Investor Glossary-underwaterInvestor Glossary-underwaterInvestor Glossary-underwaterInvestor Glossary-underwaterInsightful stock market charts - Click here
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


The HTML to link to this page

In finance the term underwater can have two distinct meanings. First, an underwater stock option, also known as an out of the money option, would be one that is worthless. This can refer to a call option with a strike price that exceeds the market price of the underlying stock. Conversely, a put option would be underwater if its strike price is less than the current market price of the underlying stock.

The second usage of the term underwater in finance is in regards to solvency (i.e. book value exceeds market value). An investor who is underwater has become insolvent, or unable to meet their financial obligations. This can refer to a margin call on a brokerage account as well as a home mortgage (i.e. underwater loan). Many mortgages went underwater as a result of the bursting of the housing bubble in the late 2000s. A homeowner with an underwater mortgage may be unable to sell the property without paying the amount underwater (i.e. losses) beforehand or negotiating loan modification terms with the lender.

Rate this underwater definition...

Learn about investing with the Investor Glossary Term of the Day

Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.

Popular Terms: covered put, risk management, average price per share, deferred tax, dividends payable, retained earnings, 144a, 1031 exchange, diluted share, reverse mortgage, class C shares, inflation, Zero Cost Collar, FICO score, stock split, ex-dividend, quality assurance, in escrow, limit order, phantom income, annual return, 1035 exchange, APR, irrevocable trust, option premium, deferred revenue, VIX, Key Rate Duration, 401a, real GDP, EBITDA, LIBOR, margin rate, current ratio, stock market close, cancelled check, ex-dividend date, balance sheet, liquidity ratio, required rate of return, FTSE, labor relations, wholly-owned subsidiary, implied volatility, per diem, command economy, debt service coverage, open position, minority interest

Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use