General

Basic knowledge

American-Style Options
Options that can be exercised any time during their lifetime. These are also known as open options.

All-or-None Order
An order that must be filled completely or the trade will not take place.

Averaging Down
Buying more of a security at a price that is lower than the price paid for the initial investment. The aim of averaging down is to reduce the average cost per unit of the investment.

Bear Market
A market in which stock prices are falling.

Blue Chip Stocks
Stocks of leading and nationally known companies that offer a record of continuous dividend payments and other strong investment qualities.

Bonds
Promissory notes issued by a corporation or government to its lenders, usually with a specified amount of interest for a specified length of time.

Bull Market
A market in which stock prices are rising.

Call Option
An option which gives the holder the right, but not the obligation, to buy a fixed amount of a certain stock at a specified price within a specified time. Calls are purchased by investors who expect a price increase.

Capital
To an economist, capital means machinery, factories and inventory required to produce other products. To investors, capital means their cash plus the financial assets they have invested in securities, their home and other fixed assets.

Capital Gain or Loss
Profit or loss resulting from the sale of certain assets classified under the federal income tax legislation as capital assets. This includes stocks and other investments such as investment property.

Capitalization or Capital Structure
Total dollar amount of all money invested in a company, such as debt, preferred and common stock, contributed surplus and retained earnings of a company.

Capitalization Change
Any change in the issued and outstanding listed securities of an issuer. This change may involve the issuance, repurchase, or cancellation of listed securities or listed securities that are issuable upon conversion or exchange of other securities of an issuer.

Changes in Stock List
Any modification to the list of tradable issues of an exchange. These modifications include: new listings, supplemental security listings, substitutional listings, deletions, name changes, and stock symbol changes.

Closed-End Investment Fund
An investment trust that issues a fixed number of securities that trade on a stock exchange or in the over-the-counter market. Assets of a closed-end fund are professionally managed in accordance with the fund’s investment objective and policies and may be invested in a wide range of financial instruments/assets. Like other publicly traded securities, the market price of closed-end fund securities fluctuates and is determined by supply and demand in the marketplace.

Debt Price
The price paid per $100 of a debt instrument’s face value traded. A debt instrument trading at par would have a price of $100. A price below face value (for example, $99.1) indicates that the debt instrument has traded at a discount. A price above face value (for example, $101.1) indicates that the debt instrument has traded at a premium.

Delist
The removal of a security’s listing on a stock exchange. This is done when the security no longer exists, the company is bankrupt, the public distribution of the security has dropped to an unacceptably low level, or the company has failed to comply with the terms of its listing agreement.

Diversification
Limiting investment risk by purchasing different types of securities from different companies representing different sectors of the economy.

Dollar Cost Averaging
Investing a fixed amount of dollars in a specific security at regular set intervals over a period of time. Dollar cost averaging results in a lower average cost per share, compared with purchasing a constant number of shares at set intervals. The investor buys more shares when the price is low and buys fewer shares when the price is high.

Equities
Common and preferred stocks, which represent a share in the ownership of a company.

European-Style Option
Options that can be exercised only on their expiration date.

Exchange Offering Prospectus (EOP)
A form of prospectus that allows a company to conduct a prospectus offering through the facilities of a stock exchange, rather than issuing them directly to the public. The company then applies to list the securities on the exchange.

Exchange-Traded Fund (ETF)
A special type of financial trust that allows an investor to buy an entire basket of stocks through a single security, which tracks and matches the returns of a stock market index. ETFs are considered to be a special type of index mutual fund, but they are listed on an exchange and trade like a stock. Also known as an index participation unit (IPU).

Face Value
The cash denomination of the individual debt instrument. It is the amount of money that the holder of a debt instrument receives back from the issuer on the debt instrument’s maturity date. Face value is also referred to as par value or principal.

Fill or Kill (FOK) Order
Is eligible to receive a full fill and if not fully filled is cancelled immediately.

