| Objective |
A
fund's investment objective states the financial
goals it is aiming for, such as "growth," or
"income." |
| Options
Clearing Corporation (OCC) |
A
clearing corporation owned jointly by the exchanges
dealing in listed options. OCC is the central
or main clearing corporation for listed options.
Options traded on any SEC-regulated exchange
can be settled through OCC. |
| OCC
Prospectus |
A
prospectus published by the OCC and available
to option traders upon request. It contains
information on trading options and the risks
involved. |
| Odd
Lot |
A
quantity of securities that is smaller than
the standard unit of trading, which is usually
100 shares. |
| Offer
for Sale |
A
method of bringing a company to the market.
The public can apply for shares directly at
a fixed price. A prospectus containing details
of the sale must be printed in a national newspaper. |
| Offer
Price |
The
price at which the market maker will sell shares
to investors. |
| Open-End
Fund |
An
investment company that pools money from shareholders
and invests in a variety of securities, including
stocks, bonds, and money market instruments.
They offer growth, income, or both, and the
opportunity to invest in everything from a country
or industry to the movements of the markets
themselves. A mutual fund continually sells
new shares to investors and redeems those that
are tendered by shareholders. (Also known as
"mutual fund.") |
| Open-End
Management Company |
A
management company that is constantly issuing
new shares. |
| Opening
Transaction |
Refers
to a customer either buying or selling an option
contract to open a new position. |
| Operating
Expenses |
The
normal costs a mutual fund incurs in conducting
business, such as the expenses associated with
maintaining offices, staff, and equipment. There
are also expenses related to maintaining the
fund's portfolio of securities. These expenses
are paid from the fund's assets before any earnings
are distributed. |
| Option |
A
contract that entitles the buyer to buy (call)
or sell (put) a predetermined quantity of an
underlying securities for a specific period
of time at a pre-established price. |
| Option
Adjustments |
Changes
made in the terms of an option contract on ex-dividend
date when the underlying stock pays a cash or
stock dividend or when there is a stock split,
etc. |
| Option
Agreement |
The
agreement the customer must sign to trade options
in which the customer agrees to abide by the
rules of the listed option exchanges. |
| Option
Class |
The
group of options, put or call, with the same
underlying security. |
| Option
Fund |
A
fund which trades options to increase the value
of its shares. The fund may either be conservative
or aggressive. A conservative fund, commonly
called an "option income fund," may buy stocks
and increase shareholders' income through the
premium earned by writing options on the stocks
within the portfolio. An aggressive fund, commonly
called an "option growth fund," may buy options
in securities that the fund manager thinks will
fall or rise sharply in the near term. |
| Option
Series |
The
group of options having the same strike price,
expiration date, and unit of trading on the
same underlying stock. |
| Order
Book Official (OBO) |
An
employee of certain exchanges who executes limit
orders on behalf of the membership. |
| Order
Department |
The
department within a brokerage firm that is responsible
for sending the customers' orders to the proper
market for execution. |
| Ordinary
Shares |
The
most common form of share. Holders receive dividends
which vary in amount in accordance with the
profitability of the company and recommendations
of the directors. The holders are the owners
of the company. Also known as Common Stock. |
| Original
Issue Zeros |
Zero-coupon
securities originally issued by a corporation,
government, or governmental subdivision as zeros.
A zero-coupon security not created by severing
interest and principal payments from a preexisting
bond. |
| OTC
Bulletin Board |
An
electronic service that provides selected quotes
on over-the-counter stocks. |
| Out-of-the-Money |
Options
with no intrinsic value such as a call when
the market price is below the strike price of
the call or a put when the market price is above
the strike price of the put. |
| Over-The-Counter
Market (OTC) |
Comprised
of a network of telephone and telecommunication
systems over which unlisted securities and other
issues trade. |
| Pacific
Basin Fund |
A
fund that invests primarily in the stocks of
companies located in the Pacific Basin, which
includes Australia, Hong Kong, Japan, Malaysia,
New Zealand, Singapore, and Taiwan. |
| Pacific
Clearing Corporation (PCC) |
The
clearing corporation of the Pacific Stock Exchange. |
| Pacific
Ex Japan Funds |
A
fund that invests primarily in the stocks of
companies whose primary trading markets or operations
are concentrated in the Pacific region (including
Asian countries), and which specifically does
not invest in Japan. |
| Pacific
Stock Exchange (PSE) |
This
exchange operates in San Francisco and Los Angeles. |
| Par
Value |
A
value that a corporation assigns to its security
for bookkeeping purposes. |
| Participating
Preferred |
Preferred
stock whose holders may "participate" with the
common shareholders in any dividends paid over
and above those normally paid to common and
preferred stockholders. |
| Pass-Through
Security |
Instrument
representing an interest in a pool of mortgages.
Pass-throughs pay interest and principal on
a monthly basis. |
| Passive
Income |
Income
from an investment in a trade or business in
which the investor does not "materially participate."
