In a margin account, the amount of funds deposited in the customer's account following the successful execution of a short sale order. The credit balance amount includes both the proceeds of the short sale itself and the specified margin amount the customer is required to deposit under Regulation T. Taobiz explains Credit Balance In the case of a short sale, an investor essentially borrows equity shares from his or her brokerage and then sells the shares on the open market, hoping to buy them back off the open market for a lower price at a later date and then return them to the brokerage, pocketing the excess cash left over. When the shares are first short sold, the investor receives the cash amount of the sale in his or her margin account. This amount, plus the specified margin amount which must be deposited by the investor under Reg T, comprises the credit balance. It must be maintained in the investor's margin account as a form of assurance that the shares can be repurchased from the market and returned to the brokerage house.
A set of shares or securities that makes up one unit of a fund held by the trust that underlies an exchange-traded fund (ETF). One creation unit is the denomination of underlying assets that can be redeemed for a certain number of ETF shares. Taobiz explains Creation Unit Creation units can vary in size; with most containing between 25,000 and 600,000 ETF shares each. The use of creation units in the construction of ETF shares is critical because they allow for the representation of the underlying assets - the ETF shares, which represent a tiny chunk of a creation share - to be traded intraday. The ability to trade ETFs on an exchange gives them a significant advantage over comparable investment vehicles, such as mutual funds.
The sudden overnight appreciation of a stock's price after it has been recommended by Jim Cramer on his CNBC show, "Mad Money". This increase in price can be attributed to investors who buy stocks after seeing Cramer's recommendations. Taobiz explains Cramer Bounce This effect is fairly significant in certain classes of stock. For example, one study entitled Is the Market Mad? Evidence from Mad Money released by Northwestern University in March of 2006 showed that for smaller stocks, the overnight increase can be more than 5%. This abnormal increase lasts for only about 12 days, whereupon the stock's price retreats back to its pre-recommended price, assuming no other news has been released. This is one instance in which it can be argued that irrational investors have a significant effect on a stock's price.
A slang term to describe a situation in which a company is unaware that a marketer hired to produce legitimate opted-in email campaigns is actually using mass spam emails to promote the company's stock. This is a very unethical practice because marketers are often compensated with stock options, allowing them to capitalize on the unfounded demand they create for the stock they are promoting. Taobiz explains Cowboy Marketing This situation occurs when the marketer values its own interest over those of its client. Smart investors should not pay attention to spam emails and/or the stocks they promote. Buying these stocks will more often than not result in losing money because once the stock's price rises, the unscrupulous parties involved will cash out, causing it to plummet and leaving legitimate investors with losses.
A type of warrant that allows the holder to buy or sell a specific amount of equities, currency or other financial instruments from the issuer, usually a bank or a similar financial institution, at a specific price and time. Taobiz explains Covered Warrant The main differences between normal warrants and covered warrants are: 1. Covered warrants can have a wide variety of underlying financial products. Normal warrants only have a company's stock as their underlying financial product. 2. Covered warrants are only issued by financial institutions. Normal warrants are only issued by the company that issued the underlying equity. 3. Covered warrants can have a variety of exercise prices depending on the conditions set forth by each issue. Normal warrants generally have only one exercise price. 4. Covered warrants allow the warrant holder to buy or sell the underlying asset. Normal warrants allow the warrant holder only to buy the underlying equity.
A stock that is monitored or covered by an analyst at a brokerage firm for the purpose of issuing research reports that are disseminated to the firm's clients. Upon commencement of coverage, the analyst will usually publish an "initiating coverage" report on the stock, and subsequently issue periodic updates. Taobiz explains Covered Stock (Coverage) The number of analysts covering a stock can vary widely. While widely held blue chips may be covered by as many as 30 to 40 analysts, small companies that are not well-known may only be covered by one or two analysts. An analyst who stops covering a stock will generally issue a "discontinuing coverage" report.
A classification describing stocks that have a sizable investor following, despite the fact that the underlying company has somewhat insignificant fundamentals. Typically, investors are initially attracted to the company's potential and accumulate positions in speculation that its potential will be fulfilled, providing the investors with a substantial payout. Taobiz explains Cult Stock While most of these cult stocks promise they will be the next big story after they make a new discovery or get the newest contract from the government, most do not provide investors with anything other than the story. Furthermore, these stocks typically generate very little, if any, revenue at all. For example, many micro-cap biotech stocks are cult stocks. While they promise that they are going to be working on a miracle compound or drug, most of them do not have any source of income as they slowly burn away their initial capital in research and development. However, some cult stocks do occasionally make good on their stories to become successful. For example, Research in Motion was once a widely followed cult stock that had a great story that attracted many investors, but no revenue. Fortunately, its BlackBerry PDA device became a runaway hit, which elevated the cult stock to its multibillion market capitalization status.
The listing of a company's common shares on a different exchange than its primary and original stock exchange. In order to be approved for cross-listing, the company in question must meet the same requirements as any other listed member of the exchange, such as basic requirements for the share count, accounting policies, filing requirements for financial reports and company revenues. Taobiz explains Cross-Listing Some of the advantages to cross-listing include having shares trade in multiple time zones and in multiple currencies. This gives issuing companies more liquidity and a greater ability to raise capital. Most foreign companies that cross-list in the U.S. markets do so via American depositary receipts (ADRs). The term often applies to foreign-based companies that choose to list their shares on U.S.-based exchanges like the New York Stock Exchange (NYSE). But firms based in the U.S. may choose to cross-list on European or Asian exchanges, a strategy that may become more popular if the U.S. dollar struggles against major foreign currencies for a lengthy period of time. The adoption of Sarbanes-Oxley (SOX) requirements in 2002 made cross-listing on U.S. exchanges more costly than in the past; the requirements put a heavy emphasis on corporate governance and accountability. This, along with generally accepted accounting principles (GAAP) accounting, makes for a challenging hurdle for many companies whose "home" exchange may have laxer standards.
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