What Does Clearing House Mean?

An agency or separate corporation of a futures exchange responsible for settling trading accounts, clearing trades, collecting and maintaining margin monies, regulating delivery and reporting trading data. Clearing houses act as third parties to all futures and options contracts - as a buyer to every clearing member seller and a seller to every clearing member buyer. Each futures exchange has its own clearing house. All members of an exchange are required to clear their trades through the clearing house at the end of each trading session and to deposit with the clearing house a sum of money (based on clearinghouse margin requirements) sufficient to cover the member's debit balance. For example, if a member broker reports to the clearing house at the end of the day total purchase of 100,000 bushels of May wheat and total sales of 50,000 bushels of May wheat, he would be net long 50,000 bushels of May wheat. Assuming that this is the broker's only position in futures and that the clearing house margin is six cents per bushel, this would mean the broker would be required to have $3,000 on deposit with the clearing house. Because all members are required to clear their trades through the clearing house and must maintain sufficient funds to cover their debit balances, the clearing house is responsible to all members for the fulfillment of the contracts.

What Does Alternative Trading System - ATS Mean? A trading system that is not regulated as an exchange, but is a venue for matching the buy and sell orders of its subscribers. Alternative trading systems are gaining popularity around the world and account for much of the liquidity found in publicly traded issues. Regulation ATS was introduced by the SEC in 1998 and is designed to protect investors and resolve any concerns arising from this type of trading system. Regulation ATS requires stricter record keeping and demands more intensive reporting on issues such as transparency once the system reaches more than 5% of the trading volume for any given security. Investopedia explains Alternative Trading System - ATS Many alternative trading systems are specifically designed to match buyers and sellers who trade in very large quantities (primarily professional traders and investors). Also, institutions will often use an ATS to find counterparties for transactions, instead of trading large blocks of shares on the normal exchange, a practice that can skew the market price in a particular direction, depending on a particular share's market capitalization and trading volume. Examples of alternative trading systems include, but are not limited to, electronic communication networks (ECNs), crossing networks and call markets.

What Does Dealer Mean? 1. An individual or firm willing to buy or sell securities for their own account. 2. One who purchases goods or services for resale to consumers. Investopedia explains Dealer A dealer differs from an agent in that a dealer acts as a principal in a transaction. That is, a dealer takes ownership of assets and is exposed to inventory risk, while an agent only facilitates a transaction on behalf of a client.

What Does Broker-Dealer Mean? A person or firm in the business of buying and selling securities operating as both a broker and a dealer depending on the transaction. Investopedia explains Broker-Dealer Technically, a broker is only an agent who executes orders on behalf of clients, whereas a dealer acts as a principal and trades for his or her own account. Because most brokerages act as both brokers and principals, the term broker-dealer is commonly used to describe them.

What Does Securitization Mean? The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors. The process can encompass any type of financial asset and promotes liquidity in the marketplace. Investopedia explains Securitization Mortgage-backed securities are a perfect example of securitization. By combining mortgages into one large pool, the issuer can divide the large pool into smaller pieces based on each individual mortgage's inherent risk of default and then sell those smaller pieces to investors. The process creates liquidity by enabling smaller investors to purchase shares in a larger asset pool. Using the mortgage-backed security example, individual retail investors are able to purchase portions of a mortgage as a type of bond. Without the securitization of mortgages, retail investors may not be able to afford to buy into a large pool of mortgages.

What Does Prime Brokerage Mean? A special group of services that many brokerages give to special clients. The services provided under prime brokering are securities lending, leveraged trade executions, and cash management, among other things. Prime brokerage services are provided by most of the large brokers, such as Goldman Sachs, Paine Webber, and Morgan Stanley Dean Witter. Investopedia explains Prime Brokerage Hedge funds were what started the prime brokerage option. Hedge funds place large trades and need special attention from brokerages. What Does Call Option Mean? An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period. Investopedia explains Call Option It may help you to remember that a call option gives you the right to "call in" (buy) an asset. You profit on a call when the underlying asset increases in price. What Does Arbitrageur Mean? A type of investor who attempts to profit from price inefficiencies in the market by making simultaneous trades that offset each other and capturing risk-free profits. An arbitrageur would, for example, seek out price discrepancies between stocks listed on more than one exchange, and buy the undervalued shares on one exchange while short selling the same number of overvalued shares on another exchange, thus capturing risk-free profits as the prices on the two exchanges converge. Investopedia explains Arbitrageur Arbitrageurs are typically very experienced investors since arbitrage opportunities are difficult to find and require relatively fast trading. Arbitrageurs also play an important role in the operation of capital markets, as their efforts in exploiting price inefficiencies keep prices more accurate than they otherwise would be.

