Accredited Investor
A person or institution deemed capable of understanding and affording the financial risks associated with the acquisition of unregistered securities. The SEC recognizes the following parties as accredited:

• An individual who alone, or with a spouse, has a net worth of over $1 million.
• An individual who alone had income in excess of $200,000 in each of the past two years (or with a spouse, in excess of $300,000 in each of the past two years) and has a reasonable expectation of doing as well in the current year.
• A financial institution such as bank, broker/dealer, insurance company or business development company.
• Any director, officer or general partner of the issuer.
• A trust or business partnership, with assets in excess of $5 million, that wasn't formed for the purpose of acquiring the unregistered securities.
• Any entity wholly owned by accredited investors.

Ask
The lowest price a seller is currently willing to accept for a particular security. Also known as the offer price.

Bid
The highest price a prospective buyer is willing to pay at a particular time for a specific security.

Blue Chip
A term that describes a large and nationally known company, or the stock of such a company, with a history of financial stability and quality management. The Dow indices consist largely of Blue Chip stocks.

Bear Market
A prolonged period of falling stock prices.

Bull Market
A prolonged period of rising stock prices.

Bond
A type of loan made to companies or governments by investors. By purchasing a bond, an individual is essentially loaning a company money at a specified rate of interest that is to be paid back on a specific (maturity) date.

Call
A contract that gives the holder the option of buying a specific stock at a specified price for a limited period of time.

Certificate of Deposit (CD)
A debt instrument issued by a bank that pays a specified rate of interest and has a specified maturity date. An investor may have to pay a penalty if the certificate is redeemed before maturity.

Confirmation
Written notice summarizing the details of a trade. A confirmation is issued immediately after a trade is executed.

Dividend
The portion of a company's earnings that are paid out to shareholders.

Equity
Ownership interest in a company represented by shares of stock.

Futures
A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.

Futures Contract
A contract to buy or sell a specified amount of a commodity or financial instrument at a particular price on a specific date in the future. Futures differ from options in that the holder of an option can choose whether or not to exercise the option, but parties involved in a futures contract are obligated to complete the transaction.

Going Long
Purchasing a stock, bond or other security for investment, thereby creating a "long position." The opposite of going long is "going short," when investors sell a security they do not own, betting its share price will decline and creating a short position.

Going Public
A term describing the initial sale of shares of a privately held corporation to the public. When the stock is first sold to the public it is called an "initial public offering" (IPO).

Going Short
Selling a stock, bond or other security that is not owned, thereby creating a short position. Investors who go short generally borrow the security from their broker to deliver to the buyer in the hope that the price will go down. The investor's profit is the difference between the price of the borrowed security and the lower-priced stock that is used to replace it.

Hedging
A strategy used to offset investment risk typically through the use of options, short selling or futures contracts. A hedge can help lock in existing profits and reduce the risk of loss. A perfect hedge is one that eliminates the possibility of a future gain or loss.

Liquidity
A market is liquid when it has a high level of trading activity, allowing buying and selling with minimum price disturbance and relative ease.

Margin
The amount an investor deposits with a broker when borrowing money from the broker to buy stocks.

Margin Account
An account with a brokerage firm that allows its clients to buy securities with money borrowed from the broker - in effect, a line of credit whose limits are determined by the value of the securities in an investor's portfolio. If the value of securities used as collateral falls, the account holder may be required to put more money in the account to make up the difference. Margin accounts are governed by Regulation T of the Federal Reserve Board, NASD, various stock exchanges, and by the brokerage firm's house rules.

Margin Call
A demand for a client to deposit additional money or stock with the broker due to a decline in a stock's price (and therefore the value of the account). A failure to deposit promptly the additional funds may lead to a sale of the securities in the margin account to reduce or eliminate your indebtedness to the broker.

Market Index
A representative sample of stocks whose performance can be benchmarked. For example, the Dow Jones Industrial Average is a commonly used market index.

