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Brokerage: Glossary C
Call: An option contract under which the holder (buyer) has the right to purchase the number of shares of the underlying security that is covered by the contract at a fixed price for a fixed period of time. The call option buyer pays the call option seller (writer) a fee called a premium. It also obligates the seller (writer), if the buyer exercises, to sell the underlying security that it covered by the contract at a fixed price for a fixed period of time. Cancel: Instruction given to a broker to stop work on an order previously given. If part of the order has already been executed, a cancel instruction stops work on the remainder of the order. Capital: Accumulated money or goods used to produce income. Capital Gain: The gain (selling price minus cost basis) on an asset. Capital Markets: Markets where debt or equity securities are traded. Cash Account: A type of brokerage account which requires that transactions must be settled in full (no margin or borrowed monies) by the settlement date. Some types of accounts such as Individual Retirement Accounts and Custodian for Minor accounts must be cash accounts. Cash Dividend: A cash payment to a company's stockholders out of the company's current earnings or accumulated profits. The dividend must be declared by the board of directors. Clearing and Settlement: A comparison of the details of a transaction between brokers prior to settlement; final exchange of securities for cash on delivery. Closing Purchase: A comparison of the details of a transaction between brokers prior to settlement; final exchange of securities for cash on delivery. Closing Sale: A comparison of the details of a transaction between brokers prior to settlement; final exchange of securities for cash on delivery. Co-Manager: In most IPOs there is a lead manager that controls the offering and several co-managers. The co-managers appear on the prospectus front cover in order of importance under the lead underwriter. Commercial Paper: Short-term loans with maturity's ranging from 2 to 270 days that are made to banks and corporations. Commodity: Bulk goods such as metals, foodstuffs and grains which have their prices determined by competitive bids and offers. Commodities Exchange Act: Federal Act which regulates futures contracts and options on futures contracts; requires that all such contracts be traded on an organized commodity exchange. The Act is administered by the Commodity Futures Trading Commission (CFTC). Commodity Futures Trading Commission (CFTC): The federal regulatory agency established by the Commodity Futures Trading Commission Act of 1974 to administer the Commodities Exchange Act. The Commission is composed of five commissioners appointed by the President and subject to Senate approval. Common Stock: An equity security that represents ownership in a corporation. Community Property: Form of ownership for assets accumulated by a married couple and belonging to them jointly. Comparables: In deciding how to price an IPO, investment bankers will often study the valuations of similar companies that are already publicly traded. The comparisons are referred to as comparables. Concentration: Margin account condition whereby one or two positions are heavily represented. Typically the brokerage firm carrying the account will require a higher level of equity to offset the risk. See the explanation of concentration. Cost Basis: For tax purposes, the cost of an asset (including commissions and other fees) used to determine the gain or loss. Coupon Rate: The actual interest rate stated on a bond, typically payable in semi-annual installments. Covered Call: A short position where the writer is long (i) the underlying security; (ii) a call option with the same or lower exercise price that expires no sooner than the short call, or; (iii) an escrow receipt or guarantee letter from a bank. Covered Put: A short position, covered option where the writer is long (i) a put with the same or higher exercise price that expires no sooner that the short put, or; (ii) a bank guarantee letter stating the aggregate exercise price is on deposit. Credit Balance: The amount of cash left over in either a cash or margin account (or a combined balance of the two) after all securities have been paid for. See the explanation of margin for more complete information on using margin leverage in your investing. Current Yield: The interest rate relationship stated as a percent of the annual interest received to the actual market price of the bond. Cusip Number: A unique 9-digit number code for a given class of security (i.e.: Microsoft common stock or Acorn International Fund). CUSIP stands for the Committee on Uniformed Security Identification Procedures.
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