Capitalization
shares outstanding X price per share, The total amount of the various securities issued by a corporation including bonds, debentures, preferred stock, common stock, and surplus, which represent the sources of long-term financing of the company
SMA
Like a credit card - a line of credit
purchase power is 2X SMA
Separately managed accounts, or SMAs, are portfolios of individual securities managed by an asset management firm. As an investor in an SMA, you directly own all securities in the account. Tha
Stopped Stock
Specialist guaranteed a certain
price to a floor
Stopped trading
no trades until restated
buy stop
accelerates Bull Market
Buy Stop
elected when it reaches the stop price - then fills at market - below or above price
used to protect against a loss and to lock in a gain when used with a short stock position.
sell stop
accelerates Bear Market
403 B Plan
Only non profit employees
no investment in stocks in plan
sell stop
elected at a price that is X or below
order is triggered and then it becomes a market order to be sold at x or higher
used to protect against a loss and to lock in a gain when used with a long stock position.
Serial Bond
characterized by decreased interest
mutual fund Yield
dividend / offer price
options: even stock split
nbr contract up and premium / strike price reduced
options: odd stock split
nor of contract remain the same and strike price and premium reduced
co-terminus
all debt is overlapping (100 %)
nyse
all industrial, transportation, utility and fin. stocks
wilshire 5000
comprised of 6, 000 stocks on the nyse, mex and nasdaq
dow jones average
30 component stocks
IPO
no margin, no short sell, no relations of B/D
options
not marginable, always result in capital gain or losses
to protect
buy a put
for income
write covered call
ALPHA
violality measure - changes within company 1 - no change, 1.5 - up 50%, .75 - down 25% / violability measurement based on past vol.
WKSI
well know seasoned issues.
patriot ACT
suspicious Activity report (SAR) for under 10,000 deposit or
CTR Currency Transacion Report for deposits exceeding 10,000
1933
New Issues
penny stock rule 15c 2-6
designated securities- nonlisted, non Nasdaq and less than $5.00 or yes if Investor with firm more than one year and made 3 unsolicited purchases
Reg D
only 35 investor can be non accredited
accredited investor unlimited
1. 1 million exc. home/auto
2. 200,00 income % expected 200,000
3. purchaser 150,000
Reg A
$5 million limitation, 5 M per year, unlimited investors, 30% of stock can be pre-owned.
Reg NMS
all min 100 shares up to 10,000
all mkt maker & special to process any size order
seller must report in 30 seconds
1991
phone calls 8 - 9
1988
insider trading penalities
1940
Investment co and advisors (must be register w the state and the SEC
1939 (senior securities)
Corp Bond Indenture
1970
SIPC
basic coverage 500,000
of which no more than 100,000 Cash
Rule 147
Interstate ruling
80/80/80/100
100% of purchaser must be from state
voter registration proof
must hold for 9 mos prior to selling to nonresident
Rule 144
restricted stock re-sell rules
The weekly average for the previous four weeks trading
1% of the outstanding shares
1938 act
Maloney/SRO/ FINDRA/ OTC
A Shelf offering
The maximum life of a shelf-offering is three years
term bond
randomly called,
have sinking fund, due at one time
serial bond
reverse chronological call
has decreasing interest each year
EPRT
expansion, peak, recession, Trough
draw the chart to answer questions
Rule 145 stock
merger and acquistion
the exchange of stock for new company at no commission
Freely tranferable
Muni Bond insurers
MBIA, AMBAC, FGIC
MIG
rating for muni note: GAN, BAN, TAN, RAN
not CLN nor PN - backed by the issuance of govt housing bonds
placement ratio
new issues bought/ new issues offered
debt service coverage ratio
total revenue - expenses/yearly interest and prin payments
CMO payments
principal paid sequentially, interest paid "pro rata over of trances equally - most monthly - $1,000 investment
mutual fund expense ratio
annual operating expenses/ total NAV
municipal securities
pay out semi annually and are federally tax exempt. Municipalities partake in refunding (issuing new cheaper debt to pay off older more expensive debt) after it's passed its legal call protecti
short term capital gains
at investor's tax bracket
long term capital gains
at a max of 15 %
investment compay change investment
majority vote of the shares as voed by shareholders
investment advisors act 1940
any person who provides investment advice and charges fee mush be registered with SEC
mutual fund expenses ratio
annual operating exps/ total NAV
Yield
annual dividend/current offer price
Investment Company act 1940
Minimum net worth of $100,000, 60-40 rule for directors, new prospectus every 13 months, cannot own more than 10% of target company, cannot purchase on margin, cannot purchase real estate only REIT's, cannot purchase other investment companies, Prospectus
OFFER PRICE =
NAV / 100%- sales charge
Sub chapter M of IRC
