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Range – the difference between the high and low price during a given period.
Rating – a measure of the attractiveness or quality of a security or company. Can refer to a credit rating or a bond rating, for example. An analyst rating on a stock is a number (e.g. 1 – 5) or category (such as “strong buy” or “accumulate”) that indicates the analyst’s prediction for how the stock will perform in the future. The most commonly used rating scale is a 5-point system. (Strong buy; weak buy or accumulate or outperform; neutral or hold or market perform; underperform, avoid, weak sell; and sell or strong sell.)
Ratio Calendar Combination – an options strategy where a trader has at the same time a ratio calendar spread using calls and a ratio calendar spread using puts. The strike price of the calls is greater than the strike price of the puts.
Ratio Calendar Spread – an options strategy using either puts or calls, whereby one sells more near term options than longer term options are purchased. All options have the same strike price.
Ratio Spread – an options strategy using either puts or calls. The trader purchases a certain amount of options and then sells a larger amount of out-of-the-money options.
Ratio Write – buying stock and selling calls against the stock. It can also be constructed by shorting stock and then selling puts against the short stock.
Record Date – date by which a shareholder must officially own shares in order to be entitled to a dividend. For example, a firm might declare a dividend on Nov 1, payable Dec 1 to holders of record Nov 15. Once a trade is executed an investor becomes the “owner of record” on settlement, which currently takes 5 business days. Stocks trade ex-dividend the fourth day before the record date, since the seller will still be the owner of record and is thus entitled to the dividend.
Redemption Charge – the commission charged by a mutual fund when redeeming shares.
Red Herring – informal nickname for the preliminary prospectus. The cover of the document contains a warning, printed in red, that some parts of the document may be changed before the shares are issued and the final prospectus is printed.
Relative Strength – in technical analysis: a comparison of an individual stock’s performance to that of a market index. Most times the S&P 500 or the Dow Jones Industrial Average are used for comparison purposes. It is calculated by dividing the stock price by the index price. A rising line indicates that the stock is doing better than the market. A declining line indicates that the stock is not doing as well as the market.
Repurchase Agreement (repo) – the sale of securities with a commitment to buy them back at a specified date and at a specified price. Repos are used by the Federal Reserve as a type of open market operation and by government securities dealers to finance their inventories of bonds.
Resistance – in technical analysis: a price level where a security’s price stops rising and moves sideways or downward. It indicates an abundance of supply. Because of this, the security may have difficulty rising above this level. There are short term and longer term resistance levels.
Retracement – a price movement in the opposite direction of the previous trend.
Return – change in value of an asset or portfolio over a period of time, including any distributions made from the asset or portfolio.
Return On Assets (ROA) – indicator of profitability. Determined by dividing net income for the past 12 months by total assets. The result is shown as a percentage.
Return On Equity (ROE) – indicator of profitability. Determined by dividing net income for the past 12 months by common stockholders’ equity (adjusted for stock splits). The result is shown as a percentage.
Reverse Stock Split – a proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. A firm generally institutes a reverse split to boost its stock’s market price and attract investors.
Rights Offering – issuance of “rights” to current shareholders allowing them to purchase additional shares, usually at a discount to market price. Shareholders who do not exercise these rights are usually “diluted” by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them.
Risk – a measure of the volatility and likelihood of loss in an investment.
Road Show – series of presentations to potential investors by the senior management of a company. The company is not permitted to disclose any material information that is not already in the prospectus. The meetings are generally restricted to institutional investors. Representatives of the press are not permitted, since SEC rules prohibit the company from making public statements other than what is contained in the prospectus.
Rule of 72 – shortcut method to approximate how long it will take for an investment to double at a particular annual compound growth rate, or what annual compound growth rate is required to double an investment in a given number of years. Divide 72 by either number to get the other number. For example, at a compound growth rate of 12%, an investment will double in approximately 72/12 = 6 years. An example the other way: if an investment doubles in 15 years, then the annual compound growth rate was approximately 72/15 = 4.8%. The method is not precise, but it does give a close approximation.
Russell 1000, 2000 and 3000 – a series of indexes computed by The Frank Russell Company. The firm takes the 3,000 largest capitalization U.S. stocks, which represent approximately 98% of the investable US equity market, measured in dollars. As of the June 30, 1999, reconstitution of the index, the individual market capitalizations ranged from $407.2 billion at the top down to $178.2 million at the bottom. These 3,000 stocks are divided into the 1,000 largest market caps (which ranged down to $1,350.8 million as of June 30, 1999), and the 2,000 smallest market caps. Russell further divides the stocks in its indexes into Growth and Value, based on forecasted earnings growth rate and price-to-book ratio. The Russell 2000 is one of the most widely used benchmarks for tracking the performance of “small cap” stocks.