Wondering what other real estate investors are saying? Are you new to the biz? Even the seasoned pros get their words mixed up some times. To help you steer clearly through the jargon of real estate investing, we have created this real estate investor glossary of useful terms to know out on the field. We want real estate investing to be as easy to understand as possible and to eliminate any questions you might have about investing!
Want to learn more than just the lingo? Discover more secrets behind real estate investing. Click Here!
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
AAA Rating: A rating service provides this grade to indicate the high level of certainty that the interest and principal are repaid on time to the issuer.
Abandonment Option: The option to close an investment before fulfilling the original conditions for termination.
Absolute Return: What an asset achieves over a period of time.
Absorption Rate: The rate at which real estate is able to be leased or sold in a specific area.
Acquisition: When a stock purchase or exchange has resulted in a corporation being acquired in either a friendly or hostile takeover.
Adjustable Rate Mortgage (ARM): A mortgage that allows adjustments of the loan interest rate at pre-determined regular intervals.
Alternative Minimum Tax (AMT): taxing method that the IRS gives to large corporations, estates, or high-income individuals to guarantee they meet a minimum tax amount even with deductions and exemptions.
AMEX (American Stock Exchange): The second larges stock exchange that handles approximately 10% of all security trades made in the U.S. and is located in New York City.
Amortization: A debt paid in installment payments that include principal and interest over a period of time.
Asset Allocation: When a portfolio is separated among major asset categories that will diversify it and reduce risk.
At The Money: When the current market value of the underlying stock is the same as the exercise price of the option.
Average True Range (ATR): This indicator measures a security’s volatility.
Return to top
B-Shares: The classification name for a common stock denoting less security and voting rights than a class A share.
Balance Sheet: Where the quantitative summary of a company’s financial condition that includes its assets, liabilities and net worth at a specific point in time. This is also referred to as statement of financial condition.
Balanced Investment Strategy: Portfolio allocation is a method which avoids unnecessary risk while earning income and providing capital appreciation.
Bear: The description of an investor whose outlook on the current market is negative and results with him selling soon to avoid a prediction of future losses.
Benchmark Index: An index (a composite figure like the Dow Jones Industrial Average) becomes a benchmark index when you choose it as the standard against which to measure your own portfolio’s performance over time.
Big Mac Index: The Economist magazine developed this index to evaluate the currencies around the world to measure their relative value.
Buy To Cover: An order placed to close out a short position in a particular stock when short selling.
Return to top
Call Option: When a stock price rises to a certain level in a specific amount of time for an investment.
Capital Gain: When a profit is made an asset increases its value over the purchase price, and can be “realized” gain once the asset is sold, or “unrealized” gain when the profit is only potential.
Chicago Board Of Trade (CBOT): The oldest futures and options exchanges that brings together over 3,600 members to make record amounts of open outcry trades and Etrades of options contracts.
Chicago Board Option Exchange (CBOE): Operated in Chicago with trade stock options in more than 1200 companies, stock indexes and ETFs this is one of the largest option exchanges in the world.
Closing Transaction: Prior to expiration, the option holder or option seller, closes out the position: thereby removing any obligation to fulfill the contract creating a closing transaction.
Commission: The additional fee attached to the price of a service, in order to directly pay the lender or broker providing the service.
Commodity: The physical materials such as gold, oil, metal, art, or grain that have varying market values and are sold through future contracts.
Compound Interest: Calculated interest on the principal in addition to interest already acquired from all previous periods.
Contract Size: Commonly known as “unit of trading,” the amount of shares that may be purchased or sold from a single option contract. The standard size for share is 100 per option and gives holder the right upon exercise to purchase 100 shares of the underlying stock.
Convertible Bond: This is a type of corporate bond that is issued to shareholders of a company with the ability to be exchanged for shares of the company’s common stock, and increase in value as the stock rises.
Credit Risk: When a party is seen as having the possibility of not being able to meet their obligation of a contractual debt.
Return to top
Debt: The amount of money owed to a person or party that one plans to pay back by a certain date in incremented payments.
Default: Being unable to pay interest or principal on a debt or fail at performing on a futures contract as required by an exchange.
Deficit: When the money spent that exceeds the amount of income is known as your deficit or deficit spending.
Discount Broker: A person or firm that provide services on low commissions while offering additional services apart from completing buying and selling orders.
Diversification: The strategy of dividing your wealth into different investments, such as stocks, real estate, or gold, in an attempt to decrease your risks and allow for different movement to occur simultaneously in your portfolio.
Dividend: Cash or stock used as payment to shareholders from a company’s retained earnings allowing a shareholder to buy company stock, also known as a payout.
Dividend Discount Model: Undervalued stocks are identified by using this mathematical model. The price that a stock should be selling at based on the discounted value of projected future dividend payments. It is determined by dividing the Dividend per share by the difference between Discount Rate and the Dividend Growth Rate.
Dividend Irrelevance Theory: The theory explained the value of a company has no real effect from a company’s dividend policy.
Drawdown: The magnitude of a decline in an investment during a specific period, either in percentage or dollar terms, as measured from peak to subsequent trough.