Freeze
An interruption in trading on a stock, triggered when an order violates parameters set by …

Frequency
Frequency refers to the given time period on an intraday, daily, weekly, monthly, quarterly or yearly perspective. Typically, choosing a weekly or monthly perspective when looking at several years of data makes it easier to identify long-term trends. Daily charts are useful for active traders and short-term time period charts.

Futures
Contracts to buy or sell securities at a future date.

Good-Till-Cancelled (GTC) Order
A GTC order will remain in the system until the date that it is filled or until a maximum of 90 calendar days from date of entry, whichever happens first. This type of order is also referred to as an open order. A Participating Organization can cancel a GTC order at any time.

Good-Till-Date (GTD) Order
A GTD order will remain in the system until it is either filled or until the date specified, at which time it is automatically cancelled by the system. This is another kind of open order. A Participating Organization can cancel a GTD order at any time.

Hedge
A strategy used to limit investment loss by making a transaction that offsets an existing position.

Improving the Market
An order that either raises the bid price or lowers the offering price is said to be improving the market. The market improves because the spread between the bid and offer decreases.

Index
A statistical measure of the state of the stock market, based on the performance of stocks.

Inflation
An overall increase in prices for goods and services, usually measured by the percentage change in the Consumer Price Index.

Initial Public Offering (IPO)
A company’s first issue of shares to the general public.

Inside Information
Non-public information pertaining to the business affairs of a corporation that could affect the company’s share price should the information be made public.

Insider
All directors and senior officers of a company, and those who are presumed to have access to inside information concerning the company. An insider is also anyone owning more than 10% of the voting shares of a company.

Insider Trading
There are two types of insider trading. The first type occurs when insiders trade in the stock of their company. Insiders must report these transactions to the appropriate securities commissions. The other type of insider trading is when anyone trades securities based on material information that is not public knowledge. This type of insider trading is illegal.

Investment
The purchase or ownership of a security in order to earn income, capital or both. Investments may also include artwork, antiques and real estate.

Investment Advisor
A person employed by an investment dealer who provides investment advice to clients and executes trades on their behalf in securities and other investment products.

Investment Capital
Initial investment capital necessary for starting a business. Investment capital usually consists of inventory, equipment, pre-opening expenses and leaseholds.

Investment Counsellor
A specialist in the investment industry paid by fee to provide advice and research to investors with large accounts.

Investment Fund
A closed-end fund that offers investors the ability to buy a security that represents a portfolio of investments with a specific investment strategy. These products use funds raised through a public offering to invest in a portfolio of securities, which are actively managed to create income streams for investors, typically through a combination of dividends, capital gains, interest payments, and in some cases, income from derivative investment strategies. These funds are not directly related to an operating business. Some examples are: funds of income funds, senior loan funds, mortgage-backed security funds, and commodity funds.

Issue
Any of a company’s securities or the act of distributing the securities. Issued shares refer to the portion of a company’s shares that have been issued for sale. A company does not have to issue the total number of its authorized shares.

Issue Status
The trading status of a class or series of an issuer’s listed securities, such that a class or series of listed securities of an issuer may be halted, suspended, or delisted from trading.

Issuer Status
The trading status of a listed or formerly listed issuer. Issuer status types include: delisted, listed, suspended, and trading.

Limit Order
An order to buy or sell stock at a specified price. The order can be executed only at the specified price or better. A limit order sets the maximum price the client is willing to pay as a buyer, and the minimum price they are willing to accept as a seller.

Liquidity
This refers to how easily securities can be bought or sold in the market. A security is liquid when there are enough units outstanding for large transactions to occur without a substantial change in price. Liquidity is one of the most important characteristics of a good market. Liquidity also refers to how easily investors can convert their securities into cash and to a corporation’s cash position, which is how much the value of the corporation’s current assets exceeds current liabilities.

Margin Account
A client account that uses credit from the investment dealer to buy a security. A client needs to deposit a margin amount with the balance advanced by the investment dealer against collateral such as investments. The investment dealer can make a margin call, which means the client must deposit more money or securities if the value of the account falls below a certain level. If the client does not meet the margin call, the dealer can sell the securities in the margin account at a possible loss to cover the balance owed. The investment dealer also charges the client interest on the money borrowed to buy the securities.