Internal Revenue Code: regulated investment company passes through 90 % of net investment income
diversed investment Company
75%/5%/ 10%:
wash sale
is defined as selling a security at a loss and purchasing or repurchasing the same security (or a substantially similar security) within 30 days before or after the sale of that security.The easy way to tell if a sale is a wash sale is if the question giv
Option Taxation
option EXPIRES the premium of the option becomes a short-term CAPITAL gain or loss at expiration. �
Capital gains
If a stock is held for one year or less and sold at a PROFIT, it is netted against any short-term and/or long-term capital losses, and then taxed at the same rate as the person's tax bracket. �If a stock is held for one year and one day or more and sold a
AMT Alternative Minimum Tax
The alternative minimum tax is the regular tax plus "tax preference items
Roth IRA
funded with after Tax dollars. first $ taken are contribution not appreciation
LEAP marginablity
only pay 75% of the cost so investor can borrow 25% of value
naked option requirements
intial requ are the present premium plus 20% of mkt value of stock or 15 % for index options
max amount of option contracts on one side of the market
25,000 contracts
asked proceeds or cost basis of option
just find the BE point of the option
pricing foriegn currance options
contract size X .01 X premium
except FF .001 and yen .0001 ( yen 3 lttrs FF 2 lttrs)
Foreign currancy option
reminder: NO american dollar options in US
so pick put and call in Foregn currancy
VIX
mkt est violatity for S& P 500 - investor feeling
premium in 100 so 3 is 300
execrised on expiration date only (Euro)
Nasdaq level 1
view quotes - Quotron does not report trades as their occur
This is you, the registered rep
nasdaq level 2
B/d allowed to enders order execute trades
. the highest bid
the lowest ask
_This is the trading desk
Nasadaq Level 3
Market maker level - can change their own quotes and sizes
fok - fill or kill
execute order in full at set price or cancel
IOC Immediate or cancel
any amount that can executed is taken then any amount not filled is cancelled
All or None (aon)
entire order has to be fille at price But NOT IMMEDIATELY
either or order
investor either certain amount purchased( increase postion)or certain amount sold (liquiting ) immediately
opening price
opening price or cancelled
at closed
as close to end of day as possible
BLiSS
BL or SS reduce at ex dividen date
DNR
Do Not reduce (stated on order) never reduce for a cash dividend
SuperDot
up to 100,000 shares
order direct to specialist- trade announced to crowd
excluded Advertisement for FINDRA review
Tombstone ads, internal material (marked for Broker use only) Prospectus, red herring and offering circulars of new corp offering (excepting investment co propectus)
FREERIDING
The prohibited action of a client who buys securities and then sells them without paying for the initial purchase., illegal practice in which an underwriter allocates shares of a hot issue to business associates, friends, family members, or other proscrib
Cannot charge customers
for forwarding proxies
Regular way trade t +1
Gov't, trading all options and exercising index or interest rate options
regular way (T +3)
stocks, corp muni bons, exerising equity options
payment or settlement
T +3 or Reg T (T + 5) if payment not received must aaply and rec extra after t 5
ETN
traded on exchange so can short & margin held until maturity, the investor receives a one-time payment based on the performance of the underlying asset, index, or strategy. ETNs track commodities, currencies, stocks with certain volatility, stocks based o
ETF
non mged - follow an index - sld on exhg - commissed - marginable and can be sld short
deliver Stock
Findra allows Y +13 business days - 10 days over 3 day settle - if no B/d must buying securities & Freeze the acct
expired option taxation
short term captial gain if written or short c or p, short term capital loss if long call or put, if LEAP long term capital loss if over a year
closed option taxation
whether long or short - the gains or loss are short term loss or gain - LEAPs long term
Taxation on exercised Options
ADDED to the STRIKE PRICE to determine the COST BASIS or PROCEEDS if the option is a CALL (buy or sell respectively)
�
SUBTRACTED from the STRIKE PRICE to determine the COST BASIS or PROCEEDS if the option is a PUT (sell or buy respectively)
Discount Bond Accretion
a bond is purchased at a discount, the appreciation (gain) that will be received at maturity must be ACCRETED over the life of the bond. The process of ACCRETING the difference in value between the discounted amount and the maturity value follows one of t
Secondary Market Discount Bond Accretion
All bonds (municipal, corporate, and government) bought at a discount in the secondary market have the accreted gain taxed as ordinary income if held to maturity
OID Original Issue Bond
If the bond is a municipal bond, the accreted amount is treated as the interest credited to the municipal bond and is, therefore, tax-free.
