactions of fixed income securities, such as most bonds and notes.

Accumulation Bond

A bond sold at a price below its face value and can be redeemed at its face value when matured. Also called discount bond.


The act of acquiring control of another corporation, by either stock purchase or exchange. This can be achieved either through hostile or friendly means.

Active Management

The constant supervision of a portfolio's holdings to maximize gains. Active management by fund managers is one of the benefits of a mutual fund.


The headquarters address of the company as provided in the latest SEC filings.


See American Depositary Receipt.


See American Depositary Share.

Advanced Option

Complex option strategies. See Spread Order, Straddle, Strangle, Buy/Write, Sell/Write, and Unwind.


The firm primarily responsible for a fund's day-to-day operation.

After-hours Trading

The buying and selling securities when the major markets are closed. After-hours trading was once a privilege of institutional investors, individual investors can now participate. Stocks are traded after hours on ECNs, which match buyers and seller with a computer system in order to execute trades.


Markets in which an investor purchases a security from other investors rather than the issuer, subsequent to the original issuance in the primary market. Also called secondary market.

Agency Security

The bills, notes, and bonds issued by agencies of the federal government.

Aggressive Growth Funds

Mutual funds that focus on small-company stocks, the fund's high level of risk is justified by potential for accelerated earnings.

All-or-None (AON)

The type of order instructing the execution of the entire order quantity at the stated price (or better), or none of it. This prevents partially filled orders. The difference between All-or-None and Fill-or-Kill is that the AON order is left open if the entire order quantity cannot be filled, whereas the FOK order will be cancelled.


The measure of a fund's risk-adjusted return. Alpha is derived by compares the fund's actual returns and the expected returns as determined by its level of risk (beta). A positive alpha indicates the fund has performed better than expected, while a negative alpha indicates the fund has underperformed.

American Depositary Receipt (ADR)

The negotiable certificates held in an U.S. bank representing shares of a foreign stock traded on an U.S. stock exchange.

American Depositary Share (ADS)

The shares issued under an ADR agreement, which is actually traded.

American Stock Exchange (AMEX)

A major stocks and options exchange located at 86 Trinity Place, New York.

American-Style Option

An option contract that can be exercised at any time between the date of purchase to expiration. Most exchange-traded options are American-style.


See American Stock Exchange


The gradual elimination of a liability, in regular payments over a specified period of time. Such payments must be sufficient to cover both principal and interest.

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, or be part of the returns from stocks and bonds, which can also experience capital growth.

Annual Report

The audited report of a corporation's year-end financial results and operations filed annually with the SEC. The report contains information on the company's financial condition, legal liabilities and future plans. Shareholders may obtain a free copy of the Annual Report from the corporation.

Annual Report (Mutual Fund)

A report that gives an overview of a fund's performance and operations. SEC requires funds to distribute the report to shareholders at least semiannually.

Annualized Returns

The return on an investment over a specified number of years, calculated as what an investor would have received each year if the cumulative return were distributed evenly over each year within the specified time period.


See All-or-None.

Appreciation Funds

Types of funds that invest in stocks whose value is expected to increase significantly.


See Annual Percentage Rate.


See Annual Percentage Yield.


Profiting from differences in the price of a security that is traded on multiple markets.

Arms Index - 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.


The overdue interest or dividends of a bond or preferred share.

Asian Funds

A fund that targets primarily the stocks of companies located in Asia. These funds appeal to investors who are bullish on the potential of Asian companies, and want to capitalize on that growth.

Asian Option

An option whose payoff depends on the average value of an underlying security over a specified period.

Ask (Asked Price)

The lowest round lot price at which a broker will sell a security.

Ask Price (Mutual Funds)

Also known as the offering price, the ask price is the price at which a mutual fund's shares can be bought. The ask price is calculated by adding a fund's current net asset value per share to its sales charges, if any.


The receipt of an exercise notice by an options writer that requires him to sell (in the case of a call) or purchase (in the case of a put) the underlying security at the specified strike price.

Assessment Bond

Municipal bond used for specific projects, to be repaid using tax proceeds collected from those who benefit from the project. Also called special-purpose bond.

Asset Allocation Funds

Funds that seek to provide an optimal mix of stocks, bonds and cash at any given time.


An option is at-the-money if the strike price of the option is equal to the market price of the underlying security. For example, if a company's stock is trading at $68, then the company's $68 option is at-the-money.

Auction (Treasury)

The issuance of new Treasury bills, notes, and bonds at stated intervals by the Federal Reserve.

Auction Market

A market where buyers and sellers enter bids and offers simultaneously, such as the New York Stock Exchange.

Automatic Investment

A shareholder service that allows the periodic transfer of a preset amount from the shareholder's bank account his or her mutual fund account.


Also known as an index, it is the mathematical calculation that indicates the value of a group of securities. Some of the most famous averages include the Dow Jones Industrial Average (DJI), Standard & Poor's (S&P) 500, and the New York Stock Exchange Composite.

Average Life

An estimate of the time to maturity for a pool of mortgage-backed securities.

Average Maturity

The average time to maturity of securities held by a mutual fund. Changes in interest rates have greater impact on funds with a longer average life.

Average Volume

Average volume is calculated by dividing the total volume for the previous three months by the number of trading days in the period. Compare this number to the daily volume to see if interest in the security has increased or decreased.

Away From the Market

On a limit order, a buy order which is lower than the current market price, or a sell order which is higher than the current market price. These orders are held to be executed later, unless they are of the fill-or-kill type.