What Does Counterparty Risk Mean? The risk to each party of a contract that the counterparty will not live up to its contractual obligations. Counterparty risk as a risk to both parties and should be considered when evaluating a contract. In most financial contracts, counterparty risk is also known as "default risk". Investopedia explains Counterparty Risk Because A is a counterparty to B and B is a counterparty to A both are exposed to this risk. For example if Joe agrees to lends funds to Mike up to a certain amount, there is an expectation that Joe will provide the cash, and Mike will pay those funds back. There is still the counterparty risk assumed by them both. Mike might default on the loan and not pay Joe back or Joe might stop providing the agreed upon funds.

What Does Long (or Long Position) Mean? 1. The buying of a security such as a stock, commodity or currency, with the expectation that the asset will rise in value. 2. In the context of options, the buying of an options contract. Opposite of "short" (or short position). Investopedia explains Long (or Long Position) 1. For example, an owner of shares in McDonald's Corp. is said to be "long McDonald's" or "has a long position in McDonald's". 2. For example, buying a call (or put) options contract from an options writer entitles you the right, not the obligation to buy (or sell) a specific commodity or asset for a specified amount at a specified date. What Does Short (or Short Position) Mean? 1. The sale of a borrowed security, commodity or currency with the expectation that the asset will fall in value. 2. In the context of options, it is the sale (also known as "writing") of an options contract. Opposite of "long (or long position)". Investopedia explains Short (or Short Position) 1. For example, an investor who borrows shares of stock from a broker and sells them on the open market is said to have a short position in the stock. The investor must eventually return the borrowed stock by buying it back from the open market. If the stock falls in price, the investor buys it for less than he or she sold it, thus making a profit. 2. For example, selling a call (or put) options contract to a buyer entitles the buyer the right, not the obligation to buy from (or sell to) you a specific commodity or asset for a specified amount at a specified date.

What Does Short Sale Mean? A market transaction in which an investor sells borrowed securities in anticipation of a price decline and is required to return an equal number of shares at some point in the future. The payoff to selling short is the opposite of a long position. A short seller will make money if the stock goes down in price, while a long position makes money when the stock goes up. The profit that the investor receives is equal to the value of the sold borrowed shares less the cost of repurchasing the borrowed shares. Investopedia explains Short Sale Suppose 1,000 shares are short sold by an investor at $25 apiece and $25,000 is then put into that investor's account. Let's say the shares fall to $20 and the investor closes out the position. To

close out the position, the investor will need to purchase 1,000 shares at $20 each ($20,000). The investor captures the difference between the amount that he or she receives from the short sale and the amount that was paid to close the position, or $5,000. There are also margin rule requirements for a short sale in which 150% of the value of the shares shorted needs to be initially held in the account. Therefore, if the value is $25,000, the initial margin requirement is $37,500 (which includes the $25,000 of proceeds from the short sale). This prevents the proceeds from the sale from being used to purchase other shares before the borrowed shares are returned. Short selling is an advanced trading strategy with many unique risks and pitfalls. Novice investors are advised to avoid short sales because this strategy includes unlimited losses. A share price can only fall to zero, but there is no limit to the amount it can rise. What Does Rebate Mean? 1. In a short-sale transaction, the portion of interest or dividends earned by the owner (lender) of shares that are paid to the short seller (borrower) of the shares. 2. In an options transaction, the amount paid to the holder of the option if the option expires worthless. Investopedia explains Rebate 1. The lender and borrower usually negotiate the rate at which the short seller will be compensated. 2. The rebate is pre-negotiated and is usually a portion of the premium paid by the option holder

What Does Leverage Mean? 1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment. 2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged. Leverage is most commonly used in real estate transactions through the use of mortgages to purchase a home. Investopedia Explains Leverage 1. Leverage can be created through options, futures, margin and other financial instruments. For example, say you have $1,000 to invest. This amount could be invested in 10 shares of Microsoft stock, but to increase leverage, you could invest the $1,000 in five options contracts. You would then control 500 shares instead of just 10.

