Coordinated Capital Securities, Inc. - Glossary

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Back-end Load - A fee that an investor pays when redeeming (withdrawing) funds from an investment--also called "deferred sales charge." The fee is usually dependent on how long the investment is held--the longer the time period, the smaller the fee. Mutual funds and annuities are the most common investments with back-end loads.

Balance of payment - A summary of the international transactions of a country over a period of time including commodity and service transactions, and gold movements.

Banker's Acceptance - A draft or bill of exchange accepted by a bank; payment is guaranteed by the accepting institution.

Bankruptcy - A legally protected state that may be declared by a corporation that is unable to pay debts. There are two types of bankruptcy, one that deals with liquidation and another that deals with reorganization. Chapter 7 Bankruptcy is an option in which a bankrupt corporation is liquidated after the courts have determined that a reorganization is not worthwhile. A trustee is charged with liquidation of all assets and distribution of the proceeds to satisfy claims against the corporation in order of priority. Chapter 11 Bankruptcy is an option in which a trustee may be appointed to reorganize the bankrupt firm.

Bar chart - A chart that graphs the high, low, and settlement prices for a specific trading session over a given period of time.

Basis Point (BP) - An amount equaling 1/100th of one percent; used especially in expressing variations in the yields of bonds. For example, the difference between 12.83% and 12.88% is 5 basis points.

Bear - One who anticipates a decline in price or volatility. Opposite of a bull.

Bear market - Market in which prices are in a declining trend.

Bearer Bond - A bond that does not have the owner's name registered on the books of the issuer. Interest and principal, when due, are payable to the owner upon presentation of the bond (or a coupon attached to the bond).

Bellwether Security - A security that is perceived as an indicator of a market's direction. IBM, for example, is considered a bellwether stock. The 20-year US Treasury bond is considered a bellwether bond because it represents the direction in which all other bonds are likely to move.

Beneficial owner - A person who benefits from ownership of a security or mutual fund. Shares or title may be held by a bank or broker for safety and convenience or in “street name” to expedite transactions, but the real owner is the beneficial owner. ( See street name)

Best ask - The lowest quoted offer of all competing Market Makers to sell a particular stock at any given time.

Best bid - The highest quoted bid of all competing Market Makers to buy a particular stock at any given time.

Best-execution requirement - The obligation of Market Makers, broker/dealers, and others to execute customer orders at the best price available at the time the trade is entered.

Bid price (buy price) - The quoted bid at which a Market Maker is willing to buy a stock.

Bid/ask spread - The difference between the price at which a Market Maker is willing to buy a security (bid), and the price at which the firm is willing to sell it (ask). The spread narrows or widens according to the supply and demand for the security being traded.

Bid/offer Bid - the price at which a person is ready to buy a security. Offer - the price at which a person is ready to sell a security

Black Monday - Monday , October 19, 1987 - the day when the Dow Jones Industrial Average fell a record 508 points. This drop was on top of a series of sharp drops that occurred the previous week. The drop may have represented investors' apprehensions about inflated stock prices, the federal budget and trade deficits. However, there are many who blame program trading for the extreme volatility.

Blue-Chip Stock - Stock in a company with a national reputation for quality, reliability and the ability to operate profitably in good and bad times.

Blue-sky laws - State laws that require issuers of securities to register their offerings with the state before they can be sold to its residents. Most blue-sky laws include provisions relating to fraudulent activities and the licensing of people selling securities. NASDAQ National Market securities, subject to higher qualifications standards, are exempted from registration requirements under most states' blue-sky laws as are those listed on exchanges.

Board of Directors - The controlling bodies of NASD Regulation, Inc. and The NASDAQ Stock Market, Inc.

Board of Governors - The controlling body of the National Association of Securities Dealers, Inc.

