Resources

To learn more about the philosophy behind the Power 100^®, stocks, dividends, trading, and options, utilize the resources below.

The Power Curve: Smart Investing Using Dividends, Options, and the Magic of Compounding

In the immortal words of Albert Einstein, "compounding is the most powerful force in the universe." In his book, professional money manager and Power 100^® creator Scott G. Kyle explains in entertaining and understandable terms how to tap into this ultimate strength to improve one's stock market returns. From the fundamental to the technical to the psychological, Kyle covers everything the beginning investor needs to know to avoid common investment pitfalls and provides advanced trading techniques that will help improve performance of even the most experienced investors.

Learn more about "The Power Curve"

Financial Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Active
An investment strategy in which the investor believes he can outperform the market by making specific investing and trading decisions. In business, someone who participates in the day-to-day operations and management of a company.

American Depository Receipts (ADRs)
Since most other countries do not allow stock certificates to leave their borders, a foreign company may arrange for a trustee (typically a large bank) to issue ADRs (sometimes called American Depository Shares, or ADSs) representing the actual, or underlying, shares. Each ADR is equivalent to a specific number of shares.

American Depository Shares (ADS)
A U.S. dollar-denominated equity share of a foreign-based company available for purchase on an American stock exchange. An ADS is issued by depository banks in the U.S. under agreement with the issuing foreign company.  An ADS is a single share of the entire issuance known as an ADR.
 
American Style Options
An option that can be exercised at any time by its owner.

Annual Rates of Change (Per Share)
Compound yearly rates of change of per-share sales, cash flow, earnings, dividends, and book value, or other industry-specific, per-share figures.

Annual Total Return
A compound yearly return to shareholders that includes both stock price appreciation and dividend returns.

Arbitrage
The process of buying an asset in one market place and concurrently selling it in another for a different price.

Ask
The price at which someone is willing to sell a security. Alternatively, the price at which an investor can purchase a security.

Assets
The total of current assets (normally cash and short-term investments, inventories, and receivables) and long-term assets (typically including property, equipment and good will).

Assignment
The process by which the investor is required to buy (in the case of a short put) or sell (in the case of being short a call) stock when options sold short are in-the-money at time of expiration. See also Called Away.

At-The-Money (ATM)
Used to describe a call (or put) option that has a strike price equal to or near the price of the underlying asset.

Balance Sheet
In the case of a company, a financial statement that lists the assets, debts, and owner’s investment as of a specific date.

Basis Point
One basis point equals one-hundredth of one percentage point.

Beta
A relative measure of the historical sensitivity of the stock’s price to overall market fluctuations. A Beta of 1.50 indicates a stock tends to rise (or fall) 50% more than the broad market.
 
Bid
The price at which someone is willing to buy a stock or option contract, or conversely the price at which an owner of a stock or option can sell such security.

Bond
A long-term debt instrument, typically characterized by fixed, semiannual interest payments and a specified maturity date.

Book Value Per Share
Net worth (including intangible assets), less preferred stock at liquidating or redemption value, divided by common shares outstanding.

Buy To Close
The closing of an option contract, initiated by first selling short.

Buy To Open
The act of initiating a contract position by buying a call or put.

Buy Write
Buying a stock long while simultaneously selling a call against the long stock.  See also Covered Call.

Call Bear Spread
The simultaneous sale of a call at a given strike price and purchase of a call at a higher strike price.

Call Bull Spread
The simultaneous purchase of a call at a given strike price and sale of a call at a higher strike price.

Call Option
An option which gives its buyer the right (but not the obligation) to buy a number of shares of an underlying security at a fixed price before a specified expiration date. Call buyers hope the price of the stock will rise. Call options can be sold as a means to generate income and/or provide some downside protection for a long position.

Called Away
To be assigned, or required to sell, stock on which calls were sold short.

Cash Based Settle Options
The owner of this type of option receives cash equal to the difference between the index’s closing price and the strike price of the option rather than any securities. Most European style options are cashed based.

Cash Flow
The total of net income plus non-cash charges (depreciation, amortization, and depletion) less preferred dividends (if any).

CBOE
Chicago Board Options Exchange.

Chain (Option Chain)
An abbreviated means for providing relevant information for a given contract. Chains include the underlying security, the expiration date, the strike price and the type of option (call or put).

Compound Growth
The annual rate of growth of an investment when dividends or interest are reinvested.

Contract
An exchange traded derivative instrument that gives the holder of the contract the right, but not the obligation, to exercise the contract and trade the underlying asset at a specified price. In the case of equity options, each contract represents 100 shares.

Core Holdings
A significant long-term position within a portfolio which is purchased with the intent of maintaining for an extended period.