2. Most companies use debt to finance operations. By doing so, a company increases its leverage because it can invest in business operations without increasing its equity. For example, if a company formed with an investment of $5 million from investors, the equity in the company is $5 million - this is the money the company uses to operate. If the company uses debt financing by borrowing $20 million, the company now has $25 million to invest in business operations and more opportunity to increase value for shareholders. Leverage helps both the investor and the firm to invest or operate. However, it comes with greater risk. If an investor uses leverage to make an investment and the investment moves against the investor, his or her loss is much greater than it would've been if the investment had not been leveraged - leverage magnifies both gains and losses. In the business world, a company can use leverage to try to generate shareholder wealth, but if it fails to do so, the interest expense and credit risk of default destroys shareholder value. What Does Maintenance Margin Mean? The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and NASD, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. Keep in mind that this level is a minimum, and many brokerages have higher maintenance requirements of 30-40%. Also referred to as "minimum maintenance" or "maintenance requirement". Investopedia explains Maintenance Margin As governed by the Federal Reserve's Regulation T, when a trader buys on margin, key levels must be maintained throughout the life of the trade. First off, a broker cannot extend any credit to accounts with less than $2,000 in cash (or securities). Second, the initial margin of 50% is required for a trade to be entered. Finally, the maintenance margin says that an equity level of at least 25% must be maintained. The investor will be hit with a margin call if the value of securities falls below the maintenance margin.
What Does Bid Price Mean? The price a buyer is willing to pay for a security. This is one part of the bid with the other being the bid size, which details the amount of shares the investor is willing to purchase at the bid price. The opposite of the bid is the ask price, which is the price a seller is looking to get for his or her shares. Investopedia explains Bid Price The use of bid and ask is a fundamental part of the market system, as it details the exact amount that you could buy or sell at any point in time. Remember that the current price is not the price for which you can purchase the security, but the price at which the shares last traded hands. If you want to get an idea of the price for which you can buy a security, you need to look at the bid and ask prices because they will often differ from the current price.

What Does Ask Mean? The price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security willing to be sold at that price. Sometimes called "the ask". Investopedia explains Ask This is the opposite of bid, which is the price a buyer is willing to pay for a security, and the ask will always be higher than the bid. The terms "bid" and "ask" are used in nearly every financial market in the world covering stocks, bonds, currency and derivatives. An example of an ask in the stock market would be $5.24 x 1,000 which means that someone is offering to sell 1,000 shares for $5.24.

With the growing importance of digital technology and the internet, many investors are opting to buy and sell stocks for themselves rather than pay advisors large commissions for research and advice. However, before you can start buying and selling stocks, you must know the different types of orders and when they are appropriate. Market vs. Limit The two basic types of orders that every investor should be aware of are the market order and the limit order.

A market order is an order to buy or sell immediately at the best available price. These orders do not guarantee a price, but they do guarantee the order's immediate execution. Typically, if you are going to buy a stock, then you will pay a price near the posted ask. If you are going to sell a stock, you will receive a price near the posted bid. One important thing to remember is that the last-traded price is not necessarily the price at which the market order will be executed. In fast moving and volatile markets, the price at which you actually execute (or fill) the trade can deviate from the last-traded price. The price will remain the same only when the bid and ask prices are exactly at the last-traded price. Market orders are popular among individual investors who want to buy or sell a stock without delay. Although the investor doesn't know the exact price at which the stock will be bought or sold, market orders on stocks that trade over tens of thousands of shares per day will likely be executed close to the bid and ask prices.

A limit order sets the maximum or minimum price at which you are willing to buy or sell. For example, if you wanted to buy a stock at $10, you could enter a limit order for this amount. This means that you would not pay a penny over $10 for the particular stock. It is still possible, however, that you buy it for less than the $10.

