Investing Terms

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  • Commodity Stocks

    What Is A Commodity Stock? A commodity stock is a debt offering from a corporation involved in the consumption, extraction, refinement or delivery of raw materials. Accordingly, both company performance and share price are correlated to the relative value of an underlying commodity(s). Valuing Commodity Stocks Acting as the basis for a broad spectrum of securities, commodities are a premier asset class in the global marketplace. Essentially, any item with…

  • Commodity Dollars

    What Are Commodity Dollars? The term "commodity dollar" is used to define a currency closely correlated with raw materials integral to a nation's export sector. Also referred to as a "commodity currency" or "comdoll," commodity dollars derive a great deal of their value from specific underlying assets. The markets of oil, gold and agricultural products often play key roles in the exchange rate valuations of these currencies. Generally speaking, the…

  • Derivatives

    What Is A Derivative? Derivatives are financial instruments that derive their value from an underlying asset such as a currency, a commodity like oil, gold or wheat, stocks and bonds, or interest rates. The most common types of derivatives are options and futures, credit default swaps, interest rate swaps and collateralized debt obligations (CDOs). Pros of Derivatives Derivatives were originally developed to enable companies and producers to protect themselves against…

  • Seasonality

    What Is Seasonality? In finance, the term seasonality is used to describe periodic trends in supply/demand, business performance and asset pricing. This phenomenon occurs consistently on an annual basis, in concert with regional weather patterns, economic data releases or the celebration of assorted holidays. Seasonality is an important factor to consider when crafting investment decisions. If left unchecked, the enhanced volatility and market turbulence attributable to these trends can increase…

  • Credit Default Swap

    What Is A Credit Default Swap? A credit default swap (CDS) is a financial derivatives contract that acts as an insurance policy that an investor takes out in order to protect against a bond issuer defaulting on its obligations to pay interest and repay principal. The investor "swaps" their risk with an insurance company, a bank, or a hedge fund. The institution accepts the risk against the bond, defaulting in…

  • What Is Standard Deviation In Forex?

    For active currency traders, market volatility presents a vast array of opportunities and challenges. Fluctuations in the exchange rates of forex pairs can occur rapidly and seemingly out of nowhere. If not consistently put into a manageable context, turbulent price action can prove detrimental to a trader's chances of sustaining long-run profitability. Standard deviation is one mechanism used by forex market participants to identify normal and abnormal moves in pricing.…

  • Pump And Dump Scheme

    A "pump and dump" is an illegal scheme used to artificially boost the price of a stock by making false and misleading claims about a company's business prospects. Then, the shares are sold before the fraud becomes known, at which point the stock price usually plummets and the unsuspecting investors lose their money. Pump and dump scams have been around for a long time but are now more commonly perpetrated…

  • Current Ratio

    The current ratio is a business accounting formula that measures a company's ability to pay its short-term obligations, namely those due within a year. The mathematical formula is expressed as: Current Ratio = Current Assets/Current Liabilities Current assets include cash and cash equivalents, securities that can be sold quickly, short-term investments, accounts receivable, short-term notes receivable, inventories and supplies, and prepayments. Current liabilities, which are obligations that must be paid…

  • Collar Strategy

    A collar strategy is a defensive equity play in which an investor seeks to limit the downside in a stock in exchange for forgoing some of the upside potential. This strategy is also known as a hedge wrapper. The investor buys a long position in a stock, in which he will benefit if the price goes up, although the strategy can also be accomplished without actually buying the underlying stock.…

  • Liquidity

    Liquidity is the ability of an asset or security to be readily converted into cash. In active trading and finance, high degrees of liquidity are desirable. Liquid markets promote efficient trade, while corporate and personal solvency boost creditworthiness and value.

  • Futures Industry Association (FIA)

    The Futures Industry Association (FIA) is a leading authority on the global derivatives industry. Headquartered in Singapore, Brussels, London and Washington D.C., the FIA is an advisory body to the world's futures and options market participants. Operating as a network of clearinghouses, exchanges and trading firms, the FIA aims to satisfy its self-stated, multifaceted mission: Support market transparency, competition and open accessibility Preserve the integrity of the financial system Promote…

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