Counterparty Risk
The risk that the other party in an agreement will default. This is also known as default risk.

Covered
A position that is hedged.

Covered Call
See Buy Write.

Credit Spread
The difference between the amount received from selling an option and the amount paid for buying an option. The spread results in a credit when the price received for selling an option is higher than the price paid for buying the second option in the transaction.

Current Assets
An asset on the balance sheet that may reasonably be expected to be converted into cash, sold, or consumed during the normal operating cycle of a business, usually 12 months or less. Current assets usually include cash, receivables, and inventory.

Current Liabilities
Financial obligations that a business will have to satisfy within the next 12 months. Current liabilities include accounts payable, taxes, wage accruals, and total short-term debt, or debt due (the sum of notes payable and the portion of long-term debt maturing in the operating year).

Current Ratio
The sum of current assets divided by the sum of current liabilities.

Default Risk
See Counterparty Risk.

Delta
The amount an option will change for a corresponding one point change in the price of the underlying security. Delta values range from 0 to 1.

Delta Adjusted Exposure
Gross, or notional, exposure for a given position multiplied by the position’s delta.

Delta Premium Credit
The additional premium received by virtue of closing one short option contract and selling a later dated option with the same strike price.

Depreciation
An amount charged against operating profits to reflect the aging of plant and equipment owned by a company.

Dividend
A payout to shareholders determined by a Board of Directors.

Dividend Declaration Date
The date a company declares a dividend payable in the future.

Dividend Ex-Date
The date by which an investor must have purchased a stock in order to receive announced dividends or stock distributions. If the investor purchases stock on or after this date, he will not received the dividend.

Dividend Payment Date
The date a dividend is paid.

Dividend Record Date
The date used to determine which shareholders are entitled to the dividend or distribution. This ensures that the dividend is sent to the correct people and credited to the correct accounts. The date is usually two business days after the ex-date.

Dividend Yield
Total cash dividends declared over the previous 12 months, divided by the recent price of the stock.

Dividends Paid Per Share
The common dividends per share paid (but not necessarily declared) during the calendar year.

Earnings
A company’s total profit before nonrecurring gains or losses, but after all other expenses.

Earnings Per Share (EPS)
Net profits attributable to each common share as originally reported by the company, but adjusted for all subsequent stock splits and stock dividends.

Effective Yield
The current dividend divided by the original stock purchase price.

Equity
Ownership interest held by shareholders in a corporation.

European Style Options
An option that can only be exercised on its expiration date.

Exchange Traded Funds (ETFs)
A basket of stocks that trades throughout the day on a major exchange. Each ETF has a unique ticker and trades much like a regular stock.

Exercise
To implement the rights of an option holder by buying (in the case of a call) or selling (in the case of a put) the underlying asset. 

Expiration Date
The date at which a contract ends.

Exposure
The amount, or size, of a position. This can be represented in dollar or percentage terms, and on a notional or delta adjusted basis, and as an absolute number or as a percentage of the total portfolio.

Fill
The price at which an order is executed. To complete an order.

Gamma
The rate at which delta changes.

Gross Long Exposure
Total value of all long-oriented positions (long equity, long calls, and short puts) on a notional or fully assigned basis.

Gross Short Exposure
Total value of all short-oriented positions (short equity, long puts, and short calls) on a notional or fully assigned basis.

Gross Exposure
Total value of all positions (long and short) in a given portfolio position on a notional or face value basis. See also Total Exposure.
 
Growth Stock
Stocks of companies with earnings that grow consistently over time, reflecting the fact that such companies have limited sensitivity to the country’s economy as it moves up and down.

Hedge
To enter a position that reduces the exposure or risk of an underlying position.  To manage risk. 

Historical Volatility
A measure of a security’s or index’s past volatility, or change in price, over a given time period. Often measured by standard deviation over a preceding 12 month period.

Implied Volatility
A theoretical measure of a given security’s or index’s expected or imputed future volatility, usually over a 30 day period.

Income Statement
A financial report that lists revenues, expenses, and net income throughout a given period.

Income Stocks
Equities with higher-than-average dividend yields (often, but not always, stocks with dividends that are likely to be maintained or raised).

In-The-Money (ITM)
Used to describe a call (or put) option that has a strike price that is less (or more in the case of a put) than the price of the underlying asset. If General Electric common stock is trading at $25 per share, a call option on General Electric with a strike price of $20 is in-the-money.

Intrinsic Value
The value of a security, justified by factors such as assets, dividends, earnings, and management quality. Intrinsic value is at the core of fundamental analysis since it is used in an attempt to calculate the value for an individual stock and then compare that value with the market price.

Intrinsic Value Premium
The amount by which an option is in-the-money.

