Coordinated Capital Securities, Inc. - Glossary

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Calendar spread - An options position comprised of the purchase and sale of two options contracts of the same type that have the same strike prices but different expiration dates. Also known as a horizontal or time spread.

Call Bonds - The right to redeem outstanding bonds before their scheduled maturity. Options: The right to buy a specific number of shares at a specified price by a fixed date.

Call Features (of a bond) Part of an agreement, called an indenture, that states the schedule and price at which an issuer may make redemptions before the bond's maturity date. Municipal and corporate bonds usually have call protection periods of 10 years.

Call option - An option that gives the buyer (holder) the right, but not the obligation, to buy a futures contract (enter into a long futures position) for a specified price within a specified period of time in exchange for a one-time premium payment. It obligates the seller (writer) of an option to sell the underlying futures contract (enter into a short futures position) at the designated price, should the option be exercised at that price.

Callable - Under pre-stipulated conditions, a bond issue that may be redeemed by the issuer before its maturity date. If the issuer does call the issue, in full or part, the bondholder may receive a premium price. Issuers might call a bond when interest rates fall so drastically that it is worth the expense of issuing new bonds at the lower rates. U.S. government securities are not usually callable. However, 30-year Treasury bonds are an exception. They become callable after 25 years.

The term also pertains to preferred shares that may be redeemed by the issuing corporation.

Capital changes (Corporate Action) - An event that changes the capital structure of the firm. Published and SEC approved reorganization for a company. The reorganization can include Reverse Splits, Name Changes, Stock Dividends and Distributions, Stock Mergers, and Corporated Actions (Mandatory or Optional). Published information usually includes US and foreign tax consequences, rates of exchange or distribution, cost allocations when applicable, and recorded effectives date. There are two types of corporate actions, mandatory and voluntary.

A Mandatory Corporate Action is one where the issuer has the right to insist that the corporate action take place.

A voluntary corporate action is one where the holder of the security has the right to decide whether he wants to accept or reject a proposed corporate action.

Capital Gain - Profit made on securities, either through dividends or by selling the securities for a higher price that they originally cost.

Capped-style Option - A capped option is an option with an established profit cap or cap price. The cap price is equal to the option's strike price plus a cap interval for a call option or the strike price minus a cap interval for a put option. A capped option is automatically exercised when the underlying security closes at or above (for a call) or at or below (for a put) the option's cap price.

CD - Certificate of Deposit. A time deposit with a specific maturity evidenced by a certificate.

CD Early Redemption - Instructions to redeem Certificates of Deposit (CDs) that may be submitted at any time. Interest penalties may apply. An exception may include death puts. Supporting documentation is required for this type of early redemption to avoid penalty. The period of time for payment may vary widely depending on the issue.

CDSC - Contingent Deferred Sales Charge. A fee that an investor pays when redeeming (withdrawing) funds from an investment--also called "deferred sales charge," or "back-end" 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.

Certificate (Stock Certificate) - The actual paper evidencing ownership of a security. The certificate states the issuer's name, amount of shares, shareholder's rights, the issue's par value (or declaration of no par value) and any responsibilities of the issuer. Certificates may be issued in registered or bearer form.

Certificate of Deposit (CD) - A time deposit with a specific maturity evidenced by a certificate.

Charting - The use of graphs and charts in the analysis of market behavior, so as to plot trends of price movements, average movements of price, volume, and open interest, in the hope that such graphs and charts will help one to anticipate and profit from price trends. Contrasts with fundamental analysis.

Chinese Wall - A term used to describe procedures enforced within a securities firm that separate the firm's departments to restrict access to non-public, material information. The procedures help NASD members avoid the illegal use "inside" information.

Churning - Also called excessive trading. A broker excessively trades in an account for the purpose of increasing his or her commissions, rather than to further the customer's investment goals.

Circuit breaker - A procedure that temporarily halts trading on all U.S. stock markets for one hour when the Dow Jones Industrial Average falls 250 points or more within a trading day. The pause is designed to allow time for the markets to absorb the news that precipitated the decline. Should the average fall another 150 points within the same day, trading would again be halted, this time for two hours.

Clearing Member - A member of an exchange clearinghouse. Memberships in clearing organizations are usually held by companies. Clearing members are responsible for the financial commitments of customers that clear through their firm.

Clearinghouse - An Exchange-associated body charged with the function of insuring the financial integrity of each trade. Orders are "cleared" by means of the clearinghouse acting as the buyer to all sellers and the seller to all buyers.

Closed End Fund - An investment company that issues a fixed number of shares and is usually listed on a stock exchange. An investor who wishes to buy shares must purchase them from investors who wishes to sell their shares. They do not deal with the investment company directly.

Closing price - The last price paid for a commodity on any trading day. The exchange clearinghouse determines a firm's net gains or losses, margin requirements, and the next day's price limits, based on each futures and options contract settlement price. If there is a closing range of prices, the settlement price is determined by averaging those prices. Also referred to as settle price.