Market Maker
A trader employed by a securities firm who is required to maintain reasonable liquidity in securities markets by making firm bids or offers for one or more designated securities up to a specified minimum guaranteed fill.

Market Order
An order to buy or sell stock immediately at the best current price.

Mutual Fund
A fund managed by an expert who invests in stocks, bonds, options, money market instruments or other securities. Mutual fund units can be purchased through brokers or, in some cases, directly from the mutual fund company.

Open Order
An order that remains in the system for more than a day.

Open-End Investment Fund
An investment fund that continuously offers its securities to investors and stands ready to redeem its securities at all times. Transactions in shares/units of mutual funds are based on their net asset value (NAV), determined at the close of each business day. Examples of an open-end fund are traditional mutual funds and exchange-traded funds (ETFs).

Option
The right, but not the obligation, to buy or sell certain securities at a specified price within a specified time. A put option gives the holder the right to sell the security, and a call option gives the holder the right to buy the security.

Over-The-Counter (OTC) Market
The market maintained by securities dealers for issues not listed on a stock exchange. An OTC market is also known as an unlisted market.

Penny Stock
Low-priced speculative issues of stock selling at less than $1.00 a share.

Portfolio
Holdings of securities by an individual or institution. A portfolio may include various types of securities representing different companies and industry sectors.

Profit
What is left over for the owners of a business after all expenses have been deducted from revenues. Gross profit is the profit before corporate income taxes. Net profit is the final profit of the business after taxes have been paid.

Prospectus
A legal document describing securities being offered for sale to the public. It must be prepared in accordance with provincial securities commission regulations. Prospectus documents usually disclose pertinent information concerning the company’s operations, securities, management and purpose of the offering.

Push-Out
A push-out occurs during a stock split when new shares are forwarded to the registered holders of old share certificates, without the holders having to surrender the old shares. Both the old and new shares have equal value.

Put Option
A put option is a contract that gives the holder the right to sell a specified number of shares at a stated price within a fixed time period. Put options are purchased by those who think a stock may decline in price.

Securities and Exchange Commission (SEC)
The federal regulatory body for interstate securities transactions in the United States.

Seed Stock
The shares or stock sold by a company to provide start-up capital before carrying out an initial public offering (IPO).

Settlement
The process that follows a transaction when the seller delivers the security to the buyer and the buyer pays the seller for the security.

Short Selling
The selling of a security that the seller does not own (naked or uncovered short) or has borrowed (covered short). Short selling is a trading strategy. Short sellers assume the risk that they will be able to buy the stock at a lower price, cover the outstanding short, and realize a profit from the difference.

Thin Market
A market that occurs when there are comparatively few bids to buy or offers to sell, or both. The phrase may apply to a single security or to the entire stock market. In a thin market, price fluctuations between transactions are usually larger than when the market is liquid. A thin market in a particular stock may reflect lack of interest in that issue, or a limited supply of the stock.

Tick
Slang used for minimum spread. Depending on the stock price it could be a half-cent, one cent or five cents.

Trading Halt
A trading halt is imposed by the exchange, usually due to the dissemination of news that might impact a stock’s price.

Underwriting
The purchase for resale of a new issue of securities by an investment dealer or group of dealers who are also known as underwriters. The formal agreements for these transactions are called underwriting agreements.

Unlisted
A security not listed on a stock exchange, but traded on the over-the-counter market.

Venture Capital
Money raised by companies to finance new ventures.

Volatility
A statistical measure of changes in price over a period of time.

Warrant
A security giving the holder the right to purchase securities at a stipulated price within a specified time limit. Exercise of the warrant is solely at the discretion of the holder. Warrants are not exercisable after the expiry date. A warrant is often issued in conjunction with another security as part of a financing. A warrant may be traded as a listed security or it may be held privately.