American option

An option which can be exercised at any time between the purchase date and the expiration date. Most
options in the U.S. are of this type. This is the opposite of a European-style option, which can only be
exercised on the date of expiration. Since an American option provides an investor with a greater degree
of flexibility than a European style option, the premium for an American style option is at least equal to
or higher than the premium for a European-style option which otherwise has all the same features. also
called American-style option.

Beta

Beta is a statistical measure of the impact that stock market movements have historically had on a
stock's price. By comparing the returns of the Standard & Poor's 500 (S&P 500) to a particular stock's
returns, a pattern develops that indicates the stock's exposure to stock market risk. This will help you
decide whether you want to take on a riskier stock that moves with a higher correlation to the market or
a stock that is less susceptible to market fluctuations.

Contrarian

An investor who behaves in opposition to the prevailing wisdom; for example, buying when
others are pessimistic and selling when they're optimistic, or buying out-of-favor stocks. In an
extended bull market, the term contrarian can begin to mean someone who is bearish or prefers
value stocks to growth stocks, although this is really just a subset of contrarian investing.

Currency convertibility

The ability to exchange money for gold or other currencies. Some governments which do not
have large reserves of hard currency foreign reserves try to restrict currency convertibility, since
they are not in a position to handle large currency market operations to support their currency
when necessary.
Commercial mortgage-backed security CMBS

A type of mortgage-backed security backed by commercial mortgages rather than residential

mortgages. They are comprised of a variety of loans, each of which represents different
property sizes and locations. These loans are pooled and are broken into tranches of risk that
are sold to investors. In general, they carry less prepayment risk than loans backed by
residential mortgages.

Condor

An options strategy similar to a butterfly spread. The only difference is that in a condor, the two
middle options have different strike prices within the range established by the other two
options. This strategy is often undertaken when an increase in volatility is expected, since it
allows for positive payoffs over a relatively large range of underlying prices.

DRIP (Dividend Reinvestment Plan)

An investment plan offered by some corporations enabling shareholders to automatically

reinvest cash dividends and capital gains distributions, thereby accumulating more stock
without paying brokerage commissions . Many DRIPs also allow the investment of additional
cash from the shareholder, known as an optional cash purchase. Unlike with a Direct Stock
Purchase Plan, with a DRIP the investor must purchase the first share in the company through a
brokerage. After that, the company will take whatever dividends it would normally send as a
check and instead it will reinvest them to purchase more shares in the company for you, all
without charging a commission. The only drawback is that the investor has no control over
when his/her money from the dividends is used to purchase new stock in the company, which
means he/she might be buying new shares at sub-optimal times. also called Dividend
Reinvestment Program Ex-stock dividends. A security which no longer carries the right to the
most recently declared dividend; or the period of time between the announcement of the
dividend and the payment. A security becomes ex-stock dividend on the ex-dividend date (set
by the NASD), which is usually two business days before the record date (set by the company
issuing the dividend). For transactions during the ex-stock dividend period, the seller, not the
buyer, will receive the dividend. Ex-dividend is usually indicated in newspapers with an x next to
the stock or mutual fund's name. In general, a stock's price drops the day the ex-stock dividend
period starts, since the buyer will not receive the benefit of the dividend payout till the next
dividend date. As the stock gets closer to the next dividend date, the price may gradually rise in
anticipation of the dividend. also called ex-dividend.

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Monetary reserve

A government’s stockpile of foreign currency and precious metals . Monetary reserves are useful both
for settling transactions involving foreign counterparties and for undertaking trading in foreign exchange
and commodity markets. In general, the larger the monetary reserve, the better the country is able to
engage in transactions with foreign countries.

One-Touch Spot Options

For investors new to SPOT options or investors who are unsure of just what kind of scenarios to
predict with forex options trading, there is a One-Touch Spot option that will payout if the
exchange rate simply reaches a certain level before the expiration date.

Options Clearing Corporation OCC

The organization that handles clearing of the options trades for the various options exchanges and
regulates the listing of new options. It is regulated by the Securities and Exchange Commission, and is
owned jointly by the U.S. stock exchanges that trade options (American Stock Exchange, Chicago Board
Options Exchange, Pacific Exchange, and Philadelphia Stock Exchange). The fact that all listed options are
cleared through OCC means that all options are free of default risk, since the OCC guarantees all option
contracts. Therefore, the buyer or a seller of an option only faces the credit risk of the OCC (which is
minimal), not the credit risk of the counterparty. In order to manage risk, the OCC imposes margin
requirements on all options brokers. The margin requirement depends on the particulars of each
specific contract.

Red herring prospectus

It is a document submitted by a company (issuer) who intends on having a public offering of securities
(either stocks or bonds) in the United States. Most frequently associated with an Initial Public Offering
(IPO), this registration statement must be filed with the Securities and Exchange Commission (SEC).

"Red-herring prospectus" Means a prospectus, which does not have complete particulars on
the price of the securities offered and quantum of securities offered. The red herring statement
contains:

1. purpose of the issue;

2. proposed offering price range;
3. disclosure of any option agreement;
4. underwriter's commissions and discounts;
5. promotion expenses;
6. net proceeds to the issuing company (issuer);
7. balance sheet;
8. earnings statements for last 3 years, if available;
9. names and address of all officers, directors, underwriters and stockholders owning 10% or more
of the current outstanding stock;
10. copy of the underwriting agreement;
11. legal opinion on the issue;
12. copies of the articles of incorporation of the issuer.
Spot next

The purchase of a currency that is to be delivered the day after the spot date. The delivery price
is adjusted to account for the change in delivery date. For example, a spot one-week contract
will result in the delivery of a currency one week after the spot date.

Standard & Poor's Depositary Receipt (SPDR)

Shares of a security designed to track the value of the S&P 500. Spiders trade on the American Stock
Exchange under the symbol SPY. One SPDR unit is valued at approximately one-tenth of the value of the
S&P 500. Dividends are distributed quarterly, and are based on the accumulated stock dividends held  in
trust, less any expenses of the trust. also called SPDRs or Spiders.

Store of value

A commodity, currency or other type of capital that is tradable and can be stored for future use. It
is a fundamental component of the economic system because it allows trade to occur with items
that have inherent value. An example of a store of value is currency, which can be exchanged for
goods and services. If the value of currency becomes unpredictable, such as in times of
hyperinflation, investors and consumers will shift to alternative stores of value, such as gold,
silver, precious stones and real estate

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)

A federal law signed by President Ronald Reagan in 1982 that reversed some of the tax cuts from
the previous year's Economic Recovery Tax Act (ERTA). Specifically, the law created a 10%
withholding for dividends, repealed accelerated depreciation deductions used by corporations,
and increased both the wage base and tax rate for the federal unemployment tax.