One Caveat (Beware) When deciding between a market or limit order, investors should be aware of the added costs. Typically, the commissions are cheaper for market orders than for limit orders. The difference in commission can be anywhere from a couple dollars to more than $10. For example, a $10 commission on a market order

can be boosted up to $15 when you place a limit restriction on it. When you place a limit order, make sure it's worthwhile. Let's say your brokerage charges $10 for a market order and $15 for a limit order. Stock XYZ is presently trading at $50 per share and you want to buy it at $49.90:

By placing a market order to buy 10 shares, you pay $500 (10 shares x $50 per share)+ $10 commission, which is a total of $510. By placing a limit order for 10 shares at $49.90 you pay $499 + $15 commissions, which is a total of $514.

Even though you save a little from buying the stock at a lower price (10 shares x $0.10 = $1), you will lose it in the added costs for the order ($5), a difference of $4. Furthermore, in the case of the limit order, it is possible that the stock doesn't fall to $49.90 or less. Thus, if it continues to rise, you may lose the opportunity to buy. Other Exotic Orders Now that we've explained the two main orders, here's a list of some added restrictions and special instructions that many different brokerages allow on their orders:

Stop Order Also referred to as a stop loss, stopped market, on-stop buy, or on-stop sell, this is one of the most useful orders. This order is different because - unlike the limit and market orders, which are active as soon as they are entered - this order remains dormant until a certain price is passed, at which time it is activated as a market order. For instance, if a stop-loss sell order were placed on the XYZ shares at $45 per share, the order would be inactive until the price reached or dropped below $45. The order would then be transformed into a market order, and the shares would be sold at the best available price. You should consider using this type of order if you don't have time to watch the market continually but need protection from a large downside move. A good time to use a stop order is before you leave on vacation.

All or None (AON) This type of order is especially important for those who buy penny stocks. An all-or-none order ensures that you get either the entire quantity of stock you requested or none at all. This is typically problematic when a stock is very illiquid or a limit is placed on the order. For example, if you put in an order to buy 2,000 shares of XYZ but only 1,000 are being sold, an all-or-none restriction means your order will not be filled until there are at least 2,000 shares available at your preferred price. If you don't place an all-or-none restriction, your 2,000 share order would be partially filled for 1,000 shares.

Good 'Til Canceled (GTC) This is a time restriction that you can place on different orders. A good-till-canceled order will remain active until you decide to cancel it. Brokerages will typically limit the maximum time you can keep an order open (active) to 90 days maximum.

Day If, through the GTC instruction, you don't specify a time frame of expiry, then the order will typically be set as a day order. This means that after the end of the trading day, the order will expire. If it isn't transacted (filled) then you will have to re-enter it the following trading day.

Conclusion Knowing the difference between a limit and a market order is fundamental to individual investing. By knowing what each order does and how each one might affect your trading, you can identify which order suits your investment needs, saves you time, reduces your risk and, most importantly, saves you money.

What Does Dark Pool Liquidity Mean? The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is represented by block trades facilitated away from the central exchanges. Also referred to as the "upstairs market", or "dark liquidity", or just "dark pool." Investopedia explains Dark Pool Liquidity The dark pool gets its name because details of these trades are concealed from the public, clouding the transactions like murky water. Some traders that use a strategy based on liquidity feel that dark pool liquidity should be publicized, in order to make trading more "fair" for all parties involved.

What Does Primary Market Mean? A market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that will set a beginning price range for a given security and then oversee its sale directly to investors. Also known as "new issue market" (NIM). Investopedia explains Primary Market The primary markets are where investors can get first crack at a new security issuance. The issuing company or group receives cash proceeds from the sale, which is then used to fund operations or expand the business. Exchanges have varying levels of requirements which must be met before a security can be sold. Once the initial sale is complete, further trading is said to conduct on the secondary market, which is where the bulk of exchange trading occurs each day. Primary markets can see increased volatility over secondary markets because it is difficult to accurately gauge investor demand for a new security until several days of trading have occurred.

