| Objective | A fund's investment objective states the financial goals it is aiming for, such as "growth," or "income." |
| Options Clearing Corporation (OCC) | A clearing corporation owned jointly by the exchanges dealing in listed options. OCC is the central or main clearing corporation for listed options. Options traded on any SEC-regulated exchange can be settled through OCC. |
| OCC Prospectus | A prospectus published by the OCC and available to option traders upon request. It contains information on trading options and the risks involved. |
| Odd Lot | A quantity of securities that is smaller than the standard unit of trading, which is usually 100 shares. |
| Offer for Sale | A method of bringing a company to the market. The public can apply for shares directly at a fixed price. A prospectus containing details of the sale must be printed in a national newspaper. |
| Offer Price | The price at which the market maker will sell shares to investors. |
| Open-End Fund | An investment company that pools money from shareholders and invests in a variety of securities, including stocks, bonds, and money market instruments. They offer growth, income, or both, and the opportunity to invest in everything from a country or industry to the movements of the markets themselves. A mutual fund continually sells new shares to investors and redeems those that are tendered by shareholders. (Also known as "mutual fund.") |
| Open-End Management Company | A management company that is constantly issuing new shares. |
| Opening Transaction | Refers to a customer either buying or selling an option contract to open a new position. |
| Operating Expenses | The normal costs a mutual fund incurs in conducting business, such as the expenses associated with maintaining offices, staff, and equipment. There are also expenses related to maintaining the fund's portfolio of securities. These expenses are paid from the fund's assets before any earnings are distributed. |
| Option | A contract that entitles the buyer to buy (call) or sell (put) a predetermined quantity of an underlying securities for a specific period of time at a pre-established price. |
| Option Adjustments | Changes made in the terms of an option contract on ex-dividend date when the underlying stock pays a cash or stock dividend or when there is a stock split, etc. |
| Option Agreement | The agreement the customer must sign to trade options in which the customer agrees to abide by the rules of the listed option exchanges. |
| Option Class | The group of options, put or call, with the same underlying security. |
| Option Fund | A fund which trades options to increase the value of its shares. The fund may either be conservative or aggressive. A conservative fund, commonly called an "option income fund," may buy stocks and increase shareholders' income through the premium earned by writing options on the stocks within the portfolio. An aggressive fund, commonly called an "option growth fund," may buy options in securities that the fund manager thinks will fall or rise sharply in the near term. |
| Option Series | The group of options having the same strike price, expiration date, and unit of trading on the same underlying stock. |
| Order Book Official (OBO) | An employee of certain exchanges who executes limit orders on behalf of the membership. |
| Order Department | The department within a brokerage firm that is responsible for sending the customers' orders to the proper market for execution. |
| Ordinary Shares | The most common form of share. Holders receive dividends which vary in amount in accordance with the profitability of the company and recommendations of the directors. The holders are the owners of the company. Also known as Common Stock. |
| Original Issue Zeros | Zero-coupon securities originally issued by a corporation, government, or governmental subdivision as zeros. A zero-coupon security not created by severing interest and principal payments from a preexisting bond. |
| OTC Bulletin Board | An electronic service that provides selected quotes on over-the-counter stocks. |
| Out-of-the-Money | Options with no intrinsic value such as a call when the market price is below the strike price of the call or a put when the market price is above the strike price of the put. |
| Over-The-Counter Market (OTC) | Comprised of a network of telephone and telecommunication systems over which unlisted securities and other issues trade. |
| Pacific Basin Fund | A fund that invests primarily in the stocks of companies located in the Pacific Basin, which includes Australia, Hong Kong, Japan, Malaysia, New Zealand, Singapore, and Taiwan. |
| Pacific Clearing Corporation (PCC) | The clearing corporation of the Pacific Stock Exchange. |
| Pacific Ex Japan Funds | A fund that invests primarily in the stocks of companies whose primary trading markets or operations are concentrated in the Pacific region (including Asian countries), and which specifically does not invest in Japan. |
| Pacific Stock Exchange (PSE) | This exchange operates in San Francisco and Los Angeles. |
| Par Value | A value that a corporation assigns to its security for bookkeeping purposes. |
| Participating Preferred | Preferred stock whose holders may "participate" with the common shareholders in any dividends paid over and above those normally paid to common and preferred stockholders. |
| Pass-Through Security | Instrument representing an interest in a pool of mortgages. Pass-throughs pay interest and principal on a monthly basis. |
| Passive Income | Income from an investment in a trade or business in which the investor does not "materially participate." Material participation requires regular, continuous and substantial involvement in the operations of the activity. |
| Payment Date | The day on which a mutual fund pays income dividend or capital gains distributions to its shareholders. |