�
If the bond is a corporate bond, the accreted amount is the interest credited to the bond and, therefore, must be
Taxation on Dividends from US Corp and Mutual Fund investment
Dividends received from investments in stocks of domestic corporations (companies in the United States) and from mutual funds are taxed at a maximum of 15%.
Taxation on dividends from REITS, foreign corporations, and interest on debt issues
are considered portfolio income and are taxed at the taxpayer's income tax bracket.
CAPITAL loss
deducted from ordinary income up to a limit of $3,000 per year.
Long term Capital Gains
gained realized when the asset is held for one year or more. Individuals taxed at 15% and corp investors at 35%.
Short term Capital Gains
gains realized when the asset is held less than one year. Individuals taxed as ordinary income at the taxpayer's income tax bracket and corp investors are taxed at 35%
TAX PREFERENCE ITEMS for the ALTERNATIVE MINIMUM TAX are:
Intangible drilling costs � known as IDCs
�
The amount of percentage depletion in excess of cost depletion
�
Accelerated depreciation � known as "depreciation"
�
Interest on municipal bonds that are for private use, such as some revenue bonds and IDR bond
Passive losses
CAN NEVER be used to offset ordinary income at any time
Retirement funds before 59 1/2 for first home
or builing first home is limited to only $10,000
Retirement funds before 59 1/2 exceptions from 10% penalty
Death
�
Disability
�
Payments for higher education for someone in the family
�
First time home purchase limited to 10,000 all additional penalized
Extra-ordinary medical expenses
�
If the payments are taken in amounts that are paid over a person's life ex
529 new benefiicary
beneficiary can be changed as often as the contributor wishes.new beneficiary must be related (such as a brother, sister, or parent) to the original beneficiary
Muni Premium Bond taxation
PREMIUM, either as a NEW ISSUE or in the SECONDARY MARKET and held to maturity, there is no loss
Bond swaps done to avoid wash sale rules
To produce a loss to offset a gain for the year
To produce a gain to offset a loss for the year �
To increase or change the quality of a portfolio ��
To increase income for a portfolio
margin interest on MUNI
The interest expenses incurred when municipal securities are bought on margin are not tax deductible
MUNI Bond basis point
.0001, 1/100% or .01% or 1/10,000
BANKER'S ACCEPTANCES
are short-term notes "used to facilitate foreign trade in the United States."collateralized time deposit, meaning that they are issued for a period of time, usually 90 to 180 days
AUCTION RATE SECURITIES � ARS
ARS are re-set at 7-, 14-, 28-, or 35-day intervals
Debt security or preff stock
max term of 1 yr - not 21 days
Corp Bonds one point
$1 so 1/2 is .5
efficient market
a trading market that is characterized by high trading volumes (which minimize marketability risk) and narrow dealer spreads. Such markets have lower transaction costs for investors to buy and sell, minimizing liquidity risk as well.
SMA in a long account
Anytime the market value in a long account rises, the account will generate more SMA. -If the market value in the long account goes down, the customer DOES NOT LOSE ANY SMA.
Minimum maintenance is MV � 25%
MAINTENANCE MARGIN CALL. �To find this, divide th
SMA in a short account
Anytime the market value in a short account decreases, the account will generate more SMA. -If the market value in the short account goes up, the customer DOES NOT LOSE ANY SMA. .