Investor
Someone who allocates capital with a time horizon of a year or more with the objective of providing a return on that money.

Last
The most recent price at which a trade was executed. In the case of illiquid securities and derivatives, this may differ substantially from current bid/ask quotes.

Layer In
The process for entering less than the intended full position. For example, if your goal is to purchase 1,000 shares of company X, you might purchase 500 shares today and wait for weakness to purchase the remaining 500 shares.

LEAPS
Long-term equity anticipation securities. LEAPS are options that typically have expiration time frames of 12 months or longer.

Leverage
The use of various financial instruments such as derivates (e.g. options, futures contracts) or margin borrowing with the goal of amplifying returns.  In business, the use of borrowing (usually in the form of bank debt) to finance operations or to enhance ROE.

Limit Order
An order placed to buy or sell a set number of shares or contracts at a specified price or better.

Long
To enter a position with the objective of profiting from the increase in price of a security.

Long-Term Debt
The portion of borrowings (including bank notes, debentures, and capitalized leases) that will be due not in the current 12 months, but in future operating years.

Margin
An amount borrowed from one’s brokerage firm.

Market Capitalization (Market Cap)
The market value of all common shares outstanding for a company, calculated by multiplying the recent price of a stock by the number of common shares outstanding. While there is no single definition accepted, large-cap stocks typically have market values of more than $5 billion. Mid-cap stocks have market values from $1 billion to $5 billion. Small-cap stocks have market values of less than $1 billion.

Market Neutral
A portfolio for which net exposure is at or near zero.

Market Order
A buy or sell order in which the broker is to execute the order at the best price currently available.

Market Value
The price at which a security currently can be sold.

Multiple
A ratio, or measure, usually applied to various financial metrics of a company such as its stock price.

Naked
To hold a position that is un-hedged. 

Net Asset Value (NAV)
The market value of a company’s assets less any liabilities divided by the number of shares outstanding. In the case of a mutual fund, the market value of all cash and securities held within the fund, less any liabilities, divided by the number of shares outstanding.

Net Exposure
Gross long exposure less gross short exposure.

Net Profit (or Income)
A company’s total profit before nonrecurring gains or losses, but after all other expenses.

Net Profit Margin
Net income before nonrecurring gains and losses as a percentage of revenues.

Net Worth
All the assets shown on the balance sheet, including any tangible assets (i.e. goodwill, debt discount, deferred charges) less current liabilities, long-term debt, and all other non-current liabilities. In other words, the sum of common plus preferred stockholders’ equity. Also referred to as shareholders’ equity.

Notional Exposure
The total face value of the option were it fully assigned.

Open Interest
The total number of contracts (for a given strike price and expiration period) that have not yet been exercised, expired, or fulfilled by delivery. This is not the same as volume traded.

Operating Earnings
Earnings left after subtracting the cost of goods sold, marketing, and general and administrative costs from sales. Sometimes referred to as EBITDA (earnings before interest, taxes, depreciation, and amortization).

Option
A contract that gives the buyer the right to buy or sell 100 shares of stock within a certain period of time and at a pre-established price. A call option gives an investor a right to buy 100 shares of stock at a specified price, while a put option allows him to sell 100 shares.

Out-Of-The-Money (OTM)
Used to describe a call option with a strike price above the price of the underlying asset or a put option with a strike price below the price of the underlying asset. For example, a put option to sell 100 shares if IBM stock at $60 per share is out-of-the-money if the stock currently trades at $80. Even though an out-of-the-money option has no intrinsic value, it may have market value based on variables such as time and volatility.

Overweight
A portfolio that contains a greater amount of a given security compared to the security’s weight in the underlying benchmark portfolio.

Passive
An investment strategy involving limited ongoing buying and selling of securities. A belief that one can not outperform the market as a whole by taking advantage of near-term market fluctuations and/or the temporary mis-pricing of a given sector. In business, someone who does not play an active role in the management of a company.

Payout Ratio
The ratio on a percentage basis of the net income a firm pays to its stockholders in dividends. If a company pays out no dividends, its payout ratio is 0%. If it pays out in dividends the exact amount of its earnings, its payout ratio is 100%. A company with earnings of $2 per share and an annual dividend of $1 per share has a payout ratio of 50%.

Premium
The price at which an option trades. The size of the premium is affected by various factors including the time to expiration, interest rates, strike price, and the price and price volatility of the underlying asset.

Price
The amount at which any asset trades.

Price Earnings Ratio (P/E Ratio)
The most widely used measure of stock valuation. The price of the stock divided by earnings per share for a 12 month period.

