INVESTMENT TERMINOLOGY
By: Richard M. Hetzer, Regional Vice President
Financial Investors Trust
CALL is the right, but not the obligation, to buy an asset.
PUT is the right, but not the obligation, to sell an asset.
An example: You want to buy a share of IBM stock trading at $100 a share. You can pay a premium, something like $1, to buy a "call at 105", instead of the stock. What you want to do is if the price of one share of IBM stock rises above $105, execute your call. Simply, you're then buying a share for only $105 that is costing everyone else more. A put is the same thing, only in the reverse. You buy a put on stock you own so that if the price of that stock decreases to below your call level, you can sell at that higher level than the stock is actually worth at that moment in time.
FDIC provides insurance to cover deposits at participating banks and savings and loans. This insurance is provided through the Banking Insurance Fund. It insures savings type accounts up to a maximum of $100,000 per depositor (not to be confused with per deposit) and demand deposit accounts up to $100,000 on non-interest bearing accounts. Special trust fund accounts may be eligible for additional insurance.
Diversification is an investment strategy using a variety of investments to help reduce risk of capital.
Liquidity is the ease of converting a particular financial holding into cash.
Maturity is when an investment is due for payment.
An obligation is money committed to a particular purpose, a formal and binding agreement or acknowledgement of a liability.
Your portfolio is all the securities held by you or the commercial paper held by a bank or other financial house.
A security is evidence of debt or property such as stock certificates or bonds.
Banker's acceptance refers to a bill of exchange drawn on or accepted by a bank to pay specific bills for one of its customers when the bills become due.
Bank Notes are promissory notes released by an authorized bank that is payable on demand to the bearer and can be used as cash. These notes are redeemable as money and are considered to by full legal tender.
CUSIP, basically a security identification number, stands for the American Bankers Association's Committee on Uniform Securities Identification Procedures that established alphabetical and numerical descriptions for securities traded on the exchanges and in over-the-counter markets.