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Magic of diversification
The effective reductions or risk (variance) of a portfolio, achieved without reduction to expected returns through the combination of assets with low or negative correlations (covariances). Related: Markowitz diversification
Maintenance margin requirement
A sum, usually smaller than but part of the original margin, which must be maintained on deposit at all times. If a customer's equity in any futures position drops to, or under, the maintenance margin level, the broker must issue a margin call for the amount at money required to restore the customer's equity in the account to the original margin level. Related: Margin, Margin call
Make a Market
A market maker stands ready to buy or sell a particular security for his/her own account to keep the market liquid.
Management fee
An investment advisory fee charged by the financial advisor to a fund based on the fund's average assets, but sometimes determined on a sliding scale that declines as the dollar amount of the fund increases.
Management Investment Company
Common type of ETF that tracks indexes closely, allows sampling (not every stock in index is necessarily purchased) and derivatives in its operations. Similar to Unit Investment Trust. Examples include iShares, Sector SPDRs.
The Firm that provides the fund with investment research and portfolio management services.
Manager Tenure
How long the portfolio manager has been responsible for a fund's management.
Also called security deposit. An amount of funds that must be deposited with the broker for each contract as a good faith deposit on the contract. Related: Security deposit (initial).
Margin Account
A customer account in which a brokerage firm lends the customer part of the purchase price of a trade.
Margin call
A demand for additional funds because of adverse price movement. Maintenance margin requirement, Security deposit maintenance.
Margin Requirements (Options)
The amount of cash an uncovered (naked) option writer is required to deposit and maintain to cover his daily position price changes.
The daily adjustment of an account to reflect profits and losses.
Marked to Market
At the end of each business day the open positions carried in an account held at a brokerage firm are credited or debited funds based on the settlement price of the open positions that day.
A specific asset, security or commodity that is traded at an exchange.
Market capitalization
The total market value of a company or stock. It is calculated by multiplying the number of shares outstanding by the latest closing price of the stock. Generally speaking, small-cap stocks have market values below $1 billion, while large-caps have values in excess of $5 billion. Mid-caps fall inbetween.
Market conversion price
Also called conversion parity price, the price that an investor effectively pays for common stock by purchasing a convertible security and then exercising the conversion option. This price is equal to the market price of the convertible security divided by the conversion ratio.
Market impact costs
Also called price impacts costs, the result of a bid/ask spread and a dealer's price concession.
Market Maker
An independent trader or trading firm that is prepared to buy and sell shares or contracts in a designated market. Market makers must make a 2-sided market (bid and ask) in order to facilitate trading.
Market model
This relationship is sometimes called the single-index model. The market model says that the return on a security depends on the return on the market portfolio and the extent of the security's responsiveness as measured, by beta (i). In addition, the return will also depend on conditions that are unique to the firm. Graphically, the market model can be depicted as a line fitted to a plot of asset returns against returns on the market portfolio.
Market on Close
An order specification that requires the broker to get the best price available on the close of trading, usually during the last five minutes of trading.
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