Closing transaction - A transaction in which at some point prior to expiration, the option holder makes an offsetting sale of an identical option, or the option writer makes an offsetting purchase of an identical option. A closing transaction in an option reduces or cancels out an investor's previous position as the holder or the writer of that option.

C-Notice - A notice that is generated when the IRS has notified FCC that the taxpayer has under-reported on dividends and/or interest. Withholding must apply to all non-exempt accounts under the client's TIN listed on the C notice.

Collateral - Securities or other property pledged by a borrower to secure repayment of a loan.

Comfort letter - An accounting firm's statement provided to a company preparing to go public. The letter indicates the accountants' comfort that unaudited financial data in the company's prospectus consistently follow generally accepted accounting principles, and no material changes have occurred since the report was prepared.

Commercial Paper - Debt instruments that are issued by established corporations to meet short term financing needs. Such instruments are unsecured and have maturities ranging from 2 to 270 days. Commercial paper is rated by Standard & Poor's and Moody's.

Commission fee - A fee charged by a broker for executing a transaction. Also referred to as brokerage fee.

Commitment or open interest - The number of open or outstanding contracts for which an individual or entity is obligated to the Exchange because that individual or entity has not yet made an offsetting sale or purchase, an actual contract delivery, or, in the case of options, exercised the option.

Committee on Uniform Security Identification Procedures (CUSIP) number - A unique nine-character alpha/numeric code appearing on the face of each stock certificate that is assigned to a security by Standard & Poor's Corporation. The number is used to expedite clearance and settlement.

Commodity - An article of commerce or a product that can be used for commerce. In a narrow sense, products traded on an authorized commodity exchange. The types of commodities include agricultural products, metals, petroleum, foreign currencies, and financial instruments and index, to name a few.

Common stock - Securities which represent an ownership interest in a public corporation. Owners are entitled to vote on the selection of directors and other important matters as well as to receive dividends when they are declared. If a corporation is liquidated, the claims of secured and unsecured creditors, bondholders and owners of preferred stock have priority over the claims of common stockholders.

Community Property - A special ownership for married couples under laws of community property. Not all states have community property laws. Each has ual rights to any appreciation or income derived from those assets.

Compensation - Income from employment NOT including income from savings and investments, rental income or pension income. Compensation, also referred to as Earned Income, is required in order to set up and contribute to a Traditional IRA. Generally, what is earned from working is Compensation. The IRS treats Compensation as any amount properly shown in box 1 (wages, tips and other Compensation) of Form W-2. See IRS Publication 590 for further definition.

Compliance departments - Departments set up in all organized stock markets to oversee market activity and make sure that trading complies with Securities and exchange Commission and other Exchange regulation.

Computer Assisted Execution System (CAES) - NASDAQ service that automates order routing and execution for securities listed on domestic exchanges in the Intermarket Trading System (ITS). When linked to ITS, Market Makers can execute trades in exchange-listed securities through CAES with specialists on an exchange floor.

Computerized Trading Reconstruction System - A Chicago Board of Trade computerized surveillance program that pinpoints in any trade the traders, the contract, the quantity, the price, and time of execution to the nearest minute.

Computer-to-computer interface (CTCI) - High speed communication interface between large member firms' mainframes and the NASDAQ system for more efficient transfer of information.

Conduit IRA - Conduit IRAs were established as holding accounts for distributions received from an employer's qualified retirement plan until those funds are rolled over into another employer's qualified retirement plan. Example: An individual changes jobs and receives a distribution from their previous company's retirement plan. They elect to do a Direct Rollover of the distribution into a Conduit IRA. At some point in the future, the Conduit IRA (the original rollover plus the earnings that have accumulated) can be distributed and rolled over into a new employer's qualified retirement plan.

Confirmation - Formal memorandum from a broker to a client giving details of curities transaction. When a broker acts as a dealer, the confirmation must disclose that fact to a customer.

Consolidated Quotation System (CQS) - An electronic service that provides quotations on issues listed on the New York and American stock exchanges, regional stock exchanges, and issues traded by NASD member firms in the third market. NASDAQ processes this data and provides it to its subscribers as the Composite Quotation Service. The initials may be used either for the exchange system or NASDAQ service.

Consumer Price Index (CPI) - A measure of price changes in consumer goods--also known as the "cost of living index." The index is calculated monthly by the US Bureau of Labor Statistics. Some CPI components are food, housing costs and transportation.

Contingency order - An order which becomes effective only upon the fulfillment of some condition in the marketplace.

Contingent Deferred Sales Charge (CDSC) - A fee that an investor pays when redeeming (withdrawing) funds from an investment--also called "deferred sales charge," or "back-end" 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.

Contra party - The party to the other side of a trade. Example: To a seller, the contra party is the buyer. In practice, contra broker or contra are the more commonly used phrase. Essentially they all mean the same thing.

Controlled account - An arrangement by which the holder of the account gives written power of attorney to another person, often his broker, to make trading decisions. Also known as a discretionary or managed account.

