A difficult situation that a company or individual experiences that will result in either success or failure. Examples include Initial Public Offerings (IPOs), a new CEO hired to manage a struggling company, and hostile takeover attempts. Taobiz explains Baptism of Fire A baptism of fire will either weaken or strengthen the entity involved. The phrase is an allusion to the Bible in both Acts 2:3-4 and Matthew 3:11.
A method of transacting different security orders that involves the accumulation of orders and their simultaneous execution. Taobiz explains Batch Trading For example, a security experiencing a relatively high volume of trades can have its orders batched and executed at the same time when the desired price is reached. Batch trading is more efficient for market makers and specialists because a large number of accumulated orders can be executed with fewer transactions. In the U.S., batch trading occurs for all orders sent to market after market hours. These orders are collected and batched until the market opens, at which time they are transacted all at once.
A single unit of at least 15 stocks that are used in program trading. Baskets are traded on both the NYSE and the CBOE for institutions and index arbitrageurs. Both instruments allow for the composite purchase of all of the stocks in the S&P 500 in a single trade. Baskets were created after the stock market crash in 1987 to better facilitate institutional trading on the index. Taobiz explains Basket Basket was also the nickname given to a specific type of financial instrument that briefly traded on the Philadelphia Stock Exchange in 1989. This security was removed from trading due to regulatory controversy over its nature. The baskets that traded on the other two exchanges eventually also ceased trading due to poor volume.
A category of stocks that accounts for companies involved with the discovery, development and processing of raw materials. The basic materials sector includes the mining and refining of metals, chemical producers and forestry products. Taobiz explains Basic Materials Sector The basic materials sector is sensitive to changes in the business cycle. Because the sector supplies materials for construction, it depends on a strong economy. This sector is also sensitive to supply and demand fluctuations because the price of raw materials, such as gold or other metals, is largely demand driven.
A rough measurement of the amount of a company’s profit that can be allocated to one share of its stock. Basic earnings per share (EPS) do not factor in the dilutive effects on convertible securities. Basic EPS is calculated as follows: Basic EPS = (net income – preferred dividends) / weighted average number of common shares outstanding If a company has a simple capital structure, meaning that it has not issued any potential dilutive securities, basic EPS can be a useful metric on its own. Taobiz explains Basic Earnings Per Share For companies that have a complex capital structure (that is, they have issued potential dilutive securities), diluted EPS is considered to be a more precise metric than basic EPS. Diluted EPS takes into account all of the outstanding dilutive securities that could potentially be exercised (such as stock options and convertible preferred stock) and shows how such an action would impact earnings per share. Companies with a complex capital structure must report both basic EPS and diluted EPS to provide a more accurate picture of their earnings per share; basic EPS will always be the higher of the two. If the company has a simple capital structure, it only needs to report basic EPS.
1. The analysis of economic trends in relation to a specific base year. base-year analysis expresses economic measures in base-year prices to eliminate the effects of inflation. 2. The analysis of a company's financial statements by comparing current data with that of a previous year, or base year. base-year analysis allows for comparison between current performance and historical performance. Taobiz explains base-Year Analysis 1. base-year analysis is often used when expressing gross domestic product, and is known as real GDP when referred to in this way. By eliminating inflation, the trend of economic growth is more accurate, as price level changes are accounted for. $$ (base Year) = $$ (Chosen Year) x Price Index (base Year) / Price Index (Chosen Year) 2. base-year analysis of a company's financial statements is important to be able to determine whether a company is growing or shrinking. If, for example, a company is profitable every year, the fact that its revenues are shrinking year-over-year may go unnoticed. By comparing revenues and profits to those of a previous year, a more detailed picture emerges.
Alternate term for a short position in a financial security. A bear position attempts to profit in a market by betting that prices will fall for certain securities. The short seller borrows securities in the hopes that prices will decline. When the price drops, the investor makes a profit on the price change. When the price rises, the investor loses money. There are also numerous alternative ways to initiate bear positions such as buying put options or buying inverse ETFs. Taobiz explains Bear Position A bear position is the opposite of a bull position. A bear position is a trade or investment that is made in the hopes that the security's price will drop. If a short sale moves against the investor or trader, the trader may be exposed to unlimited losses since the price of the security can continue to rise. This is in contrast to a long position where the price of the security can move against the investor only a certain amount; that is, to zero. The use of alternative strategies to initiate a bear position can mitigate some of these risks.
A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market. Taobiz explains Bear Market A bear market should not be confused with a correction, which is a short-term trend that has a duration of less than two months. While corrections are often a great place for a value investor to find an entry point, bear markets rarely provide great entry points, as timing the bottom is very difficult to do. Fighting back can be extremely dangerous because it is quite difficult for an investor to make stellar gains during a bear market unless he or she is a short seller.
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