Dividend

1. A distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (dividends per share). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield. Also referred to as “Dividend Per Share (DPS)”.

2. Mandatory distributions of income and realized capital gains made to mutual fund investors.

Dividends may be in the form of cash, stock or property. Most secure and stable companies offer dividends to their stockholders. Their share prices might not move much, but he dividend attempts to make up for this. High-growth companies rarely offer dividends because all of their profits are reinvested to help sustain higher-than-average growth.

Mutual funds pay out interest and dividend income received from their portfolio holdings as dividends to fund shareholders. In addition, realized capital gains from the portfolio’s trading activities are generally paid out (capital gains distribution) as a year-end dividend.

Source: http://www.investopedia.com

In The Money

In The Money

1. For a call option, when the option’s strike price is below the market price of the underlying asset.

2. For a put option, when the strike price is above the market price of the underlying asset.

In other words, this is when your stock option is worth money and you can turn around and sell or exercise it for a profit.

Source: http://www.investopedia.com

Intrinsic Value

For call options, this is the difference between the underlying stock’s price and the strike price. For put options, it is the difference between the strike price and the underlying stock’s price. In the case of both puts and calls, if the respective difference value is negatice, the instrinsic value is given as zero.

Intrinsic calue in options is the in-the-money portion of the option’s premium. For example, If a call options strike price id $15 and the underlying stock’s market price is at $25, then the intrinsic value of the call option is $10. An option is usually never worth less than what an option holder can receive if the option is exercised.

Source: http://www.investopedia.com

P/E Ratio Mean

A valuation ratio of a company’s current share price compared to its per-share earnings.

Calculated as:

Market Value per Share

= ---------------------------

Earnings per Share (EPS)

In general, a high P/E suggests that investor are expecting higher earnings growth in the future compared to companies with a lower P/E.

However, the P/E ratio doesn’t tell us the whole story by itself. It’s usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company’s own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects.

Source: http://www.investopedia.com

What is a Credit Default Swap?

A credit default swap is an agreement between two parties that works like a side bet on a football game. Swap seller promise buyers a big payment if a company’s bonds or loans default. In return for the promise they get quarterly payments. Neither needs to hold the underlying debt when entering into a swap.

Source: http://www.investopedia.com

Zero-Investment Portfolio

A group of investment which, when combined, create a zero net value. Zero-investment portfolio can be achieved by simultaneously purchasing securities and selling equivalent securities. This will achieve lower risk/gains compared to only purchasing or selling the same securities.

Investopedia explains Zero-Investment Portfolio

Zero-investment portfolios have many uses, including:

1. Reducing taxes, because they generate little or no interest income.

2. Reducing risk by protecting against unexpected shifts in the value of the held securities.

3. Protecting the overall value of the portfolio so that investment can be made at a later date.

4. Determining if the average portfolio returns are statistically different from zero.

For example, if John bought (that is, took a long position) one share of XYZ Corp., he would be fully exposed to the change in value of that stock. If, however, John sold the same stock (that is, took a short position), then any movement up or down would be canceled out. The combination of these two positions creates a zero-investment portfolio.

Source: http://www.investopedia.com

The EOCD

The EOCD is a group of 30 member countries who discuss and develop economic and social policy.

The EOCD has been called a think tank, monitoring agency, rich man’s club, and unacademic university. Whatever you want to call it, the OECD has a lot of power, as the member nations account for two thirds of the worlds goods and services.

Source: http://www.investopedia.com

Conflict of Interest

A situation where a professional, or a corporation has a vested interest which may make them an unreliable source. The interest coud be money, status, knowledge or reputation for example. Ehen such a situation arises, the party is usually asked to remove themselves, and it is often legaly required of them.

An example of a conflict of interest would be a board member voting on the induction of lower premiums for companies with fleet vehichles when he is the owner of a tow truck companies outside of the corporation. In relation to law, representation by a party with a vested interest in the outcome of the trial would be considered conflict of interest, and the representation would not be allowed.

Source: http://www.investopedia.com

Stagflation

A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, or inflation.

Stagflation occurs when the economy isn't growing but prices are, which is not a god situation for a country to be in. This happened to a great extent during 1970s, when world oil proces rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects.

Source: http://www.investopedia.com

Overheated Economy

When a prolonged period of good economic growth and activity causes high levels of inflation (from increased consumer wealth) and inefficient supply allocations as producers oveproduce and create excess production capacity in an attempt to capitalize on the high levels of wealth. Unfortunately, these inefficiencies and inflation will eventually hinder the economy's growth and cause a recession.

Rising rates of inflation are typically one of the first signs that an economy is overheating. As a reslt, governments and central banks wil usually raise interest rates in an attempt to lower the amount of spending and borrowing. Between June 2004 and June 2006, the Federal Reserve Board increased the interest rate 17 times as a gradual means af slowing America's overheated economy.

Source: http://www.investopedia.com