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S&P Indexes – indexes computed by Standard & Poors, a division of The McGraw-Hill Companies, Inc. They include indexes for specific industry groups as well as stocks grouped by market capitalization. The stocks grouped by market capitalization are selected by a committee to be representative, and they must meet certain criteria. The S&P 500 consists of 500 of the largest stocks. The S&P MidCap 400 includes 400 stocks that are smaller than stocks in the 500. The S&P SmallCap 600 comprises 600 stocks that are smaller than those in the S&P Midcap 400. Stocks in all three indexes combined as the S&P Supercomposite 1500. S&P indexes are also compiled by sector.
Sales Charge – the fee charged by a mutual fund when purchasing shares, usually payable as a commission. It represents the difference, if any, between the share purchase price and the share net asset value.
Secondary Market – a market available to trade securities after their initial public offering. The New York Stock Exchange, as well as all other stock exchanges, the bond markets, etc., are secondary markets.
Sector – a broader category than an industry. For example, the Basic Materials sector would include industries such as agriculture, aluminum, chemicals, paper, non-ferrous metals, steel, and cement. Definitions of sectors vary, depending on the reporting service.
Securities Exchange Commission (SEC) – the Federal Agency that overseas all US Securities practices including the Initial Offering of stock and the Exchanges. The primary federal regulatory agency of the securities industry.
Security – the term describes stocks, bonds, and other financial instruments.
Seller’s Market – a market in which the seller has an advantage because demand exceeds supply, and prices are rising or high. The opposite of a buyer’s market.
Selling Short – borrowing a security and then selling the security with the intent of buying it back and replacing it at a lower price than it was borrowed. The short trader is betting that the price of the security will go down.
Series – Stocks: shares, which have common characteristics, such as rights to ownership and voting, dividends, par value, etc. In the case of many foreign shares, one series may be owned only by citizens of the country in which the stock is registered. Options: All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price.
Shareholder – the holder of a number of stock certificates in a given company.
Shareholder Equity – ownership interest of common and preferred stockholders in a company. The difference between the assets and liabilities of a company, which is sometimes called also net worth.
Shares – certificates or book entries representing ownership in a corporation or similar entity.
Share Repurchase – a program by which a corporation buys back its own shares in the open market. It is usually done when shares are undervalued. Since it reduces the number of shares outstanding and thus increases earnings per share, it tends to elevate the market value of the remaining shares held by stockholders.
Shell – a public company that has never done business, or is no longer doing business. A “shell” can be used by another company to “go public” by a reverse merger. If Company A is the shell and Company B wants to become public without going through the normal underwriting process, then Company A acquires Company B, issuing its shares to Company B shareholders. Then Company A has a shareholders meeting to change its name. The process is much faster than a regular underwriting. However, the new company may suffer from a lack of attention from investors.
Short Interest – shares that have been sold short and not yet repurchased.
Short Interest Ratio – a ratio which tells how many days it would take to buy back all the shares which have been sold short. A short interest ratio of 2 would indicate that it would take 2 trading days to buy back all the shares which have been sold short. This is based on the current volume.
Short Position (Options) – a position wherein a person’s interest in a particular series of options is as a net writer (i.e., the number of contracts sold exceeds the number of contracts bought).
Short Position (Stocks) – occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make “good delivery” to the buyer. Eventually, the shares must be bought to close out the transaction. Technique is used when an investor believes the stock price is going down. Opening a “short position” has the same meaning as ” selling short“.
SIC – abbreviation for Standard Industrial Classification. Each 4-digit code represents a unique business activity.
Slippage – the difference between estimated and actual transaction costs. The difference is usually comprised of commissions and price differences.
Soft Dollars – commission payments that are used to pay for additional services besides trading securities. Research services provided to institutional investors are often paid for with “soft dollars”.
S-1 – a registration statement filed with the SEC for an IPO. The S-1 includes a draft of the prospectus as well as other required information. The SEC reviews it and provides comments to the company. The document is revised as necessary, resubmitted to the SEC, and a preliminary prospectus (the red herring) is printed. At no time does the SEC “approve” an offering. The preliminary prospectus is the only written document that may be shown to the public to explain and market the offering. The preliminary prospectus will normally have all the information that the final prospectus will have, except for the actual sales price of the securities. Sometimes some of the language is changed when the final prospectus is printed, usually to add comments about any recent developments. The period between the date of filing a registration statement with the Securities and Exchange Commission and the date the securities are offered to the public (the effective date), is typically at least 20 days. This is called the “waiting period” or “cooling off period” It was imposed after abuses in the 1920s, when underwriters would file a deal and then immediately sell it before investors had enough time to study it.
Spot Month – the current trading month. Also known as the front month in commodity trading.
Spot Price – the current cash price for which a commodity is trading at a specific time and place.
Spread – the gap between the highest price buyers are willing to pay (the bid) and the lowest price sellers are willing to accept (the ask).
Spread Strategy – an options strategy having both long and short options on the same underlying security.
Stock – ownership in a company. See also Equity.
Stock Dividend – payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.
Stockholder – see Shareholder.
Stock Split – change in the number of shares outstanding which has no effect on the total value of the shares. In a 2-for-1 split, for example, shareholders receive one additional share for each share owned, and the trading price of the stock drops to approximately one half the previous level. In a reverse split, the number of shares is reduced, usually in an effort by the company to increase the trading price per share. For example, in a 1-for-5 reverse split, shareholders would receive one new share for each five old shares held.
Stop (-Loss) Order – an order to sell a stock when the price falls to a specified level.
Stop Limit Order – this is similar to a stop order. It is an order, which becomes a limit order once the specified price is touched.
Straddle – an options strategy where the purchase or sale of an equal number of puts and calls is made. The same strike price and expiration date is the same for all.
Strangle – an options strategy which is a combination involving a put and a call with different strike prices with the same expiration date.
Strike Price – the stated price per share for which underlying stock may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract. Although there are a number of different strike prices and expiration dates for each exchange-traded option, the exchange sponsoring the trading establishes rules for determining which strike prices and expiration dates will be traded for each option. This standardization is designed to elicit interest by many potential traders, thereby promoting contract liquidity.
Subscription Price – a fixed price at which a new issue of securities is sold to the public.
Support – in technical analysis: a price level at which declining prices stop falling and move sideways or upward. It is a price level where there is sufficient demand to stop the price from falling.
Syndicate – a group of financial firms acting jointly on a temporary basis. The term is used to refer to a group of banks making a loan and to a group of underwriters selling a new issue of stocks or bonds.
Systematic Risk – risk related to market fluctuations in the Capital Asset Pricing Model. Also called undiversifiable risk. Beta is a measure of systematic risk. According to the Capital Asset Pricing Model, investors are only rewarded for taking on systematic risk. Investors do not earn any excess return for taking on diversifiable or unsystematic risk.