Useful Definitions
| Dividend | Money and/or stock distributions shared as part of the profits with stock holders. | |
| Extreme Dividends | Dividends that are substantially larger than the average pay outs in any given industry – Typical 20% to 155% yields | |
| ETF | Exchange Traded Fund | Managed Investment Funds that are traded on stock exchanges of which many pay dividends |
| ETN | Exchange Traded Note | Bonds traded like stock shares on stock exchanges, used to finance business activities. Brokers usually warn of higher risks due to possibility of defaults, but some of these instruments pay VERY WELL in the form of profit sharing coupons plus balloon payments at the end of the bond’s life. |
| Margin | Credit offered to broker’s customers secured by the customers stock and creditworthiness. | |
| MLP | Master Limited Partnership | Stock that has special tax benefits for shareholders such as business deductions, while not making the shareholders liable for company risks beyond the value of the shares. Examples would be royalty shares of gas and oil well companies. |
| Mutual Fund | A professionally managed collection of assets such as stocks or commodities (such as precious metals – GLD, SLV) where in management fees are charged and dividends can be paid to shareholders | |
| Options | Contracts made to or by stockholders for the purchase or sale of stocks at predetermined prices within fixed time frames | |
| Strike price | A pre arranged contract price a stock is exchanged for | |
| Exercise | Owner entitled transfer of stock and money to fulfill an option contract | |
| Calls (naked) | Option contracts to sell a stock at a fixed price if the buyer is still interested by the expiration date guaranteed with the seller’s cash or credit | |
| Call (covered) | Calls are contracts to sell in the future at a fixed price (strike price)– regardless of the market price within the fixed time period – wherein the potential transaction is guaranteed – covered – with the seller’s stock holdings | |
| Call (synthetic covered) | A call offered at a fixed (STRIKE) price backed up by a call the seller owns at a higher strike price – in this case if the call is exercised, the seller only loses the difference between the two calls | |
| Put | Stock insurance – A guarantee to buy a stock for a fixed (STRIKE) price before the expiration date if its’ listed trading price drops below the strike price. This option is secured with cash or credit. Similar to synthetic covered calls, risk to the sellers is sometimes limited by them purchasing puts of lower strike prices. | |
| REIT | Money and/or stock distributions shared as part of the profits with stock holders. – Real Estate Investment Trusts -A type of stock with special profit and reduced tax implications. Typical REITS are required to pay 90% of their profits to stockholders. REIT dividends qualify for lower tax status | |
| Longs | Owned a stock or option positions | |
| Shorts | Sold borrowed stock or option positions for which the seller usually rents the stock from a brokerage and guarantees the sold options. | |