Glossary of Financial Terms: S
This article is from the Glossary of
Glossary of Financial Terms: S
- Sales charge
The fee charged by a mutual fund when purchasing shares, usually
payable as a commission to amarketing agent, such as a financial
advisor, who is thus compensated for his assistance to a
purchaser. It epresents the difference, if any, between the share
purchase price and the share net asset value.
The Securities and Exchange Commission, the primary federal
regulatory agency of the securities industry.
- Secondary market
A market that provides for the purchase or sale of previously
owned securities. Most trading is done in the secondary
market. The New York Stock Exchange, as well as all other stock
exchanges, the bond markets, etc., are secondary markets.
- Selling short
If an investor thinks the price of a stock is going down, the
investor could borrow the stock from a broker and sell
it. Eventually, s/he must buy the stock back on the open
market. For instance, you borrow 1000 shares of XYZ on July 1 and
sell it for $8 per share. Then, on Aug 1, you purchase 1000 shares
of XYZ at $7 per share. You've made $1000 (less commissions and
other fees) by selling short.
Options: All option contracts of the same class that also have the
same unit of trade, expiration date, and exercise price.Stocks:
shares which have common characteristics, such as rights to
ownership and voting, dividends, par value, etc. In the case of
many foreign shares, one series may be owned only by citizens of
the country in which the stock is registered.
- Settlement date
The date on which payment is made to settle a trade. For stocks
traded on US exchanges, settlement is currently 5 business days
after the trade, but this will be reduced to 3 days in 1995. For
mutual funds, settlement usually occurs in the U.S. the day
following the trade. In some regional markets, foreign shares may
require months to settle.
Certificates or book entries representing ownership in a
corporation or similar entity
- Share repurchase
Program by which a corporation buys back its own shares in the
open market. It is usually done when shares are undervalued. Since
it reduces the number of shares outstanding and thus increases
earnings per share, it tends to elevate the market value of the
remaining shares held by stockholders.
- Short position (Options)
A position wherein a person's interest in a particular series of
options is as a net writer (ie, the number of contracts sold
exceeds the number of contracts bought).
- Short position (Stocks)
Occurs when a person sells stocks s/he does not yet own. Shares
must be borrowed, before the sale, to make "good delivery" to the
buyer. Eventually, the shares must be bought to close out the
transaction. Technique is used when an investor believes the stock
price is going down.
- Short sale
Selling a security that the seller does not own but is committed
to repurchasing eventually. It is used to capitalize on an
expected decline in the security's price.
The difference between estimated transaction costs and actual
transaction costs. The difference is usually composed of revisions
to price difference or spread and commission costs.
Abbreviation for Standard Industrial Classification. Each 4-digit
code represents a unique business activity.
- Stock dividend
Payment of a corporate dividend in the form of stock rather than
cash. The stock dividend may be additional shares in the company,
or it may be shares in a subsidiary being spun off to
shareholders. Stock dividends are often used to conserve cash
needed to operate the business. Unlike a cash dividend, stock
dividends are not taxed until sold.
- Stop (-loss) order
An order to sell a stock when the price falls to a specified
- Strike price
The stated price per share for which underlying stock may be
purchased (in the case of a call) or sold (in the case of a put)
by the option holder upon exercise of the option contract.