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Abandon
The act of not exercising or selling an option before its expiration.
Abandoned Baby Pattern
A rare candlestick pattern in which an upside gap doji star (where the shadows do not touch) is followed by a downside gapblack candlestick where the shadows also do not touch; considered a major top reversal signal.
Abandonment
Voluntarily giving up all title, rights or claims to property that rightfully belongs to the owner, such as bonds, mutualfunds or stocks held in a brokerage account for which the company is unable to locate the listed owner over a specified time period, usually several years. Other types of property subject to abandonment include: inventions, leases, patents, contracts, copyrights and trademarks.
ABC
Elliott wave terminology for a three-wave countertrend price movement. Wave A is the first price wave against the trend of the market. Wave B is a corrective wave to Wave A. Wave C is the final price move to complete the countertrend price move. Elliott wave followers study A and C waves for price ratios based on numbers from the Fibonacci series.
Acid-Test Ratio
A measure of a corporation's liquidity, calculated by adding cash, cash equivalents, and accounts and notes receivable, and dividing the result by total current liabilities. It is a more stringent test of liquidity than current ratio.
Active Management
Ongoing supervision of a portfolio and its holdings to achieve maximum results. Active portfolio managersuse economic data, investment research, market forecasts, and other indicators to help make investment decisions. Active management is one ofthe main benefits of investing in a mutual fund.
Actuals
The physical commodity underlying a futures contract.
Adjustable Rate Mortgage Funds (ARMS)
A fund that invests primarily in adjustable rate mortgage securities. Funds in this category usually attempt to maintain a relatively stable net asset value, but can still be volatile in times of rising or falling interest rates. During periods of rising interest rates, investors stand to make more money, but homeowners faced with the prospect of paying more tend to prepay, prematurely canceling the investor's expected income. During periods of falling interest rates, the value of adjustable rate mortgages decreases relative to other fixed income securities.
Adjusted Futures Price
The cash-price equivalent reflected in the current futures price. This is calculated by taking the futures price times the conversion factor for the particular financial instrument (e.g., bond or note) being delivered.
Adjustment
The process of buying or selling instruments to bring your position delta back to zero and increase profits.
Adviser
The company that takes primary responsibility for managing a mutual fund. The adviser receives an annual fee for this service, usually ranging between 0.50% and 1% of a fund's total assets.
After Tax Return
The return from an investment after all income taxes have been accounted for and deducted. The SEC has adopted a number of rule and form amendments requiring mutual funds to disclose standardized after-tax returns. The amendments require a mutual fund to disclose standardized after-tax returns for 1-, 5-, and 10-year periods in the risk/return summary of the prospectus.
Agency Basis
A means of compensating the broker of a program trade solely on the basis of commission established through bids submitted by various brokerage firms.
Agency Incentive Arrangement
A means of compensating the broker of a program trade using benchmark prices for issues to be traded in determining commissions or fees.
Agressive Growth Funds
A fund with an investment objective of rapid growth of capital. Aggressive growth funds usually include funds that invest in smaller companies, funds that invest heavily in a single industry, and funds that employ riskier investment techniques such as leveraging and short selling.
All Ordinaries Index
The major index of Australian stocks. This index represents 280 of the most active listed companies or the majority of the equity capitalization (excluding foreign companies) listed on the Australia Stock Exchange (ASX).
Alpha
A measure of performance in percentage above or below what would have been predicted by risk as suggested by its Beta. Positive alpha means a fund performed greater than its risk would suggest, while negative Alpha means the fund under performed.An ETF of Alpha 1.5 outperformed its index by 1.5% as predicted by its Beta.
AMBAC Indemnity Corporation
One of the largest private insurers of municipal bonds. This insurance provides that the bonds will be purchased from an investor at par value should the bond issuer default. Municipal bond funds featuring insured bonds tend to provide a higher degree of safety than funds without such insurance, but they also tend to offer a lower yield.
American Depository Receipt (ADR)
Security representing the ownership interest in a foreign company's common stock. ADRs allow foreign shares to be traded in theUnited States much like any other security. Shareholders of ADRs are entitled to receive all dividends and capital gains. Individuals thatwant to own a foreign company without buying it on an overseas market can purchase an ADR listed on U.S. exchanges.
American Option
An option that may be exercised at any time up to and including the expiration date. Related: European options
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