Category: Business – This Explainer

Short selling generally involves borrowing a security, selling it, and later buying it back. This explainer covers locate and delivery, margin, borrowing fees, dividends, unlimited loss potential, squeezes, buy-ins, disclosure, manipulation rules, and portfolio use.

Securities lending allows an owner to lend stocks or bonds to a borrower in exchange for collateral and a fee. This explainer covers beneficial ownership, title transfer, collateral, rebates, agents, short selling, manufactured payments, recalls, voting rights, default, and program risk.

Margin trading lets an investor buy securities partly with money borrowed from a broker. This explainer covers collateral, initial and maintenance margin, interest, buying power, house requirements, concentration, liquidation, voting and dividends, leverage, and risk controls.

A margin call is a broker’s demand for additional equity after a margined account falls below required levels. This explainer covers maintenance calculations, market declines, house requirements, deadlines, liquidation rights, concentration, cross-collateral effects, day trading, and prevention.

A trading halt temporarily stops trading in a security on one or more venues. This explainer covers pending news, volatility mechanisms, regulatory suspensions, listing concerns, order handling, reopening auctions, price gaps, options, and investor response.

Stock market circuit breakers temporarily pause trading when broad indexes or individual securities move sharply. This explainer covers market-wide decline levels, limit up-limit down bands, reopening, reference prices, timing, order risk, derivatives, and why safeguards cannot prevent losses.

A stock split divides each existing share into multiple shares without changing the owner’s proportional stake. This explainer covers split ratios, price adjustment, market capitalization, par value, earnings per share, historical data, options, fractional treatment, and investor interpretation.

A reverse stock split combines multiple existing shares into a smaller number without changing proportional ownership by itself. This explainer covers exchange compliance, share-price adjustment, fractional shares, authorized shares, options, liquidity, market capitalization, and investor warnings.

The ex-dividend date is the first trading day when a buyer generally does not receive the declared dividend. This explainer covers declaration, record, ex, and payment dates, settlement timing, price adjustment, pending orders, special dividends, short positions, taxes, and common mistakes.

A dividend record date is the cutoff the issuer uses to identify holders entitled to a declared payment. This explainer covers street-name ownership, transfer agents, settlement, ex-dividend dates, payment dates, due bills, share lending, pending trades, and why buying on the record date can be too late.

A dividend reinvestment plan, or DRIP, automatically applies cash dividends toward more shares. This explainer covers company and broker plans, fractional shares, compounding, purchase timing, discounts, fees, taxes, recordkeeping, concentration, opt-out rules, and total return.

A cash dividend is a board-declared payment from a corporation to eligible shareholders. This explainer covers regular and special payments, declaration and payment dates, retained earnings, cash flow, payout ratios, debt covenants, tax treatment, price adjustment, and sustainability.