What Does Underwriter Mean? A company or other entity that administers the public issuance and distribution of securities from a corporation or other issuing body. An underwriter works closely with the issuing body to determine the offering price of the securities, buys them from the issuer and sells them to investors via the underwriter's distribution network. Investopedia explains Underwriter Underwriters generally receive underwriting fees from their issuing clients, but they also usually earn profits when selling the underwritten shares to investors. However, underwriters assume the responsibility of distributing a securities issue to the public. If they can't sell all of the securities at the specified offering price, they may be forced to sell the securities for less than they paid for them, or retain the securities themselves

What Does Book Building Mean? The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors. Investopedia explains Book Building An underwriter "builds a book" by accepting orders from fund managers indicating the number of shares they desire and the price they are willing to pay

What Does Private Placement Mean? The sale of securities to a relatively small number of select investors as a way of raising capital. Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds. Private placement is the opposite of a public issue, in which securities are made available for sale on the open market. Investopedia explains Private Placement Since a private placement is offered to a few, select individuals, the placement does not have to be registered with the Securities and Exchange Commission. In many cases, detailed financial information is not disclosed and the need for a prospectus is waived. Finally, since the placements are private rather than public, the average investor is only made aware of the placement after it has occurred.

What Does Shelf Registration Mean? A regulation that a corporation can evoke to comply with U.S. Securities and Exchange Commission (SEC) registration requirements for a new stock offering up to three years before doing the actual public offering. However, the corporation must still file the required annual and quarterly reports with the SEC. In terms of SEC regulations, it is formally known as SEC Rule 415.

Investopedia explains Shelf Registration Sometimes current market conditions are not favorable for a specific firm to issue a public offering. For example, suppose the housing market is heading toward a dramatic decline. In this case, it may not be a good time for a home builder to come out with its second offering, as many investors will be pessimistic about companies working in that sector. By using shelf registration, the firm can fulfill all registrationrelated procedures beforehand and go to market quickly when conditions become more favorable. What Does Dividend Reinvestment Plan - DRIP Mean?

A plan offered by a corporation that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date.
Investopedia explains Dividend Reinvestment Plan - DRIP A DRIP is an excellent way to increase the value of your investment. Most DRIPs allow you to buy shares commission free and at a significant discount to the current share price. Most DRIPS don't allow reinvestments much lower than $10. This term is sometimes abbreviated as "DRP". What Does Rights Offering (Issue) Mean? Issuing rights to a company's existing shareholders to buy a proportional number of additional securities at a given price (usually at a discount) within a fixed period. Investopedia explains Rights Offering (Issue) Rights are often transferable, allowing the holder to sell them on the open market.

What Does Short-Term Debt Mean? An account shown in the current liabilities portion of a company's balance sheet. This account is comprised of any debt incurred by a company that is due within one year. The debt in this account is usually made up of short-term bank loans taken out by a company. Investopedia explains Short-Term Debt The value of this account is very important when determining a company's financial health. If the account is larger than the company's cash and cash equivalents, this suggests that the company may be in poor financial health and does not have enough cash to pay off its short-term debts. Although short-term debts are due within a year, there may be a portion of the long-term debt included in this account. This portion pertains to payments that must be made on any long-term debt throughout the year.

What Does Long-Term Debt Mean? Loans and financial obligations lasting over one year. In the U.K., long-term debts are known as "long-term loans." Investopedia explains Long-Term Debt For example, debts obligations such as bonds and notes, which have maturities greater than one year, would be considered long-term debt. Other securities such as T-bills and commercial papers would not be long-term debt because their maturities are typically shorter than one year.

What Does Bond Mean? A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities. Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents. Investopedia explains Bond The indebted entity (issuer) issues a bond that states the interest rate (coupon) that will be paid and when the loaned funds (bond principal) are to be returned (maturity date). Interest on bonds is usually paid every six months (semi-annually). The main categories of bonds are corporate bonds, municipal bonds, and U.S. Treasury bonds, notes and bills, which are collectively referred to as simply "Treasuries". Two features of a bond - credit quality and duration - are the principal determinants of a bond's interest rate. Bond maturities range from a 90-day Treasury bill to a 30-year government bond. Corporate and municipals are typically in the three to 10-year range.

