Statutory Stock Option

Statutory Stock Option

A Statutory stock option is also known as incentive stock options. This type of employee stock option gives participants an additional tax advantage that unqualified or non-statutory stock options do not. Statutory stock options require a plan document that clearly outlines how many options are to be given to which employees, and those employees must exercise their options within 10 years of receiving them. Furthermore, the option exercise price cannot be less than the market price of the stock at the time the option was granted. Statutory stock options cannot be sold until at least a year after the exercise date and two years after the date the option was granted. The taxation of statutory stock options can be somewhat complicated. Exercise of statutory stock options will not result in immediate declarable taxable income to the employee. Capital gains tax is then paid on the difference between the exercise and sale price. This type of option is also considered one of the preference items for the alternative minimum tax.

Window Dressing

Window Dressing

A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.

Nonforfeiture Clause

Nonforfeiture Clause

A clause in an insurance policy that allows for the insured to receive all or a portion of the benefits or a partial refund on the premiums paid if the insured misses premium payments, causing the policy to lapse. The nonforfeiture clause may only be in effect for a limited period of time, and may only kick in after the policy has been active for several years.

Agreed Amount Clause

Agreed Amount Clause

A property insurance provision in which the insurer agrees to waive the co-insurance requirement. To obtain an agreed amount clause, insurers require a statement of property values signed by the insured as a condition of activating or including an agreed value provision in a commercial property policy, otherwise known as an agreed amount clause. The coinsurance clause requires the insured to have a certain percent of the property value insured, and often provides the insured a substantial reduction in rate, provided he or she maintains insurance equal to the amount agreed upon at the inception of the policy.

Stock Replacement Strategy

Stock Replacement Strategy

An investment strategy that attempts to mimic the returns of a certain asset or group of assets by using a combination of different derivatives rather than buying the individual shares in the market. Traders will attempt to profit from the leverage found in options and futures because they can provide the same type of exposure to the underlying asset for a lower cost than if the trader were to buy the underlying assets outright.

Value Added Reseller (VAR)

Value Added Reseller (VAR)

Third-party vendor that enhances or modifies existing hardware or software, adding value to the services provided by the processor or acquirer.

Reverse Stock Split

Reverse Stock Split

A reduction in the number of a corporation's shares outstanding that increases the par value of its stock or its earnings per share. The market value of the total number of shares (market capitalization) remains the same. For example, a 1-for-2 reverse split means you get half as many shares, but at twice the price. It's usually a bad sign if a company is forced to reverse split - firms do it to make their stock look more valuable when, in fact, nothing has changed. A company may also do a reverse split to avoid being delisted.

Universal Life Insurance

Universal Life Insurance

A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup. The death benefit, savings element and premiums can be reviewed and altered as a policyholder's circumstances change. In addition, unlike whole life insurance, universal life insurance allows the policyholder to use the interest from his or her accumulated savings to help pay premiums.

Equity-Indexed Universal Life Insurance

Equity-Indexed Universal Life Insurance

A permanent life insurance policy that allows policyholders to tie accumulation values to a stock market index. Indexed universal life insurance policies typically contain a minimum guaranteed fixed interest rate component along with the indexed account option. Indexed policies give policyholders the security of fixed universal life insurance with the growth potential of a variable policy linked to indexed returns.