Maker Market
A dealer that maintains firm bid and offer prices in a given NASDAQ security by standing ready to buy or sell at publicly quoted prices. (see also Payment for Order Flow, Specialist and Spread)

Moving Average
Used in charts and technical analysis, the average price of a stock (or commodity) over a given period.

Mutual Fund
A pool of money that is held and invested by an investment company. Different mutual funds may have different objectives, such as generating income or a high level of return over a long period of time or a lower level of return over a shorter period of time.

NASD
The National Association of Securities Dealers is a self-regulating organization, like the New York Stock Exchange, that is responsible for regulating its members. Most broker-dealers are members. The NASD operates the NASDAQ stock market.

NASDAQ
The National Association of Securities Dealers Automatic Quotation System is a computerized Over-the-Counter market. The NASDAQ is known for the heavy concentration of technology-related companies that list with it.

Net Worth
The value of your personal assets (including your home, contents of your home, car(s), investments, retirement plans, and insurance) minus any outstanding obligations (mortgage, outstanding loans and credit card debt).

NYSE
The oldest and largest stock exchange (founded in 1792) in the U.S. Located in New York City, it is where more than 3,000 (common and preferred) stocks are traded. Also known as the Big Board or The Exchange.

Odd Lot
An order to trade less than 100 shares of stock.

Payment for Order Flow
A practice by which market makers and specialists pay brokerage firms for the right to execute customer buy and sell orders.

Price Improvement
Occurs when an investor is able to pay less than the "ask" price when buying a stock and receive more than the "bid" price when selling.

Put
A contract giving the holder the right to sell a certain number of shares of a specific stock at a specific price on a fixed date.

Risk
The degree of uncertainty that is involved with an investment. Generally, investments that are expected to yield higher returns have higher levels of risk and investments that expect lower returns involve less risk.

Round Lot
An order to trade 100 (or a multiple of 100) shares of stock.

SEC
The Securities and Exchange Commission is the federal agency created to administer various acts that constitute the federal securities laws.

Specialist
A member of a stock exchange responsible for maintaining an orderly market in an exchange-listed stock. They may match buy and sell orders or buy and sell for their own account, if necessary to assure an orderly market.

Split
When a company increases the number of shares it has outstanding. In a two-for-one split, each share is split into two. The investor's percentage of equity in the company remains the same. So, if you had 100 shares valued at $50, each, after the split you would have 200 shares valued at $25 each. Companies often split their stock when the price gets too high. There are also reverse splits, when companies decrease the number of shares outstanding.

Spread
The difference between the bid and ask price for a stock.

Stop Order
An order to buy or sell a stock when a pre-determined price is reached, either above or below the price when the order was given. On a sell, the stop order price is generally lower than the current bid price, with the objective of protecting a profit for the stock holder. If a stop order is placed on a buy, the price is generally higher than the current ask price, ensuring that the stock will be purchased.

Ticker Symbol
Generally a 1- to 4-letter abbreviation for a company name that is the symbol used to identify the company for trading purposes.

Take
The act of accepting an offer price in a transaction.

Trader
An individual who buys and sells for their own account for short-term profits. Also, an employee of a broker-dealer or financial institution who specializes in handling purchases and sales of securities for the firm and/or its clients.

Trading Halts
When trading in a stock, bond or option is suspended by the exchange in anticipation, and during the broadcast of, news about the company.

Trading Between the Spread
Trades executed between the bid and ask prices of a stock or option.

Unconditional Order
Another term for a market order - an order to buy a security at the best available price when the order is entered. This type of order is entered in an effort to ensure fast execution, but carries the risk of buying or selling at an unspecified price.

Unexecuted Order
Often used to refer to an "open order", or a trade that was not executed due to prices remaining beyond limits entered.

Yield
Generally refers to the return on an investment. The dividends or interest a security will earn, expressed as a percentage.