Price Earnings/Growth Ratio (PEG) The ratio of price/earnings per share compared to a company’s growth rate.  If a given company is trading for 22x earnings and its earnings are growing at 30% per year, its PEG ratio is approximately 0.73. In general, a PEG ratio under 1 is viewed as favorable.

Price To Book
A stock’s total capitalization (market cap) divided by its book value, calculated either on a total valuation or a per share basis.

Price To Sales
A stock’s total capitalization (market cap) divided by its sales over a 12 month period.

Put Bear Spread
The simultaneous purchase of a put at a given strike price and sale of a put at a lower strike price.

Put Bull Spread
The simultaneous sale of a put at a given strike price and purchase of a put at a lower strike price.

Put Option
Gives the buyer the right to sell a number of shares of stock at a price until the option’s expiration date. Put buyers hope the price of the stock will fall. Puts may also be purchased to protect an investment in case the price of the stock goes down. Put options may be sold as a means to generate income and/or create an entry point for a stock purchase at a price that is lower than the then-market-price of the stock.

Ratio Call Selling
The sale of more short calls on a given position than what is held of long stock or deep in-the-money short puts.

Raw
Gross, or total, return not converted to an annualized basis.

Real Estate Investment Trust (REIT)
A financial intermediary that invests its equity capital and debt in income-producing real estate and mortgages. In general, at least 95% of otherwise taxable income must be distributed to shareholders in the calendar year earned, and specified percentages of both investments and gross income must be related to real estate.

Retained Earnings
Net profit for the year, less all common and preferred dividends, when relating to the income statement. With respect to the balance sheet or common equity, it is the sum of net profit in all years of the company’s existence less all dividends (common and preferred) ever paid.

Roll
To close one option contract and open up a new contract with the same strike price with a later dated expiration.

Roll Up and Out
To close one option contract and open up a new contract with a higher strike price (in the case of a call) with a later dated expiration.

Return on Equity (ROE)
A company’s earnings divided by its shareholder equity. A critical measure that demonstrates how well a company uses its reinvested earnings to generate additional earnings.

Return on Investment (ROI)
For a business, a measure of a company’s profitability for a given time period, usually 12 months, divided by total common stock, preferred equity, and long-term debt. How effectively a company uses its capital to produce profits.  For investors, the amount of money made divided by the capital deployed for a given investment.

Sales
Gross volume less returns, discounts, and allowances; net sales.

Sell To Close
To complete a contract position that was opened up by buying long.

Sell To Open
The act of initiating an option contract by first selling it short. 

Sell Write
To sell a stock short while simultaneously selling a put against the short stock position.

Settlement Price
The price established by the exchange at the end (or beginning in the case of index options) of each day for the purposes of determining net gains or losses in a given contract as well as margin requirement.

Short
To enter a position with the objective of profiting from the decline in price of the security.

Special Situations
Otherwise quality companies that pay little or no dividends and, temporarily and for non-fundamental reasons, have fallen on hard times.

Spread
The difference, or delta, between the bid and the ask.

Standard Deviation
A measure of a security’s volatility, usually calculated over a 12 month period. The distance a stock is likely to move from its average.

Straddle
The purchase or sale of puts and calls in equal proportion and with the same terms.

Strangle
The purchase of both an out-of-the-money put and an out-of-the-money call, each option having the same underlying asset and maturity.

Strike Price
The exercise price at which the owner of a call option can purchase the underlying stock or the owner of a put option can sell the underlying stock.

Synthetic Stock
A financial instrument that artificially simulates another instrument through the combination of other assets. For example, the simultaneous purchase of a long call and the sale of a short put creates a synthetic stock.

Tau
See Vega.

Theta
The measurement of time decay of a given option position.

Time Value Premium
Total premium less intrinsic value premium. In the case of out-of-the-money options, the entire premium amount is time value premium.

Total Exposure
See Gross Exposure.

Trader
Someone who allocates capital with a time frame of one year or less with the goal of getting a return on that capital.

Underweight
A portfolio that contains a lesser amount of a given security compared to the security’s weight in the underlying benchmark portfolio.

Value
The amount of an asset’s true worth based on objective financial metrics.

Vega
The amount by which the option price changes when volatility changes. Also known as Tau.

VIX
The implied volatility for the S&P 500 for the subsequent 30 day period.

Volatility
The measure of the amount by which an underlying security is expected to fluctuate in a given period.

Volume
The total number of shares or options traded over a given period, usually a day.

VXN
The implied volatility for the NASDAQ 100 for the subsequent 30 day period.

Working Capital
The amount of current assets found on the balance sheet less current liabilities.

Write
To sell an option, the seller of the option being known as the writer of the option. 

Yield
Dividends paid for the previous 12 months divided by the current price, expressed as a percentage. Also known as Dividend Yield.