Minimum Maintenance = Market Value � 30%
Maintenance Margin Call = Credit B
A broker
is a agent and gets a commission
They effect trades. The firm either buys or sells for their customers
A dealer
is a principal and gets a mark-up
A dealer buys shares for or sells shares out of its account
Short swing profit
when an affiliate of a company buys and sells that company's stock within a six month period
Abritration excepts
there can be no customer to customer arbitration
Firm can not bring to customer
if Bond offer is oversold
1st priority: Pre-sale orders � when the order was taken -2nd priority: Group net orders � the number of syndicate members that are credited with the sale -3rd priority: Designated orders � the individual syndicate member that is credited with the sale -4
PRESALE ORDERS
are taken by the underwriter prior to the bid being made or the negotiated offering being settled
GROUP NET ORDERS
are large orders placed by selling syndicate members for institutional buyers during the order period where all members of the syndicate are credited with part of the sale
DESIGNATED ORDERS
are entered by a syndicate member, so that one or more syndicate members get credit for the sale
MEMBER ORDERS AT THE TAKEDOWN
are orders submitted by one syndicate member after the order period has closed. Any designated orders for mutual funds for which the member is also the sponsor must be placed as a member order at the takedown
Fixed Annuity
No Growth
Variable grow and protect principle
Reg T
No for Munis or Govt
DPP Passes on to ordinary income
Cap Loss or Gain / Intangible drilling expense
When Selling Short (in question)
Pick lowest price
The EFFICIENT MARKET Theory
The theory that stock and bond prices instantaneously and fully reflect all available information.
NASDAQ 3 Levels Workstation II:
Level 1: Registered Representative (RR) -Level 2: Trading desk trades -Level 3: Market maker (changes)
SUPER DOT
The maximum order that can be entered is under 100,000 shares. NYSE
Both odd-lot and round-lot orders can be entered
ORS: Options Routing System �
Used in sending option orders to the Order Book Official (OBO) at the CBOE (Chicago Board of Options Exchange).
-This is the same as DOT on the NYSE, but is for trades on the CBOE, and it is quick since the order goes to the OBO.
SOES
Maximum number of shares that can be entered and traded at one time is 500 shares - SuperMontage
Only market orders and limit orders that are immediately executable can be entered
No stop orders are allowed to be entered on a NASDAQ stock
buy stop limit
buy at x stop, then once tiggered (elected) buy at x limit. it must first rise to X price - elect order- so mkt stays a x or go down to be executed- elected, then x or lower to buy
Sell Stop Limit
This is the sell at X or higher - so stk must drop to x price to elect order then trades at x or higher before executed- after order is elected at - it then becomes a SELL limit order
At what point does the gain of one point offsets dollar for dollar by another ....
if they are calls always pick high nbr
if they are puts always pick lowest number
beta coeffiicient less than one
pick the lesser number of puts
beta coefficent greater than one
pick the larger number of puts
eastern - undivided
% of total unsold
Western - divided
only obligated to sell what they did not sell of their allocation
non qualified
taxed prior to investing
qualified
funded with non taxed $
when is a guardian removed
if no activity in 6 months
number account
whether cash or margin - no signature required
FINDRA and Msrb confirmation requirement
Broker/dealer's name, customer's name and address -The type of security and symbol, if there is one -The price at which the security traded and the total price -Whether it is an opening or closing transaction and whether it is a purchase or a sale -B/D ca
MRSB add'l confir require
Description of the bonds � issuer, interest rate, revenue, or GO bond and type of GO bond -If the bonds are callable and date they can be called; note that registered or bearer is not needed -A notation if the bonds are pre-refunded -Bond yield � lower of
All discretionary orders
must be approved by principal asap
when asked which bond is quote at ytc
and there are 2 premium bonds pick premium bond callable at par
ERISA
protects Corp pension plans only
Reverse Convertible bonds
righ but not obligabtion
specificed nbr of shs of another company
bonds of a specified company or
Cash
Debt service coverage
Total income - exps/prin + interest
TAN
Tax anticipation Note- temp $ to fund til taxes
CLN PN
new low income housing
RAn
Revenue anticipation Note
BAN
Bond anticipation Notes
GAN
Grant anitcipation Note
beta
violatility based on stock mkt index.
