Friday, February 3rd 2012 - 06:04:47 pm

TradeStocksAmerica.com Glossary of Terms

Glossary of Terms
(Some abbreviations are for communication on the Trading Room)

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S&P-500 - Standard & Poor's 500. A basket of 500 stocks that are considered to be widely held. The S&P 500 index is weighted by market value, and its performance is thought to be representative of the stock market as a whole. The S&P 500 index was created in 1957, this index provides a broad snapshot of the overall U.S. equity market. Most experts consider the S&P 500 one of the best benchmarks available to judge overall U.S. market performance.

Sallie Mae – Student Loan Mortgage Association (SLMA). A federally established, publicly traded corporation which buys student loans from colleges and other lenders, pools them and sells them to investors. In this way, Sallie Mae is able to provide financing to providers of student loans.

Santa Claus rally - The rise in stock prices that sometimes occurs in the week after Christmas, often in anticipation of the January effect.

Scalp is a very short term trade that captures pennies to a few dollars. The trade usually lasts a matter of minutes. It used to be considered trying to capture part of the spread between bid and ask when the spreads were high but now the term has evolved as an intraday trade where the trader is trying to capture the micro movements of the stock throughout the day.

Secondary market - A market in which an investor purchases a security from another investor rather than the issuer, subsequent to the original issuance in the primary market. Also considered the open market.

Secondary offering - A registered offering of a large block of a security which has been previously issued to the public, by a current shareholder. The proceeds of the sale go to the holder, not the issuing company, and the number of shares outstanding does not change; also called secondary distribution.

SEC – Securities and Exchange Commission.

Securities lending - A loan of a security from one broker/dealer to another, who must eventually return the same security as repayment. The loan is often collateralized. Securities lending allows a broker-dealer in possession of a particular security to earn enhanced returns on the security through finance charges. This is filling the demand for shares to sell short for individual brokerage accounts.

Security - An investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization which offers evidence of debt or equity. The official definition, from the Securities Exchange Act of 1934, is: "Any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a 'security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited."

Sell – refers to closing a long position.

Selloff - A sudden drop in price as a result of widespread selling.

Sell Short – is opening a position that sells a stock first in anticipation that the stock will drop in price and the trader/investor can buy it back at a lower price, called Buy to Cover, to close a short position and capture the profit. More info: Borrowing a security (or commodity futures contract) from a broker and selling it, with the understanding that it must later be bought back (hopefully at a lower price) and returned to the broker. Short selling (or "selling short") is a technique used by investors who try to profit from the falling price of a stock. The profit is the difference between the price at which the stock was sold and the cost to buy it back, minus commissions and expenses for borrowing the stock. But if the price of the shares increase, the potential losses are theoretically unlimited but short sales have a limited profit potential because a stock can only go to zero. For this reason, short selling is a higher risk technique. SEC rules no long require investors to sell short only on an uptick or a zero-plus tick as of late 2007.

Sentiment - A measurement of the mood of a given investor or the overall investing public, either bullish or bearish.
Share - Certificate representing one unit of ownership in a corporation, mutual fund, or limited partnership.

Share price - The price of one share of stock.

Shareholder - One who owns shares of stock in a corporation or mutual fund. For corporations, along with the ownership comes a right to declared dividends and the right to vote on certain company matters, including the board of directors. Also called stockholder.

Shares issued - are the authorized number of shares issued by the company and brought public by underwriters or a private placement.

Shares outstanding - The number of shares of a corporation's stock that have been issued and are in the possession of the investor’s including insiders (open market).

Short market value - The total value of all securities that have been shorted in a given account. Essentially, this is the amount that has been borrowed in order to sell securities that were not owned before the sale.

Short selling – The process of selling short a stock as an opening transaction first in anticipation that the stock price falls and the investor can buy to cover to close the position and profit from the difference between the purchase price and the selling price. The concept of buying low and selling high is still correct but with selling short, the investor sells first, then buys later.

Short Squeeze - is when a stock rises sharply caused by speculators buying long AND people who are covering their short position. This is usually most prominent with stocks that have a low float. Sophisticated traders or trading firms can actually plan the timing of this when conditions are conducive for a specific stock to rise, primarily when a stock has a large short position on it relative to the total size of the float

Small Cap - $250 million to $1 billion capitalization.

Specialist - A stock exchange member who makes a market for certain exchange-traded (i.e. NYSE, AMEX securities, maintaining an inventory of those securities and standing ready to buy and sell shares as necessary to maintain an orderly market for those shares. Can be an individual, partnership, corporation or group of firms. Equivalent term for NASDAQ is market maker.

Spike – refers to the stock pricing going up in a sharp and sudden fashion.

Split adjusted price - The price per share of a stock after it splits. For historical price data, when the stock price in the past is adjusted to reflect subsequent splits, allowing the data to be compared with current prices.

Spread - The difference between the current bid and the current ask (in over-the-counter trading) or offered (in exchange trading) of a given security; also called bid/ask spread.

Stochastics: Developed by George C. Lane in the late 1950s, the Stochastic Oscillator is a momentum indicator that shows the location of the current close relative to the high/low range over a set number of periods. Closing levels that are consistently near the top of the range indicate accumulation (buying pressure) and those near the bottom of the range indicate distribution (selling pressure).
The theory behind this indicator is that in an upward-trending market, prices tend to close near their high, and during a downward-trending market, prices tend to close near their low. Transaction signals occur when the %K crosses through a three-period moving average called the "%D".

Stock certificate - A document reflecting legal ownership of a specific number of stock shares in a corporation; also called certificate of stock.

Stock dividend - A dividend paid as additional shares of stock rather than as cash. If dividends paid are in the form of cash, those dividends are taxable. When a company issues a stock dividend, rather than cash, there usually are not tax consequences until the shares are sold.

Stock Splits - can occur when a company declares a 2-for-1 or a 3-for-2 or 3-for-1. A stock split increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. This theoretically encourages smaller investors to buy shares even though there is no difference to buy half the number of shares of, let’s say, a $100 stock versus twice as many shares of a $50 stock. It is more of a psychological reason in addition to the fact that the float is being increased. Options and warrants are included.

Stock simulator - A computer program that mimics the actions of the stock market. It can be created purely as a game for recreational enjoyment, or for the purpose of practicing to see what real-world trading is like. The former are usually based on fictional data and situations, while the latter are often based on actual stock market data. This is a good idea to get the feel of

Stock symbol - Ticker symbol for a stock.

Stock trading – The process of buying and selling stocks with the goal of buying stocks at a lower price and selling (or holding) at a higher price. Stocks can also be sold short first (opening your short position) at a high price in anticipation of profiting from a falling stock price in which you can buy to cover a short position (closing your short position).

Stop loss or stop order is an order that limits your loss on a stock when a stock is going against you. If you are long a stock or investment (you want it to go up to make money) and it starts to come back down, a stop loss order can be set to trigger an automatic sale without you having to initiate the order. This is convenient when you are away from your computer, on the road traveling or at work. It could be a trailing stop loss by percentage or points (and fractions).

Support – the price level at where buyers are willing to buy a stock and the price the stock appears to not drop below based on previous periods of time. Also referred to as support level; see resistance level as opposite.

Swing trading - A type of investing implemented by individual traders/investors who are looking for quick gains over a few days. Similar to day trading, swing traders analyze stocks to determine which ones are likely to gain over a period from a few days to a couple of weeks. Swing trading is a short term strategy.

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