| Penalty Plan | A mutual fund accumulation plan in which sales fees for the entire obligation are deducted from shares purchased in the first few years that the plan is in effect. In the event that the investors redeem the shares after a short time, only a small portion of the purchase price will be refunded. Sales charges and penalty plans are regulated by the Investment Company Amendments Act of 1970. |
| Penny Stocks | Extremely low-priced securities that trade over the counter. |
| PEPS (Personal Equity Plans) | These allow investment in a number of shares and carry various tax benefits, including the receipt of dividends without paying income tax on the income and sales free from capital gains tax on the profit. |
| Per capita | A method of dividing an estate that gives one equal share to each person in a class of people who are all related in the same degree of relationship to the deceased person. For example, all grandchildren take equal shares regardless of how many children the deceased person had. |
| Per stirpes | A method of dividing an estate among a class of people based on representation at a closer degree of relationship to the deceased person than the degree of the class itself. For example, grandchildren take only the shares that their respective parents would have taken. |
| Performance | A measure of how well a fund is doing. Two commonly used mutual fund performance measures are yield (which measures dividends) and total return (which measures dividends plus changes in net asset value). |
| Periodic Payment Plan | A plan in which an investor agrees to make monthly or quarterly investments in a mutual fund as a method of accumulating shares over a period of years. Fixed periodic contributions result in dollar cost averaging. |
| Personal Assets | Assets acquired for your use and enjoyment, including your home, automobiles, furnishings and similar possessions. |
| Phantom Interest | The yearly accreted interest that a zero-coupon security is presumed to pay each year you hold it even though payment of interest isn't made until the zero matures. |
| Pink Sheets | Daily publication providing dealer names and quotes on penny stocks. It is actually printed on pink paper. |
| Plus-Tick Rule | SEC rule that states that no short sale may be made when the last trade on the security was a minus tick. |
| Point | A price movement of one full increment. For example, a stock rises one point when its price goes from 23 to 24. |
| Pooling | Pooling is the basic concept behind mutual funds. A fund pools the money of thousands of individual and institutional investors who share common financial goals. The fund uses this pool to buy a diversified portfolio of investments |
| Portfolio | A collection of securities owned by an individual or an institution (like a mutual fund). A fund's portfolio may include a combination of stocks, bonds, and money market securities. |
| Portfolio Manager | The individual who is responsible for managing a mutual fund's assets. |
| Portfolio Theory | The management of a portfolio based on quantitative analysis, where the selection of securities in a portfolio is made as a result of a mathematical assessment of the risk and return against the market as a whole and/or by reference to the risks or returns determined by the client for the portfolio. Portfolio theory will assess risk-free returns and the likelihood of returns made by market timing, determining the benefits of investments by their volatility (beta coefficient) or dispersion (risk) and the capital asset pricing model. |
| Portfolio Turnover | A measure of the trading activity in the fund's portfolio of investments. In other words, how often securities are bought and sold. |
| Position Limits | The maximum number of option contracts that may be held on the same side of the market for a particular security. The number may vary depending on the security. |
| Pre-Existing Conditions | Medical conditions that existed, were diagnosed or were under treatment before you took out a policy. Medical, disability and long-term care insurance policies may limit or exclude benefits payable for such conditions. |
| Pre-Tax Rate of Return | The rate of return before income taxes (and any applicable tax credits) are taken into account. See After-tax rate of return. |
| Precious Metals Fund | A fund that seeks an increase in the value of its holdings by investing at least two-thirds of its portfolio in securities associated with gold, silver, and other precious metals. Also known as "gold funds." |
| Preemptive Right | A right, sometimes required by the issuer's corporate charter, by which current owners must be given the opportunity to maintain their percentage ownership if additional shares of the same class are issued. Additional shares of the soon-to-be issued security are offered to current owners in proportion to their holders before the issue can be offered to others. Usually one right is issued for each outstanding share. The rights are used to subscribe to the additional shares at a predetermined cash amount. |
| Preference Shares | These are normally fixed-income shares whose holders have the right to receive dividends before ordinary shareholders but after debenture and loan stockholders have received their interest. |
| Preferred Stock | Stock that represents ownership in the issuing corporation and that has prior claim on dividends. In the case of bankruptcy, preferred stock has a claim on assets ahead of common stockholders. The expected dividend is part of the issue's description. |
| Premium | (1) If the market price of a new security is higher than the issue price, the difference is the premium. If it is lower, the difference is called the Discount. (2) The cost of purchasing or selling a traded option. |
| Premium Bond | A note or bond selling at a price above par. |
| Prenuptial Agreement | An agreement entered into by prospective spouses before marriage, in which the property rights of one or both are determined. |
