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CALL OPTION
An option contract that gives the holder of the option the right (but
not the obligation) to purchase, and obligates the writer to sell, a specified
number of shares of the underlying stock at the given strike price, on
or before the expiration date of the contract.
CAPITAL EXPENDITURES
Amount used during a particular period to acquire or improve long term
assets such as property, plant, or equipment.
CAPITAL GAIN
When a stock is sold for a profit, it's the difference between the net
sales price of securities and their net cost, or original basis. If a
stock is sold below cost, the difference is a capital loss.
CAPITAL LOSS
The difference between the net cost of a security and the net sale price,
if that security is sold at a loss.
CASH DIVIDEND
A dividend paid in cash to a company's shareholders. The amount is normally
based on profitability and is taxable as income. A cash distribution may
include capital gains and return of capital in addition to the dividend.
CASH AND EQUIVALENTS
The value of assets that can be converted into cash immediately, as reported
by a company. Usually includes bank accounts and marketable securities,
such as government bonds and Bankers' Acceptances. Cash equivalents on
balance sheets include securities (e.g., notes) that mature within ninety
days.
CASH FLOW
In investments, it represents earnings before depreciation amortization
and non-cash charges. Sometimes called cash earnoings. Cash Flow from
operations (called Funds From Operations (FFO) by real estate and other
investment trusts, is important because it indicates the ability to pay
dividends.
CHURNING
Excessive trading of a client's account in order to increase the broker's
commissions.
CLOSING PURCHASE
A transaction in which the purchaser's intention is to reduce or eliminate
a short position in a stock, or in a given series of options.
CLOSING SALE
A transaction in which the seller's intention is to reduce or eliminate
his long position in a stock, or a given series of options.
COMMON STOCK/OTHER EQUITY
Value of outstanding common shares at par, plus accumulated retained earnings.
Also called shareholders' equity.
CONFIDENCE INDICATOR
A measure of investors' faith in the economy and the securities market.
A low or deteriorating level of confidence is considered by many technical
analysts as a bearish sign.
CONFIRMATION
The written statement that follows any "trade" in the securities
markets. Confirmation is issued immediately after a trade is executed.
It spells out settlement date, terms, commission, etc.
CONVERGENCE
The movement of the price of a futures contract toward the price of the
underlying cash commodity. At the start, the contract price is higher
because of the time value. But as the contract nears expiration, the futures
price and the cash price converge.
CORNER A MARKET
To purchase enough of the available supply of a commodity or stock in
order to manipulate its price.
COUPON RATE
In bonds, notes or other fixed income securities, the stated percentage
rate of nterest, usually paid twice a year.
COVERED CALL
A short call option position in which the writer owns the number of shares
of the underlying stock represented by the option contracts. Covered calls
generally limit the risk the writer takes because the stock does not have
to be bought at the market price, if the holder of that option decides
to exercise it.
COVERED PUT
A put option position in which the option riter also is short the corresponding
stock or has deposited, in a cash account, cash or cash equivalents equal
to the exercise of the option. This limits the option writer's risk because
money or stock is already set aside. In the event that the holder of the
put option decides to exercise the option, the writer's risk is more limited
than it would be on an uncovered or naked put option.
CURRENT ASSETS
Value of cash, accounts receivable, inventories, marketable securities
and other assets that could be converted to cash in less than 1 year.
CURRENT LIABILITIES
Amount owed for salaries, interest, accounts ayable and other debts due
within 1 year.
CURRENT RATIO
Indicator of short-term debt paying ability. Determined by dividing current
assets by current liabilities. The higher the ratio, the more liquid the
company.
CURRENT YIELD
For bonds or notes, the coupon rate divided by the market price of the
bond.
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