If a municipality or company decides to issue bonds, they will need to form an alliance with an underwriting entity to help them price and distribute the bonds, and the Purchase Agreement outlines their contract. Underwriters on debt issues are normally large investment banks. They help the issuer, which could be a city government or company, structure the bonds and price them in a way that is suitable to their needs, and also agrees to help them distribute them. Continue reading...
Articles of Partnership lay out the nature of the agreement entered into by partners in business entity. Also called a ‘partnership agreement,’ articles of partnership plainly describe the nature of the partnership, which partners are General Partners and which are Limited Partners, and other important details. Partnerships can take the form of Limited Liability Partnerships, General Partnerships, and even S Corporations (but those file articles of incorporation instead). Continue reading...
Accommodation Trading is when two traders enter into a non-competitive trade agreement which disregards the current market price for the securities being traded. The primary reason to engage in accommodation trading is for an investor to avoid taxes by harvesting more losses than actually occurred. One investor will buy shares from another investor for a price significantly below the market value so that the selling investor can report more losses. The partners will typically agree to allow the selling party to buy the shares back later at the same price. Continue reading...
APY is an annualization of an interest rate which may be assessed on a different schedule, such as on a monthly basis, and is useful for comparing debt and loan agreements that use different schedules. Annual Percentage Yield is a way to compare products and loans with different interest rates and different schedules for calculating the interest. It is a calculation of the effective annual rate, and it takes into account the effects of compounding interest, which a similar calculation for APR (Annual Percentage Rate) does not do. Continue reading...
REPO is shorthand for Repurchase Agreement. It is a money-market practice where two entities agree to buy/sell government securities overnight and reverse the transaction the next day for the sake of providing the selling entity with short-term cash. Repurchase Agreements provide the selling party with short term liquidity, and are considered a money-market instrument. A third party usually acts as a clearing agent. Continue reading...
Cash and cash equivalents are negotiable instruments which have a stable value and are highly liquid. Cash and Cash Equivalents is a phrase used often in the financial world. Generally money market accounts are the most used cash equivalent. They are invested in currency, and their goal is to preserve the value of the the investor’s dollars. Money market accounts are basically completely liquid, and investors can even write checks and make ATM withdrawals from their money market accounts. Continue reading...
If you expect that a security will depreciate, you can sell it on the market without owning it, and, if your expectations prove to be right, you can buy it for less before “covering” your position – keeping the difference in profit. Short selling is done with the help of a brokerage/custodian, who will lend you the security so that you can sell it, and they will charge interest on the loaned amount until you actually purchase the security to “cover” your loan. Continue reading...
Adaptive selling is a sales and marketing principal where the product or services offered are framed or actually modified based on the preferences or demographics of the audience or client. Adaptive selling requires the ability to customize a shopper’s experience as they interface with the real or virtual storefront. The sales system leaves room to learn about the customer and to adopt the language and products offered based on changing interpretations of the customer. This may require a well-trained sales representative or a well-designed computer algorithm, as has been implemented on some e-commerce sites. Continue reading...
If a person buys a stock that pays a dividend on or after the ex-dividend date, where we understand “ex” to mean “after,” it means that the buyer would be buying the shares for the amount that still has a dividend (or some of it) priced-in, but the seller, not the buyer, will get to have the dividend, and the share price will go down immediately after the dividend is paid. Stock prices will tend to go up in anticipation of a dividend, and more so after the declaration date, which might be anywhere from two months to two weeks before the actual dividend is paid, when the company announces when a dividend is to be paid and how much it will be. Continue reading...
When a company decides to use excess cash to purchase its own shares from the market, it is called a buyback or “share repurchase program.” There are only so many things a company can do with earnings in excess of their projections; among these are issuing a dividend, paying off debts, expanding, acquiring another company, or buying back shares of its own stock. Buybacks are also known as Stock Repurchase Agreements. There may be guidelines in state law or the company’s contracts or buy laws that determine what options they have and how many shares can be repurchased. Continue reading...