| Prepayment Risk | The possibility that, as interest rates fall, homeowners will refinance their home mortgages, resulting in the prepayment of GNMA securities, and possible decline in net asset values of GNMA Funds. |
| Price Spread | A spread in which the two options have the same expiration date but have different exercise or strike price. |
| Price/Earnings Ratio | The current share price divided by the last published earnings per share, where earnings per share is net profit divided by the number of ordinary shares. |
| Primary Dealer | Any of 40 firms recognized by the Treasury Department as eligible to bid on Treasury and agency securities when they are initially issued and to make a market for secondary buyers. |
| Primary Market | (1) The initial offering of certain debt issues. (2) The main exchanges for equity trading. |
| Principal | a.) The amount of money that is financed, borrowed or invested, generally to distinguish this amount from the interest or other earnings derived from the principal. Earnings; b) A brokerage firm when it acts as a dealer and marks up a purchase price or marks down a sale price when reporting the execution. |
| Private Company | A company which is not a public company and does not offer its shares to the general public. |
| Private Placement | An issue that is offered to a single or a few investors as opposed to being publicly offered. |
| Privatization | Conversion of a state run company to public limited company status often accompanied by a sale of its shares to the public. |
| Probate | Proceedings involving a court of law that pertain to the administration and distribution of an estate. This includes determination of the validity of a will, appointment of an executor or administrator, and settlement of the estate. |
| Probate Price | The price used to assess the value of shares for inheritance tax purposes. Calculated on the "quarter up" principle. That is, instead of taking the Mid Price in the Official List, the difference between the two prices (bid and offer) given under "quotation" is divided by four, and the result added to the lower of the two prices. |
| Professional Management | The pool of shareholder dollars invested in a fund is managed by full-time, experienced professionals who decide which securities to hold, when to buy, and when to sell. |
| Program Trading | Professional investors and institutions often use computer-generated buying and selling programs as part of their trading activities. These normally buy or sell shares, options or futures, on the basis of market movements and operate automatically. Can cause considerable market volatility. |
| Property Ownership | How legal title to property is held (for example, sole ownership, joint tenancy, tenancy by the entirety, tenancy in common, or in trust). |
| Prospectus | The official document that describes a mutual fund. It contains information required by the Securities and Exchange Commission on such subjects as the fund's investment objectives, policies, services and fees. A prospectus must be given to every investor. In the US, a more detailed document, known as "Part B" of the registration statement, (or "Statement of Additional Information,") is available at no charge upon request. |
| Proxy | A form and a process for voting via the mail, permitting stockholders to vote on key corporate issues without having to attend the actual meeting. |
| Proxy Fight | An attempt by a dissident group to take over the management of a corporation. The group sends proxies electing them to the board; the current management sends proxies favoring them. The shareholders cast their votes by selecting one proxy or the other. |
| Public Limited Company (PLC) | A public company limited by shares and having a share capital, and which may offer shares for purchase by the general public. Only PLC's may qualify for listing or trading on the USM on the London Stock Exchange. |
| Public Market | The listed exchanges through which zero-coupon investments can be purchased and sold. |
| Public Offering Date | The first day the new issue is offered to the public, on or shortly after the effective date. |
| Purchase Price | The amount paid to purchase a Treasury or agency obligation. |
| Purchasing Power Parity | Purchasing power parity between two currencies exists when their exchange rates are in equilibrium with each other, i.e. their domestic purchasing powers at that exchange rate are equivalent ('at parity'). For instance, the exchange rate of £1 = $1.60 would be in equilibrium if £1 could buy the same amount of goods and services in the UK as $1.60 would buy in the US. If indeed they are equivalent in terms of purchasing power at that exchange rate, one says that PPP holds. Otherwise one currency is overvalued with respect to the other. PPP theory is important in international economics and finance. The basic underlying idea is that arbitrage forces will come into play if one currency is overvalued relative to the other, and these will eventually lead to the equalisation of goods and services prices internationally (taking into account the exchange rate). As such, PPP theory is a 'law of one price'. In reality, PPP theory seems to hold relatively well in the long-run, but is quite unreliable in the short-run. It is especially deficient as a theory in that it cannot explain the high volatility in exchange rates and prolonged divergences from PPP. Other theories that build on PPP have been introduced which are slightly more satisfactory - overshooting for example. Probably a major reason for the unsatisfactory performance of PPP theory is that international comparisons and estimates of the price of equivalent baskets of goods and services are extremely difficult to make accurately. |
| Put | An option that permits the owner to sell a standard amount of an underlying security at a set price for a predetermined period. |