A brokerage house notification that the customer's equity in a margin account has fallen below the maintenance requirement level. If the client fails to immediately deliver the required margin by depositing more funds or securities into the account, his or her position will be liquidated. Also known as a "margin call". Taobiz explains House Call House call limits are usually higher than the limits mandated by the National Association of Securities Dealers (NASD), a self-regulatory group, and the major exchanges with jurisdiction over these rules. For example, if a brokerage set its house call limits equal to the limits mandated by NASD, the brokerage would violate this mandate each time a client required additional margin. Thus, the house limit provides the brokerage with a cushion and is in addition to the initial margin requirements set by Regulation T of the Federal Reserve Board.
An initial public offering that appeals to many investors and for which there is great demand. Hot IPOs are often oversubscribed - meaning market demand far exceeds the supply of shares - which results in the stock price surging as soon as it is offered on the market. Watch: Initial Public Offering (IPO) Taobiz explains Hot IPO The late 1990s saw one of the hottest IPO markets ever. There was so much demand for internet stocks that nearly all of them were oversubscribed, leading to substantial gains during the first days of trading. For example, Priceline.com saw its stock rocket 325% in a single day from an IPO price of $16 to $68/share. Because hot IPOs are in high demand, underwriters usually offer those shares to their most valued clients.
An order requiring that all or part of the order be executed immediately after it has been brought to the market. Any portions not executed immediately are automatically cancelled. Taobiz explains Immediate Or Cancel Order - IOC This is used for large orders where filling quickly can be difficult.
A situation when too many orders of a particular type - either buy, sell or limit - for listed securities and not enough of the other, matching orders are received by an exchange. Also referred to as "order imbalance". Taobiz explains Imbalance of Orders Shares experiencing an imbalance of orders may be temporarily halted if trading has already commenced for the day. If it occurs prior to market open, trading may be delayed. Better-than-expected earnings or other unexpected good news can result in a surge in buy orders in relation to sell orders. Likewise, unexpected negative news can bring a large sell-off.
The state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value. Illiquid assets also cannot be sold quickly because of a lack of ready and willing investors or speculators to purchase the asset. The lack of ready buyers also leads to larger discrepancies between the asking price (from the seller) and the bidding price (from a buyer) than would be found in an orderly market with daily trading activity. Taobiz explains Illiquid Some examples of inherently illiquid assets include houses, cars, antiques, private company interests and some types of debt instruments. On the other end of the spectrum, most listed securities traded at major exchanges, such as stocks, funds, bonds and commodities are very liquid, and can be sold instantaneously during regular market hours at fair market price. Illiquid securities carry higher risks than liquid ones; this becomes especially true during times of market turmoil when the ratio of buyers to sellers may be thrown out of balance. During these times, holders of illiquid securities may find themselves unable to unload them at all, or unable to do so without losing a lot of money.
A dividend declared by a corporation that is in violation of its charter and/or of state laws. Should such a dividend be declared, the company's board of directors can be sued by its shareholders and creditors; the company may also face prosecution. Taobiz explains Illegal Dividend Many states prohibit dividend payments from the capital surplus account. Dividends are generally paid out of net income or retained earnings. Illegal dividends may significantly weaken the financial position of the company and expose its creditors to a greater degree of risk.
A method used to calculate the share impact of convertible securities if they were converted into new shares. only in-the-money convertible securities (securities where the stock price is above the exercise price) are considered in the if-converted method. This method assumes that convertible securities are converted at the beginning of the fiscal period or at the time of issuance, whichever is later. The number of new shares is calculated on the basis of the convertible securities' conversion ratio. Taobiz explains If-Converted Method Convertible debt that is converted into stock increases share dilution but reduces interest expense, which is a tax-deductible expense for a company. For example, a company with a $20 million convertible debenture carrying an interest rate of 5% would incur an annual interest expense of $1 million. The if-converted method takes this into account by adding after-tax interest savings arising from the conversion to earnings per share (EPS), which offsets the dilution caused by the new shares.
A chart used in technical analysis that shows support and resistance, and momentum and trend directions for a security or investment. It is designed to provide relevant information at a glance using moving averages (tenkan-sen and kijun-sen) to show bullish and bearish crossover points. The "clouds" (kumo, in Japanese) are formed between spans of the average of the tenkan-sen and kijun-sen plotted six months ahead (senkou span B), and of the midpoint of the 52-week high and low (senkou span B) plotted six months ahead. Taobiz explains Ichimoku Cloud The ichimoku cloud was developed by Goichi Hosoda, a Japanese journalist, and published in the late 1960s. It provides more data points than the standard candlestick chart. The overall trend is up when prices are above the cloud, down when prices are below the cloud and flat when they are in the cloud itself. When senkou span A is rising above senkou span B the trend is stronger upward, and is typically colored green. When senkou span B rises above senkou span A, the trend is stronger downward and is denoted with a red-colored cloud.
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