Investor Glossary-underwaterInvestor Glossary-underwaterInvestor Glossary-underwaterInvestor Glossary-underwaterInsightful stock market charts - Click here
investor
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

Underwater

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


Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
Investor Glossary Index >>> # 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 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
Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
©2004-2014 Investor Glossary - All rights reserved - Terms of Use