January
Effect
Tendency
of the stock market to rise between
December 31 and the end of the first week
in January. The January Effect occurs because many investors choose
to sell some of their stock right
before the end of the year in order to claim a capital loss for tax purposes. Once the
tax calendarrolls over to a new year on January
1st these same investors quickly reinvest their money in
the market, causing stock prices to rise. Although the January
Effect has been observed numerous times throughout history, it is difficult for
investors to profit from it since the market as a wholeexpects it to happen and therefore adjusts its prices accordingly.
Certificate
of Deposit
CD. Short- or medium-term, interest-bearing,
FDIC-insured debt instrument offered by banks and savings and loans. CDs offer higher rates of return than most comparable investments, in exchange for tying up invested money for the duration of the certificate's maturity. Money removed
before maturity is subject to a penalty. CDs are low risk, low return investments, and are also known as "time deposits",
because the account holder has agreed to keep the money in the account
for a specified amount of time, anywhere from three months to six years
intrinsic value
intrinsic value
1. The actual value of a security, as opposed to
its market price or book value. The
intrinsic value includes other variables such as brand name, trademarks, and copyrights that
are often dificult to calculate and sometimes not accurately reflected in the
market price.
One way to look at it is that the market
capitalization is the price (i.e. what investors are willing
to pay for the company)
and intrinsic value is the value (i.e. what the company is really worth). Different
investors use different techniques to calculate intrinsic value.
2. The amount by
which a call option is in the money,
calculated by taking the difference between the strike price and
the market price of the underlier. For
example, if a call option for 100 shares has a strike
price of $35 and the stock is trading at $50 a
share than the call option has an intrinsic value of $15 share, or $1500. If
the stock price is less than the strike
price the call option has no intrinsic value.
3. The amount by which a put option is
in the money, calculated by taking the difference between the strike price and
the market price of the underlier. For example, if a put option for 100 shares
has a strike price of $35 and the stock is trading at $20 a share than the put
option has an intrinsic value of $15 per share, or $1500. If the stock price is
greater than the strike price the put option has no intrinsic value.
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