What is a vertical spread?
A Vertical Spread involves the strategy of buying and selling an equal number of options on the same underlying security with the same expiration date, but different strike prices. Vertical Spreads can be both bullish and bearish, depending on your view of the underlying security. If you use calls, you are constructing a Vertical Bull Spread, and if you’re using puts, you’re constructing a Vertical Bear Spread. Continue reading...
How Do I Prepare a Will?
If your balance sheet is a relatively simple one, and you have very little or no debt, then it may be fine to simply use a trusted online resource. More complicated wills usually require the help of an attorney who can help you and guide you through the process. Be warned though: hiring an attorney will not be cheap, but it may very well be worth the cost in the long run. Do I Need Professional Help to Prepare a Will? How Much Does it Cost to Prepare a Will? Continue reading...
What is the Bid-Ask Spread?
The Bid-Ask Spread is the difference between an offer made on a security and the price a seller is willing to accept. The Bid-Ask Spread is the amount by which the ask price exceeds the bid. For example, if the bid price is $50 and the ask price is $51 then the "bid-ask spread" is $1. The larger the bid-ask spread, the less liquid the market for that particular security - buyers and sellers are too far apart for trades to occur easily. When trading, investors have to pay attention to the bid-ask spread, because it is ultimately an additional cost to investing in or trading stocks. Continue reading...
What is an Investment Manager?
An investment manager’s job is to adhere to the guidelines set forth in a prospectus while directing the decision-making process for a pooled investment company such as a mutual fund. He must remain accountable to the shareholders and observe SEC regulations while attempting to generate the best returns possible. Investment managers direct the flow of assets and trading in an investment account, usually a pooled investment using the funds of various numbers of investors, while seeking to serve the best interests of the investors whom he serves. Continue reading...
What is the Dead Cat Bounce (Bearish) Pattern?
The Dead Cat Bounce pattern appears when a security's price falls quickly but has a temporary “v-shaped” recovery before resuming its downward trend. The temporary bounce (from point 2 to point 3) may be explained by shorters covering their positions or buying by investors who think the price has already reached a low point. It is important to wait for the confirmation move, which is when the price breaks below the low where the dead cat bounce occurred (point 2). Continue reading...
What is the Dead Cat Bounce (Bearish) Pattern?
The Dead Cat Bounce pattern appears when a pair’s price falls quickly but has a temporary “v-shaped” recovery before resuming its downward trend. The temporary bounce (from point 2 to point 3) may be explained by shorters covering their positions, or buying by investors who think the price has already reached a low point. It is important to wait for the confirmation move, which is when the price breaks below the low where the dead cat bounce occurred (point 2). Continue reading...
What is the Descending Triangle (Bearish) Pattern?
The Descending Triangle pattern has a horizontal bottom (1, 3, 5) which represents the support level, and a down-sloping top line (2, 4). The breakout can be either up or down and the direction of the breakout determines which corresponding price level is the target. This pattern is commonly associated with directionless markets, since the contraction (narrowing) of the market range signals that neither bulls nor bears are in control. When the price of a pair consolidates in a somewhat volatile fashion, it may indicate growing investor concern that the price is set to break out. Continue reading...
What is an Account Number?
An account number is a serialized identifier which is ascribed to a particular account holder or account at a financial institution, retailer, or other entity. Account numbers may include letters or numbers and may be of various length, but they usually exceed 5 characters. An account number is a way for a company or organization to uniquely identify the accounts associated with each individual customer. Continue reading...
What is Adjusted Book Value?
Adjusted Book Value takes true fair market value of all assets and liabilities into account. Adjusted Book Value tends to be used when a company has been devalued to the point of facing possible bankruptcy and liquidation. Book value in general does not account for intangible assets, such as intellectual property, so it is more useful in assessing the risk of loss in a foundering company than the earnings potential of a profitable company. Technically the adjustments to book value will raise or lower the value of assets and liabilities according to current fair market value. Continue reading...
What are Small Cap Mutual Funds?
Mutual funds that invest heavily in companies that are small, but not micro-size, can be described as small cap funds. A small capitalization mutual fund primarily invests in small companies. Small companies are usually defined as companies with market capitalization of under $2 billion. The companies in this category are larger than those in the “micro” and “nano” cap categories. A mutual fund investing in small cap companies will generally experience higher price volatility than both mid cap and large cap mutual funds. Over time, small cap companies as a group have tended to outperform the broader market, so the higher risk is associated with higher return. Continue reading...