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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An option contract gives the holder of the option the rights (but not the obligation) to purchase, and obligates the writer to sell a specified number of shares of the underlying asset at the given strike price on or before the expiration date of the contract.

Call Date

The date when callable bonds are eligible to be redeemed before maturity.

Call Protection

The degree of security that an investor has against a bond being called, usually measured by the number of years between today and the call date.

Call Spread

Simultaneously buying and selling a call options contract on the same underlying security but with different expiration dates, different exercise prices, or both.


A securities feature of some bonds or convertible securities that allow the issuer to retire the issue prior to the original maturity date. If the current interest rate falls below the yield paid on the security, it is in the issuer's best interest to call and retire the security, then reissue at the new lower rate. To reflect this risk for the holder of the security, a callable security is usually priced lower than a non-callable security.

Callable Bond

A bond which the issuer can decide to redeem before its stated maturity date. A call date and a call price are always given. A callable bond usually trades lower than a non-callable one.

Capital Expenditures

The expenditure incurred during a particular period to acquire long-term assets such as land, plant, or equipment.

Capital Gain

The amount by which an asset's selling price exceeds its original purchase price. A realized capital gain is an investment that has been sold at a profit, an unrealized capital gain is an investment that would result in a profit if sold. IRS levies capital gains tax for realized capital gains from the sale of mutual funds, bonds, options, homes, and businesses.

Capital Growth

The increase in value of an investment when either its price rises or its profits are reinvested.


The total dollar value of all stocks and bonds issued by a corporation

Capital Loss

The decrease in the value of an investment or asset. Opposite of capital gain.

Capital Stock

The common and preferred stock of a corporation.

Cash Flow

Sometimes called cash earnings, it is the net earnings before depreciation, amortization and non-cash charges, useful in determining the solvency of a company. Cash flow is calculated by adding depreciation to net earnings then subtracting preferred dividends.

Cash Dividend

A dividend paid in cash to the shareholders of a corporation. The amount, which is usually based on profitability of the corporation and decisions of the board of directors, is considered taxable income.

Cash and Equivalents

The value of a company's assets that can be converted into cash immediately. These assets usually include bank accounts and liquid marketable securities, such as government bonds and banker's acceptances.


See Chicago Board Options Exchange.


See Contingent Deferred Sales Charge.


See Chief Executive Officer


The physical document representing ownership of a stock or bond.

Changes in Financial Position

Sources of funds internally provided from operations that alter a company's cash flow position: depreciation, deferred taxes, other sources, and capital expenditures.

Chapter 11

The section of the U.S. Bankruptcy Code which describes how a company or creditor can file for court protection.

Chicago Board Options Exchange(CBOE)

Listed option trading was originated by this marketplace on April 26, 1973.

Chief Executive Officer (CEO)

The highest ranking executive who manages the day-to-day operations of the corporation, as appointed by the board of directors.


Options of the same type, calls or puts on the same security.

Clearing Corporations

A distribution center operated for its member brokerage firms, which works with the exchanges to streamline trade comparison, settlement and assignment procedures.

Client (Account) Statement

A statement of a client's positions and activities that is required to be sent out quarterly. However, if there is monthly activity on the account, then it is to be sent out monthly.


An investment strategy that organizes bonds in the portfolio so that they all mature in the same year.


CLO orders are qualified as At-the Close. A CLO qualifier requests that your order will be executed as close to the closing price as possible. The order will be accepted if it is placed before 3:40PM (ET) . CLO orders cannot be edited or cancelled after 3:45PM (ET). Any unfilled orders after opening of the market will be cancelled.


The price of a security's last transaction on a trading day.

Closed-End Funds

A mutual fund that does not offer new shares after the initial offering. Shares of the fund can only be purchased or sold on securities exchanges. Closed-end funds are actively managed by an investment professional.

Closing Purchase

A transaction in which the purchaser's intention is to reduce or eliminate a short options positions. (Buy to close).

Closing Sale

A transaction in which the seller's intention is to reduce or eliminate his long option position. (Sell to close).

Closing Transaction

The transaction executed to close an option contract. The holder would sell to close while the writer would buy to close.

Collateral Trust Bond

A debt instrument issued by one corporation and backed by the securities of another corporation.


The option strategy involving the purchase or sale of both a put and a call on the same underlying security, but with different strike prices and/or expiration dates.

Combination Order

An order simultaneously buying a call and selling a put, or buying a put and selling a call on the same underlying security.

Commercial Paper

A short-term debt instrument issued by corporations. Its rate of interest is set at issuance and can be realized only if held to maturity.


The fee paid to a brokerage for the execution of trades or management of an investment portfolio. Commission charges vary based upon the type of brokerage, and may be dependent upon the type of security, the number of shares traded, or the dollar value of the security.