Bond - A certificate of debt in which the issuer (borrower) promises to pay the bondholder (creditor) a specified amount of interest for a specified time period and to repay the debt at maturity. Obligations that are due in more than one year are classified as bonds whereas if the debt is for less than one year, it is called a "note". Bondholders are creditors of the issuer and they do not have ownership privileges. A bond may be registered either by issuing certificates in the bondholder's name, book-entry or in bearer certificates. There are many different kinds of bonds and different methods of evidencing bond ownership. The most common types are:

A. Secured bonds are backed by collateral that may be sold if the issuer fails to pay interest and principal when they are due.

B. Unsecured bonds or debentures are only backed by the full faith and credit of the issuer. There is no specific collateral.

C. Convertible bonds give holders the right to exchange the bonds for other securities of the issuer at a future date, under prescribed conditions.

Book entry securities - Electronically recorded securities that include each creditor's name, address, Social Security or tax identification number, and dollar amount loaned, (i.e., no certificates are issued to bond holders, instead the transfer agent electronically credits interest payments to each creditor's bank account on a designated date).

Book Value - An accounting term. Book value of a stock is determined from the company's records, by adding all assets then deducting all debts and other liabilities, plus the liquidation price of any preferred issues. The arrived at is divided by the number of common shares outstanding and the result is the book value per common share. Book value may have very little relationship to market value.

Borrowing Power - Also referred to as buying power. Dollar amount that clients can buy securities on margin. The margin limit is dependent on the type of security--usually 50% of a stock's value, 30% of a bond's value and 100% of a cash equivalent's value (i.e., money market funds). Buying power can also refer to securities hypothecated (pledged) to a lender as loan collateral. The lender's policies and the type of security determine the collateral's loan value.

BP Basis Point - An amount equaling 1/100th of one percent; used especially in expressing variations in the yields of bonds. For example, the difference between 12.83% and 12.88% is 5 basis points.

Branch office - Any location identified by any means to the public or customers as a location at which an NASD member conducts investment banking or securities business.

Breakeven point - The underlying securities price at which a given options strategy is neither profitable nor unprofitable. For call options, it is the strike price plus the premium. For put options, it is the strike price minus the premium.

Breakpoint - Dollar levels of investment purchases in a mutual fund that qualify an investor for reduced sales charges. The purchases may either be a lump sum or by accumulating shares.

Broker - 1) An individual who is paid a fee or commission for acting as an agent in making contracts, sales, or purchases. 2) A floor broker is a person who actually executes trading orders on the floor of an exchange. 3) An account executive, registered commodity representative, or customers' man who deals with customers and their orders in commission house offices. See also Futures Commission Merchant.

Broker/dealer - NASD member firms that act as securities dealers or brokers, or perform both functions.

Brokerage fee - A fee charged by a broker for executing a transaction.

Brokerage house - An individual or organization that solicits or accepts orders to buy or sell futures contracts or options on futures and accepts money or other assets from customers to support such orders. Also referred to as "commission house" or "wire house."

Brokered CD - Certificate of Deposit (CD) that is issued by a bank and bought in bulk by brokerage firms who resell them to their customers. Brokered CD's may pay as much as 1% more than those sold directly by banks, carry federal deposit insurance up to $100,000, are liquid on a secondary market made by the broker, and investors are not charged a commission.

Bull - Someone who thinks market prices will rise.

Bull market - Market in which prices are in an upward trend.

Bull spread - An option strategy wherein the investor profits when the underlying security's price rises (vs. Bear Spread). There are three types of bull spreads:

A. Vertical Spread: Concurrently buying and writing (selling) the same options class and the same expiration date, but with different exercise prices.

B. Calendar Spread: Simultaneously buying and writing the same options class and sale of options of the same price but at different expiration dates.

C. Diagonal Spread: Simultaneously buying and writing the same options class at different exercise prices and different expiration dates. A diagonal spread combines a vertical and a calendar spread.

Butterfly spread - Complex option strategy that involves writing (selling) two calls and buying two calls on the same or different markets and several expiration dates. One of the call options has a higher strike price and the other has a lower strike price than the other two call options. If the underlying stock price remains stable, the investor profits from the premium income collected on the options that are written.

Buy price - Also called bid price. The quoted bid at which a Market Maker is willing to buy a stock.

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