Conversion bonds - The exchange of convertible bonds and certain classes of stock into a fixed number of shares of a different security. Conversions can be done at any time. (See "Redemption with Conversion Privilege.")

Conversion IRA - A reportable movement of assets from a Traditional, SEP, r SIMPLE IRA to a Roth IRA. This transaction is generally partially or fully taxable. However, for conversions done by 12/31/98, the individual may pay ¼ of the taxes each year for four years. SIMPLE IRAs may be converted only after they have participated two or more years. If the individual must take a Required Minimum Distribution (RMD) during the year of the conversion, the RMD amount may not be converted.

Conversion factor - A factor used to equate the price of T-bond and T-note futures contracts with the various cash T-bonds and T-notes eligible for delivery. This factor is based on the relationship of the cash-instrument coupon to the equired 8 percent deliverable grade of a futures contract as well as taking into account the cash instrument's maturity or call.

Convertible bond - A bond that can be exchanged at the option of the holder into preferred or common stock at a preset ratio.

Cooling-off period - The period after a company's prospectus has been filed with the Securities and Exchange Commission and before offering is made to the public.

Corporate Bond - Debt instrument issued by a corporation. In contrast to most municipal and government bonds, which are not traded on major exchanges and are tax-free, corporate bonds are traded on major exchanges and the interest paid to the investor is taxable.

Corporate Resolution - A document in which a corporation's board of directors states who is authorized to act on behalf of the corporation.

Cost Basis - For tax purposes, the cost of an asset (including commissions and other fees) used to determine the gain or loss.

Cost of capital - The rate that a company must pay for its capital or the minimum return that is required to maintain the market value of a company's common stock. Cost of capital reflects the market's perception of the risk associated with a company's common stock.

Cost of carry (or Carry) - For physical commodities such as grains and metals, the cost of storage space, insurance, and finance charges incurred by holding a physical commodity. In interest rate futures markets, it refers to the differential between the yield on a cash instrument and the cost of funds necessary to buy the instrument.

Co-underwriter - Almost all public offerings are co-managed by a "co-underwriter."

Coupon - The interest rate on a debt instrument expressed in terms of a percent on an annualized basis that the issuer guarantees to pay the holder until maturity.

Coupon Bond - A bond in a form that has interest coupons attached. The coupons are clipped as they come due (usually semiannually) and are ubmitted by the bondholder for payment of interest.

Cover - To offset an options position.

Covered call - A short position where the writer is long (i) the underlying security; (ii) a call option with the same or lower exercise price that expires no sooner than the short call, or; (iii) an escrow receipt or guarantee letter from a bank.

Covered put - A short position, covered option where the writer is long (i) a put ith the same or higher exercise price that expires no sooner that the short put, or; (ii) a bank guarantee letter stating the aggregate exercise price is on deposit.

Covered writing - The sale of an option against an existing position in the underlying security.

CPI Consumer Price Index. - A measure of price changes in consumer goods--also known as the "cost of living index." The index is calculated monthly by the US Bureau of Labor Statistics. Some CPI components are food, housing osts and transportation.

Credit Balance - The amount of cash left over in either a cash or margin account (or a combined balance of the two) after all securities have been paid for. See the explanation of margin for more complete information on using margin leverage in your investing.

Cumulative Preferred Stock - A preferred stock that has a provision stipulating if one or more dividends are omitted (arrearage) because of insufficient earnings or any other reason, the dividends will accumulate until they are paid to shareholders. Cumulative preferred stocks have seniority over common stocks--that is, a common stock dividend cannot be paid until all cumulative preferred dividends are current.

Currency option - The right to buy or sell one currency against another currency at a specified price during a specified period.

Current Coupon Bond - A municipal, corporate or government bond that has a coupon within half a percentage point of current market rates. Because these bonds have an interest rate that is competitive with current market instruments, they are less volatile than comparably rated bonds with lower coupons.

Current yield - The ratio of the coupon to the current market price of the debt instrument.

CUSIP number - Committee on Uniform Security Identification Procedures number. A unique nine-character alpha/numeric code appearing on the face of each stock certificate that is assigned to a security by Standard & Poor's Corporation. The number is used to expedite clearance and settlement.

Custodial Account - An account opened on the behalf of a minor by an adult who acts as custodian. The custodian is usually one of the child's parents--both parents cannot be custodian. This type of account is opened because minors cannot enter into contracts. Thus, they cannot make securities transactions for themselves. Any assets placed into a custodial account are irrevocable. Once the minor is of majority (usually 18, but some states are 21), they may do what they please with the assets. See also Uniform Gifts to Minors Act.

Custodian - A financial institution, such as a brokerage firm, or a bank that holds stock certificates and other assets on the behalf of a mutual fund, corporation or individual. An individual may also act as a custodian in the case of an account for an minor.

Cyclical Stock - that is strongly affected by changes in economic activity. The stock's price will rise when the economy turns up, and will fall when the economy turns down. Examples are automobiles and paper stocks. Non-cyclical stocks, such as stocks within the food and hospital industries, are not directly affected by economic changes.

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