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Price a seller is willing to accept to sell a security.

Price a buyer is willing to pay to buy a security.

An investment vehicle that is similar to a mutual fund in that a share of an ETF represents shares in a group or basket of stocks. One very important difference from mutual funds, however, is that ETFs are traded on an exchange, just like a stock. Another difference from many mutual funds is that ETFs are not actively managed, and therefore are most often designed to represent the composition and performance of a particular market index.

Some of the best known ETFs are:

• DIA— the “Diamonds”, representing the 30 stocks in the Dow Jones Industrial Average
• SPY—the “Spyders”, representing the stocks in the S&P 500 Index
• QQQQ—Formerly the “Triple Qs” (QQQ), now QQQQ, representing the stocks in the Nasdaq 100 Index

Here are answers to some frequently asked questions on ETFs.

See also HOLDRS.

HOLding Company Depositary ReceiptS

A specialized ETF that represents ownership in a limited number of specific stocks (typically about 20) in a particular industry group or sector. For example, one of the most popular of the HOLDRS is the Semiconductor HOLDRs (SMH), which represents shares in 20 different semiconductor related companies.

More info on HOLDRS can be found at HOLDRS.com and at the AMEX.

An order to buy or sell a security at a specified price or better. Limit orders guarantee a price, but do not guarantee execution.

Short for market capitalization, which is simply a measure of a company’s value calculated by multiplying the number of outstanding shares by the current share price.

You may see companies referred to by the size of their market capitalization: large-cap, mid-cap, small-cap, etc. There are no exact definitions on where the group boundaries lie, but here is what Investopedia has to say on the subject:

Brokerages vary on their exact definitions, but the current approximate classes of market capitalization are:

Mega Cap: Market cap of $200 billion and greater
Big/Large Cap: $10-$200 billion
Mid Cap: $2 billion to $10 billion
Small Cap: $300 million to $2 billion
Micro Cap: $50 million to $300 million
Nano Cap: Under $50 million

An order to buy or sell a security as quickly as possible at the current market price. A ‘buy’ order will typically be executed at or near the current ask price, while a ’sell’ order will typically be executed at or near the current bid price.

From 888Options.com:

A stock option is a contract that gives the owner the right, but not the obligation, to buy or sell a particular stock at a fixed price (the strike price) for a specific period of time (the expiration date). The contract also obligates the seller or writer to meet the terms of delivery if the contract right is exercised by the owner.

Options types are known as ‘calls’ and ‘puts’. Again from the 888options site:

A call is an option contract that gives the owner the right to buy the underlying stock at a specified price (its strike price) for a certain, fixed period of time (until its expiration).

A put is an option contract that gives the owner the right to sell the underlying stock at a specified price (its strike price) for a certain, fixed period of time (until its expiration).

To learn more about options, start by reading the 888Options FAQ on the basics. The 888Options site also has an options education section, Options University. The OU will allow you to learn more about the basics of options, and to dig as deeply as choose into various options trading strategies.

A charting method that takes into account only significant price movement, independent of time. The chart reversal parameters also serve to filter out less significant, day-to-day price fluctuations.

For more information on how to construct and use Point & Figure charts, check out:

• The P&F section of StockCharts.com’s Chart School
• Tom Dorsey’s book on the subject

An order to buy or sell a security that is activated once the specified ’stop’ price is reached. Once the price is reached, the order becomes a market order. Execution price is not guaranteed.

A buy stop is entered above the current ask price.
A sell stop is entered below the current bid price.

VIX is the symbol for the CBOE Volatility Index. Here is the description from the CBOE web site:

The VIX Index is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world’s premier barometer of investor sentiment and market volatility.

Many consider the VIX (chart) to be a sort of investor “fear gauge”, where low levels in the VIX indicate a level of investor complacency and high VIX levels indicate a certain level of “fear” in investors. Typically, upward spikes in the VIX reading have been associated with market bottoms.

On September 22, 2003, the methodology used to calculate the VIX was changed to use S&P 500 option prices, rather than S&P 100 options. The index calculated using the old method can now be found under the symbol VXO (chart).