Financial Glossary Q
Quadruple witching day
Once every quarter — on the third Friday of March, June, September, and December — stock options, stock index options, stock index futures contracts, and single stock futures expire on the same day in the United States.In the past, when all contracts expired at the same hour of the day, trading could be extremely volatile as professional investors attempted to capitalize on pricing differences. But in recent years, various adjustments in the trading schedule have helped to reduce the pace.
Qualified domestic trust (QDOT)
If your spouse isn’t a US citizen and your estate is large enough to risk being vulnerable to estate taxes, you can use a qualified domestic trust (QDOT) to allow your spouse to enjoy the benefit of the marital deduction until his or her own death.In short, the marital deduction means that one spouse can leave the other all of his or her assets free of estate tax. The inherited assets become part of the estate of the surviving spouse, and unless the combined value is less than the exempt amount, estate tax could be due at the death of that spouse.The difference, with a QDOT, is that at the death of the surviving, non-citizen spouse, the assets in the trust don’t become part of his or her estate, but are taxed as if they were still part of the estate of the first spouse to die. Income distributions from the trust are subject to income tax alone, but distributions of principal may be subject to estate tax.
Qualified retirement plan
A qualified retirement plan is an employer sponsored plan that meets the requirements established by the Internal Revenue Service (IRS) and the US Congress. Pensions, profit-sharing plans, money purchase plans, cash balance plans, SEP-IRAs, SIMPLEs, and 401(k)s are all examples of qualified plans, though each type works a little differently.Employers may take a tax deduction for contributions to qualified plans, and in some plans employees may make tax-deferred contributions. Among the other requirements, a qualified plan must provide for all eligible employees equivalently. That means the plan can’t treat highly paid employees more generously than it does less-well paid employees, though one group of employees, such as those within five years of the official retirement age, may receive different treatment than another group. In contrast, a nonqualified plan may be available to some employees and not others. In some plans, nonqualified contributions are made with after-tax dollars, either by the employer or the employee, although any earnings in the plan are tax deferred. In other plans, future benefits are promised but contributions are not actually deposited in an account established for the employee.Mandatory federal withdrawal rules that apply to qualified plans do not apply in the same way to nonqualified plans, though nonqualified plans are subject to stringent regulation as well.
When a securities analyst evaluates intangible factors, such as the integrity and experience of a company’s management, the positioning of its products and services, or the appeal of its marketing campaign, that seem likely to influence future performance, the approach is described as qualitative analysis.While this type of evaluation is more subjective than quantitative analysis — which looks at statistical data — advocates of this approach believe that success or failure in the corporate world is often driven as much by qualitative factors as by financial data.
When a securities analyst focuses on a corporation’s financial data in order to project potential future performance, the process is called quantitative analysis. This methodology involves looking at profit-and-loss statements, sales and earnings histories, and the statistical state of the economy rather than at more subjective factors such as management experience, employee attitudes, and brand recognition. While some people feel that quantitative analysis by itself gives an incomplete picture of a company’s prospects, advocates tend to believe that numbers tell the whole story.
An unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity. Quantitative easing is considered when short-term interest rates are at or approaching zero, and does not involve the printing of new banknotes.
The financial world splits up its calendar into four quarters, each three months long. If January to March is the first quarter, April to June is the second quarter, and so on, though a company’s first quarter does not have to begin in January.The Securities and Exchange Commission (SEC) requires all publicly held US companies to publish a quarterly report, officially known as Form 10-Q, describing their financial results for the quarter. These reports and the predictions that market analysts make about them often have an impact on a company’s stock price.For example, if analysts predict that a certain company will have earnings of 55 cents a share in a quarter, and the results beat those expectations, the price of the company’s stock may increase. But if the earnings are less than expected, even by a penny or two, the stock price may drop, at least for a time.However, this pattern doesn’t always hold true, and other forces may influence investor sentiment about the stock.
In the United States, quasi-public corporations have links to the federal government although they are technically in the private sector. This means that their managers and executives work for the corporation, not the government. And, in many cases, you can buy stock in a quasi-public corporation, expecting to share in its profits.Many quasi-public corporations were originally federal agencies that have been privatized. Among the best known are Fannie Mae, Freddie Mac, and Sallie Mae. They securitize consumer loans and sell them in the secondary market. The US Postal Service is also a quasi-public corporation, as is the Tennessee Valley Authority (TVA).
The NASDAQ Stock Market sells shares in a unit investment trust (UIT) that tracks the NASDAQ 100 Stock Index. This market capitalization weighted index includes the largest 100 companies trading on the NASDAQ and is adjusted quarterly to keep it focused on the strongest performers. The name Qubes comes from the UIT’s trading symbol: QQQQ.Qubes resemble Standard & Poor’s Depositary Receipts (SPDR), which reflect the performance of the Standard & Poor’s 500-stock Index (S&P 500) and the DIAMOND (DIA), which tracks the Dow Jones Industrial Average (DJIA). These investments are also decribed as exchange traded funds.
On a stock market, a quotation combines the highest bid to buy and the lowest offer to sell a stock. For example, if the quotation on Apple stock is “20 to 20.07,” it means that the highest price that any buyer wants to pay is $20, and the lowest price that any seller wants to take is $20.07. How that spread is resolved depends on whether the stock is traded on an auction market, such as the New York Stock Exchange (NYSE), or on a dealer market, such as the Nasdaq Stock Market (Nasdaq), where the price is negotiated by market makers.
Last Updated: December 26th, 2014