Inactive Asset
Assets that are not continuously productive, such as a computer used only when the main system is not working.
See: Asset
Inactive Post
New York Stock Exchange trading post where inactive stocks are traded in 10-share lots instead of the regular 100 share round lots.
See: Inactive Stock/Bond; New York Stock Exchange; Normal Trading Unit; Round Lot
Inactive Stock/Bond
Security that trades infrequently and has such a low volume that it makes the security illiquid.
See: Illiquid; Liquidity; Volume
In-And-Out Trader
Person who buys and sells the same security in the same day in hopes of profiting from steep price moves.
See: Day Trade; Speculator; Trader
Incentive Stock Option
Plan created by the Economic Recovery Tax Act of 1981 (ERTA) whereby qualifying options are free of taxes when granted and when exercised. Profits on exercised shares sold are taxed as ordinary income--until 1987, it was subject to capital gains tax if the shares were held at least one year.
See: Capital Gain
Income Bond
A bond that only pays interest if the corporation has sufficient earnings. These bonds are usually traded flat (without accrued interest) and are an alternative to bankruptcy.
See: Accrued Interest; Adjustment Bond; Flat
Income Mutual Fund
A mutual fund that invests in income producing securities such as bonds, preferred stocks, high dividend yielding common stock, or covered call stock options.
See: Bond; Common Stock; Covered Call Option; Dividend; Mutual Fund; Options; Preferred Stock
Income Limited Partnership
A limited partnership, such as real estate, whose objective is to generate high taxable income. These types of partnerships are usually designed for tax sheltered accounts such as IRAs and pension plans.
See: Income Property; Limited Partnership
Income Property
Real estate bought specifically to generate income. The property may be bought by individuals, corporations or income limited partnership. When selling the property, the owners also hope to sell at a profit.
See: Income Limitied Partnership; Limited Partnership
Income Shares
A class of capital stock that is issued by a split investment company or a dual purpose mutual fund. Owners receive dividends and interest generated from the income shares and from capital shares, another class of capital stock. Owners of capital shares receive capital gain generated from both classes.
See: Capital Stock; Dividend; Dual Purpose Investment; Mutual Fund
Income Statement
A quarterly or annual financial statement that shows a corporation's business results. It specifically shows all revenues, earnings, expenses, costs and taxes.
See: Balance Sheet; Financial Statement
Income Stock
A stock that pays a relatively high dividend.
Incorporation
The process by which a company receives a state's permission to function as a corporation. After incorporation, the company will show that it is incorporated by adding the word "incorporated" into its name. "Inc." or other acceptable abbreviations may be used.
See: Articles Of Incorporation
Incremental Cash Flow
Net of cash inflows and outflows that arise from a corporate investment project.
Indemnify
An agreement by one party to compensate another party for losses or damages that are incurred if specific actions or events occur.
Indenture
A written contract, also known as a "Deed of Trust", under which bonds and debentures are issued, setting forth maturity date, interest rate, redemption rights, call privileges and other terms. Under the rules of the Trust Indenture Act of 1939, the contract is executed by the issuer and a trustee who acts on behalf of the bondholders.
See: Bond; Call Features Of A Bond; Debenture; Maturity Date; Redemption
Independent Broker
NYSE member who executes orders for other floor brokers who currently have more business than they can manage themselves, or for firms whose floor brokers are not on the floor. Previously known as "Two-Dollar Brokers", these brokers used to receive $2 per hundred shares for executing such orders. These fees, paid by the commission brokers, were once fixed but are now negotiable.
See: Broker's Broker; Floor; Floor Broker; Member Firm; NYSE; Two-Dollar Broker
Index
1: A statistical yardstick that measures the economy. It is usually expressed as a percentage change from a base year or from the previous month. An example of an economy index is the Consumer Price Index . Using 1967 as its base year, the index consists of key consumer goods and services that measures price movements to changes in inflation rates.