A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return
r square
violaity related to market price
OEX
S&P100 index multiple 100
SPX
s&p 500
INDEX
best hedge against systemtic risk
multipler of 100 on option
means premium of 3 is 300
index option and interest rate options
muni correspondence under 25
signed ny bom
ADR
to facilitate trade of foreign securities in us
issued by us bank, ratio of share preset, no preemptive rights & voting rights, right to dividends
good delivery of corp bond
name of issuer, type of bond, interest rate, maturity date
Force conversion
if stock price is higher - issuer call bond and force holder to convert stock
reverse convertible bond
short term high yield, - issuer have right to on pre set date for - specific nor of com. stock or bonds of another company or cash - could be converted for far less than original purchase price
leverage compnay
ex: utility com - have a great dal of debt to be effective
Commercial paper
unsecured promissory notes of $100,000 and up that mature (come due) in 270 days or less - from Corp
compound accreted value on zero coupon Corp bond
principal over the time bond held so need Dated date, maturity date and time bond has been held
Recession measured
by GDP gross domestic product
leading indicators
S&P 500, Consumer durable goods, housing starts, CCI (consumer Confidence Index
coincident indicator
Industrial Production Index
lagging indicators
Corp profits,
ticker tape
s = 100 shs
s/s = 10 shs
broker's broker
� Never acts as a market maker
� Helps dealers find a particular bond they are looking for
� Helps institutional firms buy and sell bonds
� Helps large buyers and/or sellers remain anonymous
� Only acts in an agent
� Never acts in a principal transaction
annuity pay out types
Life annuity Upon the death of the annuitant, payments stop and any remaining money reverts to the insurance company� -highest periodic payout amount.
�Life annuity, period certain - annuaint determines a minimum time period for the insurance company to m
ORS
Used in sending option orders to the Order Book Official (OBO) at the CBOE (Chicago Board of Options Exchange).
interest rate risk
is short term securities - debt
moves most with changing interst rate
long term debt securities
Capital Markets
Markets that trade debt (bonds) and equity (stock) instruments with maturities of more than one year
1934 ACT
enforced by SEC
If a question is not about one of the following: �New issue (1933 Act) �NASD (1938 Maloney Amendment) �Corporate bonds (1939 Trust Indenture Act) �1940 Investment Company Act �1940 Investment Adviser Act �SIPC (1970 SIPA) �1988 Insider Tra
Rate Covenant
a promise to maintain rates sufficient to pay expenses and debt service - Revenue Bonds
arbitrage
buying in one exchange and selling short in another
or buying a conv Bond when the bond and stock price are not equal
Account lettter
or syndicate letter prioties se by mgr of muni underwriting
account settlemnet lttr
after bonds sold tells how the syndicate will distribute the bonds
muni underwritng
Municipal issues are not registered with the SEC
official & preliminary offical statement can be sent with matls if approved by BOM
whenever asked to determine the highest or lowest price of a bond
always pick the bond with the longest maturity
riskest option positon
short call
short straddle
short combination
no american dollar puts or calls
remember
gains and losses
as either a LONG-TERM LOSS or a SHORT-TERM LOSS to balance against gains.must follow a process for netting capital gains and losses.
ECN
must do so as a limit order, NO market order or a stop order
super Montage
NASDAQ stock
No stop orders are allowed to be entered on a NASDAQ stock
bid/ask
an investors -sells at the bid &
buys at ask
the dealer ask for a car price (higher nbr)
the buyer will bid on a price to pay (lower nbr)
Time to rollover an IRA or retirement plan
60 days
leverage ETF
uses investors money and borrowed money
short term - sophisticated investor
inverse ETF
use short sell of index , equity swaps, buying& sellling divratives
corp bond taxation
secondary mkt purchase - if discount- ordinary income at maturity - if premium - a deduction from each yrs interest
zero coupon- no cap gain if to maturity
if sld in one yr - cap gains and ordinary income- CAV
GNMA
means the bond are guaranteed by full faith and credit of the US government
Z Tranche
zero coupon - last to be apid - least likely to be called early-no interest paid til all paid
T-Bill
bid higher then ask
non interest bearing
single price auction
not 9 months
up to a year
t- bond and t- notes
fixed interest rate