Material participation requires regular, continuous
and substantial involvement in the operations
of the activity. |
| Payment
Date |
The
day on which a mutual fund pays income dividend
or capital gains distributions to its shareholders. |
| Penalty
Plan |
A
mutual fund accumulation plan in which sales
fees for the entire obligation are deducted
from shares purchased in the first few years
that the plan is in effect. In the event that
the investors redeem the shares after a short
time, only a small portion of the purchase price
will be refunded. Sales charges and penalty
plans are regulated by the Investment Company
Amendments Act of 1970. |
| Penny
Stocks |
Extremely
low-priced securities that trade over the counter. |
| PEPS
(Personal Equity Plans) |
These
allow investment in a number of shares and carry
various tax benefits, including the receipt
of dividends without paying income tax on the
income and sales free from capital gains tax
on the profit. |
| Per
capita |
A
method of dividing an estate that gives one
equal share to each person in a class of people
who are all related in the same degree of relationship
to the deceased person. For example, all grandchildren
take equal shares regardless of how many children
the deceased person had. |
| Per
stirpes |
A
method of dividing an estate among a class of
people based on representation at a closer degree
of relationship to the deceased person than
the degree of the class itself. For example,
grandchildren take only the shares that their
respective parents would have taken. |
| Performance |
A
measure of how well a fund is doing. Two commonly
used mutual fund performance measures are yield
(which measures dividends) and total return
(which measures dividends plus changes in net
asset value). |
| Periodic
Payment Plan |
A
plan in which an investor agrees to make monthly
or quarterly investments in a mutual fund as
a method of accumulating shares over a period
of years. Fixed periodic contributions result
in dollar cost averaging. |
| Personal
Assets |
Assets
acquired for your use and enjoyment, including
your home, automobiles, furnishings and similar
possessions. |
| Phantom
Interest |
The
yearly accreted interest that a zero-coupon
security is presumed to pay each year you hold
it even though payment of interest isn't made
until the zero matures. |
| Pink
Sheets |
Daily
publication providing dealer names and quotes
on penny stocks. It is actually printed on pink
paper. |
| Plus-Tick
Rule |
SEC
rule that states that no short sale may be made
when the last trade on the security was a minus
tick. |
| Point |
A
price movement of one full increment. For example,
a stock rises one point when its price goes
from 23 to 24. |
| Pooling |
Pooling
is the basic concept behind mutual funds. A
fund pools the money of thousands of individual
and institutional investors who share common
financial goals. The fund uses this pool to
buy a diversified portfolio of investments |
| Portfolio |
A
collection of securities owned by an individual
or an institution (like a mutual fund). A fund's
portfolio may include a combination of stocks,
bonds, and money market securities. |
| Portfolio
Manager |
The
individual who is responsible for managing a
mutual fund's assets. |
| Portfolio
Theory |
The
management of a portfolio based on quantitative
analysis, where the selection of securities
in a portfolio is made as a result of a mathematical
assessment of the risk and return against the
market as a whole and/or by reference to the
risks or returns determined by the client for
the portfolio. Portfolio theory will assess
risk-free returns and the likelihood of returns
made by market timing, determining the benefits
of investments by their volatility (beta coefficient)
or dispersion (risk) and the capital asset pricing
model. |
| Portfolio
Turnover |
A
measure of the trading activity in the fund's
portfolio of investments. In other words, how
often securities are bought and sold. |
| Position
Limits |
The
maximum number of option contracts that may
be held on the same side of the market for a
particular security. The number may vary depending
on the security. |
| Pre-Existing
Conditions |
Medical
conditions that existed, were diagnosed or were
under treatment before you took out a policy.
Medical, disability and long-term care insurance
policies may limit or exclude benefits payable
for such conditions. |
| Pre-Tax
Rate of Return |
The
rate of return before income taxes (and any
applicable tax credits) are taken into account.
See After-tax rate of return. |
| Precious
Metals Fund |
A
fund that seeks an increase in the value of
its holdings by investing at least two-thirds
of its portfolio in securities associated with
gold, silver, and other precious metals. Also
known as "gold funds." |
| Preemptive
Right |
A
right, sometimes required by the issuer's corporate
charter, by which current owners must be given
the opportunity to maintain their percentage
ownership if additional shares of the same class
are issued. Additional shares of the soon-to-be
issued security are offered to current owners
in proportion to their holders before the issue
can be offered to others. Usually one right
is issued for each outstanding share. The rights
are used to subscribe to the additional shares
at a predetermined cash amount. |
| Preference
Shares |
These
are normally fixed-income shares whose holders
have the right to receive dividends before ordinary
shareholders but after debenture and loan stockholders
have received their interest. |
| Preferred
Stock |
Stock
that represents ownership in the issuing corporation
and that has prior claim on dividends. In the
case of bankruptcy, preferred stock has a claim
on assets ahead of common stockholders. The
expected dividend is part of the issue's description. |
| Premium |
(1)
If the market price of a new security is higher
than the issue price, the difference is the
premium. If it is lower, the difference is called
the Discount. (2) The cost of purchasing or
selling a traded option. |
| Premium
Bond |
A
note or bond selling at a price above par. |
| Prenuptial
Agreement |
An
agreement entered into by prospective spouses
before marriage, in which the property rights
of one or both are determined. |
| Prepayment
Risk |
The
possibility that, as interest rates fall, homeowners
will refinance their home mortgages, resulting
in the prepayment of GNMA securities, and possible
decline in net asset values of GNMA Funds. |
| Price
Spread |
A
spread in which the two options have the same
expiration date but have different exercise
or strike price. |
| Price/Earnings
Ratio |
The
current share price divided by the last published
earnings per share, where earnings per share
is net profit divided by the number of ordinary
shares. |
| Primary
Dealer |
Any
of 40 firms recognized by the Treasury Department
as eligible to bid on Treasury and agency securities
when they are initially issued and to make a
market for secondary buyers. |
| Primary
Market |
(1)
The initial offering of certain debt issues.
