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


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | 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