Common Equity

The amount of shareholders' equity attributable to common stock. Common equity usually consists of the common stock at par value, capital surplus and retained earnings.

Common Stock

A security issued representing ownership of a corporation. Common stockholders may vote to elect management, participate in corporate decision making, and receive dividends.


The correspondence between two brokerage firms outlining the terms of the transaction. Comparison can be through a clearing corporation or on a per-trade basis.

Competitive Tender

A method of purchasing new issues of Treasury bills, notes, and bonds in which the investor specifies the yield at which they are willing to purchase the security.


The acknowledgement of a securities transaction providing the investor with information such as the settlement date, terms, price and commission.

Consent to Loan Agreement

An agreement margin clients are required to sign authorizing the brokerage firm to lend the client's securities to itself or other firms.


The money value of a transaction, calculated as the number of shares multiplied by the price, before adding commission.

Constant-Dollar Investment

Securities such as savings accounts and money market funds that do not fluctuate in price.

Consumer Price Index

An inflationary indicator published monthly to reflect the upward price movement of a fixed basket of common goods and services.

Contingent Deferred Sales Charge (CDSC)

The pricing structure that imposes a sales charge when investors exit a mutual fund.

Contractual Plan

A type of accumulation plan where a mutual fund investor makes a firm commitment to invest a specified amount of money over a specific period of time.

Control Person

A director, officer or other affiliate of the issuer or a stockholder who owns at least 10% of outstanding stock.

Control Securities

Securities owned by a control person.

Convertible Issue

A securities feature that gives the issue holder the choice to convert to another issue, usually common stock. This privilege can be used only once.

Convertible Preferred Stock

Preferred stock that may be converted into common stock at specific prices or rates.

Cooling-Off Period

The period between filing of the registration statement on a new issue with the SEC to the effective date of the offering.

Corner a Market

To purchase a significant portion of the supply of a stock in order to manipulate its price.

Corporate Bonds

Bonds issued by corporations to raise capital.


The most common form of business organization, chartered by a state and given legal rights as a separate entity from its owners. Corporations are characterized by issuing shares of transferable stock, limited liability of its owners, and existence beyond the life of its owners.

  1. The detachable part of bearer stock certificates exchangeable for dividends. 2) The rate of interest on a fixed interest security; a 5% coupon means interest of 5% a year on the nominal value of the security.
Coupon Yield

A bond's coupon payment divided by par value. Also called nominal yield.


The number of times the dividend paid out by a company is covered. Calculated by dividing the total net profit a company has available for distribution as dividend by the actually amount paid.

Covered Call

A short call option position where the writer sells a call option while simultaneously owning the number of shares represented by the option contracts. Covered calls can limit the risk the writer since he/she has already purchased the deliverable security.

Covered Put

A put option position where the writer of the option is also short on the corresponding stock. This limits the option writer's risk because the put can be used to cover the short stock position.


See Consumer Price Index.

Credit Agreement

The agreement which outlines the credit arrangement between the broker and the client concerning a margin account.

Credit Balance

The funds available to a client in the cash or margin account. In a short sale, this balance is the client's liability.

Credit Risk

The danger that a bond issuer's ability to repay what it owes will deteriorate. This danger usually prompts bond rating firms to downgrade the credit rating of company or municipality that issued the bond, sending the yield of the bond higher to justify the increased risk associated with this bond.

Cumulative Dividends

A feature of preferred stocks whereby holders are still entitled to receiving dividends after a pay period has been skipped due to poor company performance, the accumulated dividends must be paid before common stockholders may receive any dividends.

Cumulative Preferred Stock

A feature of preferred stock that entitles the holder to later payment of dividends when they were not paid when due. The dividends accumulated must be paid before common stockholders may receive any dividends.

Current Assets

Liquid assets that can be converted to cash within 12 months. These include cash, marketable securities, accounts receivable and inventory.

Current Income

Regular income generated by investments (as opposed to capital growth).

Current Liabilities

Accounting term describing obligations that must be paid within 12 months. These include accounts payable, short-term debt and interest on long-term debt.

Current Maturity

The number of years remaining until a bond matures.

Current Ratio

An indicator of short-term debt-paying ability. It is determined by dividing current assets by current liabilities. The higher the ratio, the more liquid the company.

Current Share Price

Most recent market price of the shares.

Current Yield

The actual yield of a bond determined by the bond's current price on the secondary market. The current yield can be calculated by dividing the coupon by the bond's current market price. For example, a bond with a $1,000 face value and a coupon of 5% purchased at $900 has a current yield of 6.56% (50 / 900). When the market price of a bond declines, its current yield rises. Conversely, when the market price rises, the current yield declines.


Stocks whose performance is heavily influenced by the business cycle. An example would be the hosing industry, where sales slow down during winter and picks up during the warmer months.