See: Base Period; Consumer Price Index; Inflation
2: Statistical measurement of groups of securities, industries or markets that reflect market prices and the number of shares outstanding for the companies in the index. Indexes may either be broad-based (a wide range of firms in many industries aiming to mirror the overall market) or narrow-based (consisting of securities from a specific industry). Stock indexes are used as a base for trading index options.
See: Index Arbitrage; Index Fund; Indexing; Index Option; Standard & Poor's 500 Index
Index Arbitrage
A trading technique in which baskets of stocks and stock futures contracts are bought and/or sold according to their conformity and deviation from a stock index. To keep the position fully hedged, the stocks are bought and the futures are usually sold and vice versa. In doing this, the arbitrageur is locking in a profit (or loss).
See: Arbitrage; Futures Contract; Hedging; Index
Index Fund
A mutual fund that buys securities to match that of a broad-based index such as the Standard & Poor's Index. The fund aims to achieve the same return as the general market.
See: Mutual Fund; Index; Standard & Poor's 500 Index
Indexing
An investor who buys individual securities or index funds to mirror a broad-based index such as the S & P 500. The investor aims to match the index's performance.
See: Index Fund; Standard & Poor's 500 Index
Index Option
Call and put option contracts traded on an underlying index, such as the S & P 100, and not a specific security. Investors who trade index options invest in a particular market or industry group without having to buy all the underlying securities. A narrow-based index allows an investor to trade in a particular industry while a broad-based index will scope many industries.
See: Call Option; Index; Options; Put Option
Indicated Yield
The dividend or coupon rate stated as a percentage of the security's present market price. The type of security determines how the indicated yield is calculated. The indicated yield for common stock is calculated by dividing its annual dividend by its market price . For preferred stocks, the contractual dividend is divided by the market price. And, for fixed rate bonds, the indicated yield is the same as the current yield.
See: Common Stock; Coupon; Dividend; Fixed Income Investment; Preferred Stock; Yield
Indication
Estimation of what a security's bid and offer prices will be when trading resumes after a delayed opening or trading halt--also called "indicated market".
See: Delayed Opening; Imbalance Of Orders; Trading Halt; Trading Range
Indication of Interest
Underwriting term meaning a non-binding indication of a client's interest in purchasing securities that are in registration (awaiting effectiveness by the Securities and Exchange Commission). The broker is required to provide the client with a preliminary prospectus on the securities. The indication of interest is non-binding because it is illegal to sell a security that is in the registration process.
See: Prospectus; Registered Security; Underwrite
Indicators
1: Measures of economic activity utilized by economists to forecast the general direction of the economy.
See: Econometrics; Economic Growth Rate; Leading Indicators
2: Measurement utilized by technical analysts to make forecasts regarding the direction of the overall market or the movement of a particular stock.
See: Forecasting; Technical Analysis; Technical Analyst
Individual Retirement Account (IRA)
A personal savings plan that offers tax advantages to save and invest for retirement. Contributions are often tax deductible in whole or in part, depending on individual circumstances, including compensation levels and participation in an employer sponsored qualified retirement plan. Income derived from investments in a traditional deductible or nondeductible IRA is tax deferred until withdrawn. Under certain circumstances, withdrawals from a Roth IRA are tax-free. Tax penalties may apply to IRA distributions taken before age 59 ½.
See: IRA Rollover; Lump-Sum Distribution; Qualified Pension Plan Or Trust; Self-Directed IRA; Spousal IRA; Tax Deferred
Industrial
Stock market lingo that is a catch-all category that includes all firms that have businesses that are not classified as utility, transportation, or financial companies.
Industrial Development Bond (IDB)
A bond issued by a municipality to finance fixed assets that are secured by a lease agreement with a corporation whose payments amortize the debt. IDBs used to be tax-exempt to holders. However, under current tax laws, they are no longer tax-exempt.
See: Amortization; Fixed Assets; Municipal Bond; Tax Exempt Security
Industrial Production
A key economic indicator that is a released monthly by the Federal Reserve Board. The indicater relates the total output of all US factories and mines.
See: Economic Indicators; Federal Reserve Board; Indicator; Producer Price Index
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