Return to top
Equity: A stock or other security representing an ownership interest. Or the balance sheet of a company may show the amount of funds contributed by all stockholders plus the retained earnings or losses. Also, the value of securities in a margin account minus what has been borrowed from the brokerage in the context of margin trading,
Exchange Traded Fund: When collected stocks are bought then sold as a package on an exchange such as the American Stock Exchange, but also the NYSE, CBOE, and Nasdaq.
Exercise Price: Exercise Price, also referred to as strike price is the price at which the option holder has the right either to purchase (in the case of a call option) or sell (in the case of a put option) the underlying option.
Expiration Date: The date on which an option expires, after which the option can no longer be exercised.
Return to top
Full-Service Broker: A company that will provide sizeable varieties of services to clients which include investment research and advice as well as financial planning and tax tips.
Futures Contract: A contract obligating a buyer or seller to purchase or sell as asset on a fixed date at an already determined price.
Futures Market: Commodity and future contracts are bought and sold with delivery to be made on a future date.
Return to top
Hedge: An investment is made to reduce the risk of adverse price movements in an asset. This may consist of taking an offsetting position in a related security, such as a futures contract.
High-Yield Bond: More commonly known as a junk bond, this refers to a bond rated ‘BB’ or lower because of its high default risk.
Hold: An analyst’s recommendation to neither buy nor sell a security.
Hubert’s Peak: When oil production for a nation or region peaks before it begins to decline toward total depletion.
Hyperinflation: Out of control inflation.
Return to top
Implied Volatility: This occurs when a security’s price volatility is estimated.
Indexed Annuities: A type of annuity where returns are determined by a specified equity-based index.
Return to top
January Effect: Investors sometimes choose to sell some of their portfolio before the end of the year in order to claim a loss on their income tax. This generally happens between December 31st and the first week of January.
Investment Grade: An estimation of the volatility of a security’s price.
Limit Order: An order to buy or sell a security at a specific price.
Liquidity: When a stock can be bought or sold in the market without affecting the asset’s price with ease.
Long Position: When investors execute a buy order in the market, this is the status they assume. By owning a stock or a call option, you are long in the market.
Return to top
Market Capitalization: Also known as a market cap, it is the total market value of a company (number of shares outstanding multiplied by the price of the stock).
Market Order: This is when an order reaches the trading floor after placing the order to buy or sell a futures or options contract at and obtainable price.
Merger: When two companies join and become one new company.
Money Flow: Figured by find the average calculations of the high, low and closing prices of a stock, then multiply that sum by the daily volume. When compared with the previous day’s number it is determined if the money flow is positive or negative for currently.
Moving Average (MA): In technical analysis this is used frequently to show the value of security’s or commodity’s price over a period of time.
Return to top
Net Asset Value (NAV): This refers to a mutual fund that is made from the total value of a fund’s portfolio minus any liabilities.
Return to top
Opening Transaction: A purchase or sale transaction by which a person establishes a position as either the holder or the writer of an option.
Overbought: When stocks appear overvalued and susceptible to a decline.
Return to top
Penny Stock: Stock that is traced at a low price, under $5 a share.
Premium: For the option, a holder will pay this price while the writer of an option receives for the rights conveyed by the option. The buyer pays premium plus commission to purchase an option.
Purchase Power Parity (PPP): Over time, theory it is believed that the same products and services in different countries should cost the same, after exchange rates are factored in. PPP is used to gauge currency valuations and the theory only applies to goods and services that can be traded, and not to goods and services that are fixed or local.
Pullback: A falling back of a stock price from its peak. It is most often seen as a brief reversal of a prevailing upward trend.
Put Call Ratio: A ratio of the trading volume of put options to call options. It is used to gauge investor sentiment.
Put Options: An option that gives the holder the right, if they want it, to sell a fixed amount of a certain stock at a specified price within a specified time.
Return to top
Sarbanes-Oxley Act of 2002: The U.S. Congress passed legislation that protects investors from fraudulent accounting practices by corporation possibilities.
Security: A security is a type of transferable interest representing financial value like a stock, a bond or a derivative.
Short Selling: This happens when a security not owned by the investor sells and then later replaces it by buying the security at a lower price.
Short Position: Investors assume this status when they execute a sell order in advance of a buy order.
Spread: Essentially the difference between what you can buy an option for and what you can sell it for at any given time. Represented by the bid and ask prices with bid being the selling price and ask being the purchase price. The difference is the market maker’s profit.
Stop Loss Order: When a stock is to be sold at a certain price as determined by the broker. This is in order to protect the investor from further loss.
Straddle: Investors use this strategy when they are simultaneously holding a call and a put option on the same underlying stock so that if it experiences an extreme movement in either direction.
Strike Price: A pre-determined price when an option holder can buy or sell the underlying instrument (stocks, commodities, etc.).
Return to top
Time Value: Time Value is whatever the premium of the option is in addition to its intrinsic value.
Trailing Stopped: When a specific percentage below the market price is reached, a stop loss order set.
Return to top
Variable Annuity: An annuity contract under which the dollar payments received are not fixed, but vary with the fluctuations of the value of the investments.
Volatility Index: A measurement of the volatility of the market with high numbers indicating there is excess bearishness and low numbers indicating excess bullishness.
Return to top
Waiting Asset: Any asset that declines in value over time. An option is a wasting asset. It only exists until expiration, after which it becomes worthless.
Return to top
| Next > |
|---|
