An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled. Depending on the direction of the position, limit orders are sometimes referred to more specifically as a buy limit order, or a sell limit order. Watch: How Do Limit Orders Work? Taobiz explains Limit Order Limit orders typically cost more than market orders. Despite this, limit orders are beneficial because when the trade goes through, investors get the specified purchase or sell price. Limit orders are especially useful on a low-volume or highly volatile stock.
A stock index comprised of companies associated with actress Lindsay Lohan. Investors might correlate the popularity of Lohan with increased sales surrounding her related products. Firms involved with Lohan endorsements, advertising or movies are included in the index. Taobiz explains Lindsay Lohan Stock Index Fans may see Lindsay Lohan use a certain product, such as her Mercedes Benz, and rush to purchase one for themselves. The increased demand will usually drive up a company's sales, merely for being associated with Lohan. Companies involved in the index include Disney, who produce many of Lohan's films, Daimler Chrysler and Mattel. As with most celebrity-related terms, buzz words such as this usually have a shorter shelf life and may become irrelevant.
An ownership unit in a publicly traded limited partnership, or master limited partnership (MLP). This trust gives the unit holder a stake in the income generated by the partnership company. A MLP often distributes all available cash flow from operations to unit holders after the deduction of maintenance capital. Also referred to as "master limited partnership units" and "limited partner units". Taobiz explains Limited Partnership Unit Partnership units are beneficial to investors because the MLP allows the company's cash distributions to circumvent the double taxation that would normally be imposed, which generally means greater distributions for partnership unit holders. In an MLP, the cash distributions of the company are taxed only at the unit holder level and not at a corporate level. Another benefit of this type of investment is that because the units are publicly traded, there is much more liquidity for investors compared to a traditional partnership. In most cases, these investments are eligible as IRA and RRSP investments.
A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of order is good only for the market opening and does not last for the whole trading day. Taobiz explains Limit-On-Open Order A trader who believes that the market open is the best time to sell his or her shares may want to use a limit-on-open order. For example, say the trader holds 1,000 shares in ABC stock and wants to sell at the market open but also wants to guarantee that he or she will receive at least $50 per share. The trader therefore uses a limit-on-open order. If at open the shares trade above $50, the order will be executed, and if they trade below, the order will not be filled and then be canceled.
A type of limit order to buy or sell shares near the market close only if the closing price is trading better than the limit price. This order is an expansion of the market-on-close order, adding to it a limit condition, which places a maximum on the entry price and minimum on the selling price. Taobiz explains Limit-On-Close Order Say a trader believes that, because of increased volume, the best price he or she will receive is at the market close - the trader might then enter a market-on-close order. But if the trader does not want to face an unpredictable entry price, he or she will enter a limit-on-close order. For example, if the trader entered a buy limit-on-close order for 100 shares of ABC at $52.50 and the shares at the end of the day traded at $50, the order would be executed. If, on the other hand, the price rose to $54 right at the end of the day, the order would not be filled.
Securities that have been accepted for trading purposes by a recognized and regulated exchange. Taobiz explains Listed Security Listed securities have the advantage of higher liquidity within a regulated environment. In addition, investors are able to find accurate information on all listed companies.
A premium that investors will demand when any given security can not be easily converted into cash, and converted at the fair market value. When the liquidity premium is high, then the asset is said to be illiquid, which will cause prices to fall, and interest rates to rise. Taobiz explains Liquidity Premium For example, assume an investor is looking at purchasing one of two corporate bonds, each with the same coupon payments, and time to maturity. Assuming one of these bonds is traded on a public exchange, while the other is not, the investor will not be willing to pay as much for the non-public bond. The difference in prices, and yields, the investor is willing to pay for each bond is called the liquidity premium.
The path taken by a company to provide liquidity for company founders or owners. The most common liquidity paths are through mergers and acquisitions to a larger company, and through initial pubic offerings (IPOs) of stock to investors. Without a path to liquidity, private company owners may not be able to convert their ownership in the company to any other means of currency or investment. Taobiz explains Liquidity Path Most private companies of a sufficient size are constantly evaluating different liquidity paths. Some owners may simply be looking for a way to "cash out", or looking to the liquidity achieved in an IPO to help fund future business growth and expansion efforts. The state of the overall economy and the stock markets may affect the timing and direction of a liquidity path. If the stock market is currently weak, investors may have little or no appetite for IPOs, making that option less favorable because the company would likely not receive a fair price for its shares. The company could choose to wait out the markets, or change course and sell to another company or private equity investor directly.
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