A sell order on a short sale that is accompanied (or "bracketed") by a buy stop order above the entry price of the sell order and a buy limit order below the entry price of the sell order. As the three component orders are based on set prices, this type of order protects the investor from the downside but also potentially locks in a gain without the investor constantly monitoring price. Taobiz explains Bracketed Sell Order For example, say an investor enters a short position in ABC stock. To enter a bracketed sell order, he or she enters the sell order at $30 - which is the entry price - and adds a buy stop order at $35 and a buy limit order at $25. Depending on the price movement the investor will either gain $5 or set his or her maximum loss at $5.
A buy order that is accompanied by a sell limit order above the buy order's price and a sell stop order below the buy order's price. These three component orders will all be set at a price determined by the investor at the time the order is entered. This type of order allows investors to lock in profits with an upside movement and prevent a downside loss, without having to constantly follow the position. Taobiz explains Bracketed Buy Order For example, suppose that an investor places a buy order for 100 shares of ABC at $50, along with a sell limit order at $55 and a sell stop order at $45. If the price moves up to $55 or down to $45, the position will be sold. The trader will either meet a specified gain of $5 with the sell limit or suffer a loss of $5 with the stop-loss order. However, it is important to note that having a stop-loss order at $45 doesn't mean that you are guaranteed that price. This is because once triggered, the stop loss turns into a market order and will be sold at the current market price after triggering. If the stock gaps down to $40, for example, your stop loss would be triggered and your shares would be sold for around $40.
An electronic system used by the New York Stock Exchange to send orders between brokers and trading booths on the floor of the exchange. The BBSS is an extremely efficient way to direct order flow. Prior to its advent, brokers used paper forms and sent runners to give orders to the floor traders to execute. Taobiz explains Broker Booth Support System - BBSS The BBSS permits the New York Stock Exchange to handle daily trade volumes in excess of one billion shares. If this electronic system of routing orders were unavailable, brokers and traders would have to rely on paper forms to document and execute trades. In addition to being a physically demanding process, the paper format is much more difficult to audit and track than its electronic counterpart.
An anti-dilution provision used for the benefit of existing preferred shareholders when additional offerings are made by the corporation. The broad-based weighted average accounts for all equity previously issued and currently undergoing issue. Taobiz explains Broad-based Weighted Average The new weighted average price is adjusted for the preferred shareholder providing for protection against dilution. However, because all equity issued by the company is included in the weighting process, it is not as favorable as other weighting methods.
A mechanism seen in early-stage, pre-public companies in response to a subsequent round of financing that involves issuing shares at a lower price than first-stage investors received. A broad-based weighted average ratchet almost always involves preferred stock, in which early investors have a conversion price ("price X"), while a later round of investors receive preferred shares with a lower conversion price ("price Y"). A weighted average price is calculated that will effectively reprice the shares issued at price X and price Y to the value of: [(Price X) * (shares issued at Price X)] + [(Price Y) * (shares issued at Price Y)] / Total Outstanding Shares on a Fully Diluted Basis Taobiz explains Broad-based Weighted Average Ratchet The company issuing the shares would prefer to not make any adjustments to preferred shares with higher conversion prices, but most venture-capital groups and investors will insist on a clause that protects their interests in the event that a lower round of financing (also called a "down round") occurs in the future. In a broad-based ratchet, all rights of ownership (real or potential) are counted in the denominator of "total shares", whether they are preferred or convertible shares, warrants, or options. In a narrow-based ratchet, only common stock outstanding is used to compute the weighted-average price of shares to all investors.
An index designed to reflect the movement of the entire market. The smallest broad-based index is the Dow Jones Industrial Average with 30 industrial stocks and the largest is the Wilshire 5000 Total Market Index. Other examples include the S&P 500, Russell 3000 Index, AMEX Major Market Index and the Value Line Composite Index. Taobiz explains Broad-based Index Investors who want the maximum benefit of diversification can invest in securities that have as their underlying tracking instrument an index or other financial product made up of several, well-diversified stocks. Securities based on broad-based indices allow investors to effectively own the same basket of stocks contained in a major index while committing a small amount of financial resources.
An exchange-traded fund that invests in stocks and listed securities associated with the countries of Brazil, Russia, India and China. BRIC ETFs are designed to give holders diversified exposure to these growing countries. Assets are invested in both locally issued stocks and shares that trade on exchanges in the U.S. and Europe. The portfolio allocation among the four counties may vary from fund to fund, but all ETFs in the space should be passively invested around an underlying index. Watch: Understanding ETF Taobiz explains BRIC ETF Investing in the BRIC economies has been on the rise as increased economic globalization creates higher levels of world trade and commerce. Brazil, Russia, India and China have had strong growth in gross domestic product (GDP) over the past few decades, with recent rates much higher than those found in the United States and the Eurozone. BRIC ETFs may carry slightly higher expense ratios than funds focused on the U.S. and Europe due to the higher costs of investing directly in these foreign stock markets.
A certificate of deposit whose interest rate fluctuates in direct correlation to the value of an underlying market index. In other words, the interest rate paid on the CD increases as the value of the market index increases during the life of the CD. Taobiz explains Bull CD This type of CD is most often used by investors looking for a very safe investment that also gives them exposure to the stock market. The CD interest rate does not lose value if the market falls in value because there is a minimum rate that has to be paid.
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