An Accelerated Share Repurchase (ASR) is a method by which companies can buy back a significant amount of their outstanding shares with the help of an investment bank. By enlisting the help of an investment bank to accelerate a buy-back, a company can cleanly retire a large bulk of shares at once. These agreements have come into use in the last 10 years, and there is of course some variation in their composition. They fall under a category of buybacks known as structured buybacks. Continue reading...
While it is possible to sell your house without a broker, it may prove to be more trouble than it’s worth. If a person can sell their own house or property without a real estate broker, he or she can avoid paying broker’s fees out of the proceeds. A person should realize, however that brokers are well-acquainted with the real estate marketplace, and may possibly already have some potential buyers in their pipeline.They are also ready to spend the time and money to market and show your property. Continue reading...
Commodities Futures are one of the most highly traded securities in the world, and it is partially because nothing has to be delivered by the participants as in a spot-trading market. Futures can be purchased on margin, opening up large positions, long or short, and if a trader finds a place to exit before the settlement date of the contract, the trader will buy/sell to close his or her position, and the exchange will regard the trader’s position as flat, and nonexistent for all intents and purposes. Continue reading...
The notion of who bears risk for various sorts of failures, circumstances, or losses is a prevalent one in the financial world, and many institutions make all of their money accepting risks. To accept a risk is to bear the burden of loss or replacement if an event occurs that causes an asset to lose value or disappear. There is a bright side to this, however. There is a real and theoretical “risk premium” due to those who accept a risk. Continue reading...
Yes, if you sell the bond before its maturity, it’s possible that you would have to sell it at a discount. If you bought a $1,000 bond with a 5% coupon, and a year later, the company issued new $1,000 bonds with a 6% coupon, you would not be able to sell your bond to someone else for $1,000 (obviously, because they would rather purchase the new bonds for $1,000 which pay more annual interest than your old one). Continue reading...
Intraday trading means opening and closing a position, or buying and selling (or short-selling and covering) a security within the same trading day. Intraday traders are active during market hours, buying, selling, shorting, and so forth, to capitalize on the movements of the markets during the day, and they primarily trade positions which are opened and closed during the same day. Intraday traders use technical indicators to find inefficiencies or price fluctuations that they believe will correct. Continue reading...
A downtrend occurs when the successive peaks of a security's price trend downward without recovering from the troughs, with successively lower market peaks each time. Downtrends may happen in a span of minutes or months, depending on the security being discussed. In a downtrend, it may not be advisable to purchase (or “go long” on) a security, since the duration of the trend is unknown. Many traders, however, see it as an opportunity for short selling. Continue reading...
Self-Employed 401(k)s are one of the best ways for self-employed people to save for retirement. Self-Employed 401(k)s function in exactly the same way traditional 401(k)s do, except for a few tweaks. First of all, Self-Employed 401(k)s can only be opened by a business owner or partnership with no employees, although your spouse may also contribute to the Self-Employed 401(k) if he or she works for the business. Continue reading...
Bear market funds are designed to profit when the market or sector they follow declines. Bear Market Funds make money in declining markets, as opposed to Bull Market Funds. If you’re bearish on a sector, industry, commodity, the market, or anything else that’s tradable, rest assured that you’ll find a Bear Market Fund for it. There are also 2X Bear Market Funds, 3X Bear Market Funds, etc…, which use margin, short-selling, and derivative instruments to acquire large leveraged positions. Continue reading...
When an investor takes a short position on an option contract by selling (“writing”) a call or put option, he or she is opening a position, which creates more open interest in an underlying security which will be handled by the brokerage house, and this is called “selling to open.” If the price changes in the underlying security in an unfavorable way, the investor will seek to get out of the short position he holds on the options contract before the option’s expiration date. To do so, the investor must buy back the option (or, really, cancel out the position by buying the same kind of contract that he or she previously sold short). Continue reading...