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Glossary of Terms Used in Education Videos
The terms displayed here are referenced during the educational videos and do not represent a complete financial glossary. If you would like more information on these and other terms associated with these topics, please visit www.rydexinvestments.com.
Limit order
An order to buy a stock at or below a specified price or to sell a stock at or above a specified price. For instance, you could tell a broker, "Buy me 100 shares of XYZ Corp. at $8 or less" or "Sell 100 shares of XYZ at $10 or better." The customer specifies a price, and the order can be executed only if the market reaches or betters that price. A conditional trading order is designed to avoid the danger of adverse unexpected price changes.
Qualified and non-qualified retirement plan
A retirement plan established by employers for their employees that meets the requirements of Internal Revenue Code Section 401(a) or 403(a) and is eligible for special tax considerations. The plan may provide for employer contributions, as in a pension or profit-sharing plan, as well as employee contributions. Employers can deduct plan contributions made on behalf of eligible employees on the company's tax return as business expenses. Plan earnings are not taxed to the employee until withdrawn. In contrast, a non-qualified plan is a retirement plan that does not meet the IRS requirements for favorable tax treatment.
Short position
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 back to close out the transaction. This technique is used when an investor believes the stock price will drop.
Stop order (or stop)
An order to buy or sell at the market close when a definite price is reached, either above (on a buy) or below (on a sell) the price that prevailed when the order was given.
Stop-loss order
An order to unwind a position when the price moves against you. For example, if you had purchased a stock, the stop-loss order could be to sell the stock when the price falls to a specified level. If you were short the asset, the stop-loss would trigger a purchase.
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