What Does Quote Driven Market Mean? An electronic stock exchange system in which prices are determined from quotations made by market makers or dealers. Also known as a "price driven market". Investopedia explains Quote Driven Market This is the opposite of an order driven market.

What Does Order Driven Market Mean? An auction market in which prices are determined by the publication of orders to buy or sell shares. Investopedia explains Order Driven Market This is the opposite of a quote driven market.

What Does Total Return Mean? When measuring performance, the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Investopedia explains Total Return Total return accounts for two categories of return: income and capital appreciation. Income includes interest paid by fixed-income investments, distributions or dividends. Capital appreciation represents the change in the market price of an asset. What Does Cyclical Stock Mean? A stock that rises quickly when economic growth is strong and falls rapidly when growth is slowing down. Investopedia explains Cyclical Stock An example is the automobile market: as economic growth slows, consumers have less money to spend on new cars. Non-cyclical stocks would be in industries such as healthcare, where the demand for goods

What Does Price-Weighted Index Mean? A stock index in which each stock influences the index in proportion to its price per share. The value of the index is generated by adding the prices of each of the stocks in the index and dividing them by the total number of stocks. Stocks with a higher price will be given more weight and, therefore, will have a greater influence over the performance of the index. Investopedia explains Price-Weighted Index For example, assume that an index contains only two stocks, one priced at $1 and one priced at $10. The $10 stock is weighted nine times higher than the $1 stock. Overall, this means that this index is composed of 90% of the $10 stocks and 10% of $1 stock. In this case, a change in the value of the $1 stock will not affect the index's value by a large amount, because it makes up such a small percentage of the index. A popular price-weighted stock market index is the Dow Jones Industrial Average. It includes a priceweighted average of 30 actively traded blue chip stocks.

What Does NASDAQ-100 Equal Weighted Index Mean? The equal-weighted version of the NASDAQ-100 Index, which consists of 100 of the largest, most actively traded non-financial U.S. companies listed on the Nasdaq. Each of the securities in this marketcapitalization based index is initially set at a weight of 1%. The equal weighting means that the index's smaller companies contribute as much as its larger companies. Investopedia explains NASDAQ-100 Equal Weighted Index This equal-weighted index offers an alternative to market-capitalization weighting, which is a more common method of weighting index funds. The NASDAQ-100 Equal Weighted Index is rebalanced quarterly and is reconstituted annually in December. There are several ETFs that track the movements of the index.

What Does Capitalization-Weighted Index Mean? A type of market index whose individual components are weighted according to their market capitalization, so that larger components carry a larger percentage weighting. The value of a capitalization-weighted index can be computed by adding up the collective market capitalizations of its members and dividing it by the number of securities in the index. Also known as a "market-value weighted index". Investopedia explains Capitalization-Weighted Index Most of the broadly-used market indexes today are "cap-weighted" indexes, such as the S&P 500, Nasdaq, Wilshire, Hang-Seng and EAFE indexes. In a cap-weighted index, large price moves in the largest components can have a dramatic effect on the value of the index. Some investors feel that this overweighting toward the larger companies gives a distorted view of the market, but the fact that the largest companies also have the largest shareholder bases makes the case for having the higher relevancy in the index. What Does Float Mean? 1. The total number of shares publicly owned and available for trading. The float is calculated by subtracting restricted shares from outstanding shares. 2. A float can also refer to a small portion of the money supply representing a balance that is simultaneously present in a buyers and a payers account. A float results from the delay occurring between the time that a cheque is written and the money actually being deducted from the writer's account. These balances are temporarily double counted as part of the overall money supply. Investopedia explains Float For example, a company may have 10 million outstanding shares, but only seven million are trading on the stock market. Therefore, this company's float would be seven million. Stocks with smaller floats tend to be more volatile than those with larger floats.

What Does Beta Mean? A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns.. Also known as "beta coefficient". Investopedia explains Beta Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market. Many utilities stocks have a beta of less than 1. Conversely, most high-tech Nasdaq-based stocks have a beta of greater than 1, offering the possibility of a higher rate of return, but also