(2) The main exchanges for equity trading. |
| Principal |
a.)
The amount of money that is financed, borrowed
or invested, generally to distinguish this amount
from the interest or other earnings derived
from the principal. Earnings; b) A brokerage
firm when it acts as a dealer and marks up a
purchase price or marks down a sale price when
reporting the execution. |
| Private
Company |
A
company which is not a public company and does
not offer its shares to the general public. |
| Private
Placement |
An
issue that is offered to a single or a few investors
as opposed to being publicly offered. |
| Privatization |
Conversion
of a state run company to public limited company
status often accompanied by a sale of its shares
to the public. |
| Probate |
Proceedings
involving a court of law that pertain to the
administration and distribution of an estate.
This includes determination of the validity
of a will, appointment of an executor or administrator,
and settlement of the estate. |
| Probate
Price |
The
price used to assess the value of shares for
inheritance tax purposes. Calculated on the
"quarter up" principle. That is, instead of
taking the Mid Price in the Official List, the
difference between the two prices (bid and offer)
given under "quotation" is divided by four,
and the result added to the lower of the two
prices. |
| Professional
Management |
The
pool of shareholder dollars invested in a fund
is managed by full-time, experienced professionals
who decide which securities to hold, when to
buy, and when to sell. |
| Program
Trading |
Professional
investors and institutions often use computer-generated
buying and selling programs as part of their
trading activities. These normally buy or sell
shares, options or futures, on the basis of
market movements and operate automatically.
Can cause considerable market volatility. |
| Property
Ownership |
How
legal title to property is held (for example,
sole ownership, joint tenancy, tenancy by the
entirety, tenancy in common, or in trust). |
| Prospectus |
The
official document that describes a mutual fund.
It contains information required by the Securities
and Exchange Commission on such subjects as
the fund's investment objectives, policies,
services and fees. A prospectus must be given
to every investor. In the US, a more detailed
document, known as "Part B" of the registration
statement, (or "Statement of Additional Information,")
is available at no charge upon request. |
| Proxy |
A
form and a process for voting via the mail,
permitting stockholders to vote on key corporate
issues without having to attend the actual meeting. |
| Proxy
Fight |
An
attempt by a dissident group to take over the
management of a corporation. The group sends
proxies electing them to the board; the current
management sends proxies favoring them. The
shareholders cast their votes by selecting one
proxy or the other. |
| Public
Limited Company (PLC) |
A
public company limited by shares and having
a share capital, and which may offer shares
for purchase by the general public. Only PLC's
may qualify for listing or trading on the USM
on the London Stock Exchange. |
| Public
Market |
The
listed exchanges through which zero-coupon investments
can be purchased and sold. |
| Public
Offering Date |
The
first day the new issue is offered to the public,
on or shortly after the effective date. |
| Purchase
Price |
The
amount paid to purchase a Treasury or agency
obligation. |
| Purchasing
Power Parity |
Purchasing
power parity between two currencies exists when
their exchange rates are in equilibrium with
each other, i.e. their domestic purchasing powers
at that exchange rate are equivalent ('at parity').
For instance, the exchange rate of £1 = $1.60
would be in equilibrium if £1 could buy the
same amount of goods and services in the UK
as $1.60 would buy in the US. If indeed they
are equivalent in terms of purchasing power
at that exchange rate, one says that PPP holds.
Otherwise one currency is overvalued with respect
to the other. PPP theory is important in international
economics and finance. The basic underlying
idea is that arbitrage forces will come into
play if one currency is overvalued relative
to the other, and these will eventually lead
to the equalisation of goods and services prices
internationally (taking into account the exchange
rate). As such, PPP theory is a 'law of one
price'. In reality, PPP theory seems to hold
relatively well in the long-run, but is quite
unreliable in the short-run. It is especially
deficient as a theory in that it cannot explain
the high volatility in exchange rates and prolonged
divergences from PPP. Other theories that build
on PPP have been introduced which are slightly
more satisfactory - overshooting for example.
Probably a major reason for the unsatisfactory
performance of PPP theory is that international
comparisons and estimates of the price of equivalent
baskets of goods and services are extremely
difficult to make accurately. |
| Put |
An
option that permits the owner to sell a standard
amount of an underlying security at a set price
for a predetermined period. |
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