DEFINITION of holder
Holder is the buyer of an option contract who has the right to exercise the option during its lifetime. The holder is the owner of the option.
WHAT IT IS IN ESSENCE
The owner of an option may on-sell the option to a third party in a secondary market, in either an over-the-counter transaction or on an options exchange, depending on the option.
When most people think of investment, they think of buying stocks in the stock market. And many are probably completely unaware of terms like options trading. Buying stocks and holding on to them with a view to making long-term gains is, after all, one of the more common investment strategies. That kind on the participant in the market, we call holder.
One person can be shareholder or stockholder or bondholder.
Shareholders and stockholders are basically the same. They both describe someone who owns shares of stock in a business. So, holding shares, or stock and bonds mean the same. With some differences which we will explain.
Who is a shareholder?
A shareholder is individuals, companies, or trusts, that own shares of a for-profit corporation. The individuals own a specific number of shares, which they each purchased at a specific price.
Being a shareholder means taking the ride as the company’s stock goes up and down. A shareholder can sell some or all of the shares, at whatever the market price is at the time. If the shares are publicly held, it’s easy to determine the share price. But, in a closely held corporation, there is no ready market for the shares. So it’s almost impossible to determine a price or to sell shares to someone else.
Some companies also have preferred stock and shareholders. Dividends must be paid to these shareholders before they are paid to common stock owners, but these shareholders do not have voting rights. Preferred shares are like a hybrid, with characteristics of both stocks and bonds.
And stockholders invested their money to purchase these shares and they gain in two ways:
- Through dividends paid based on the number of shares owned by the shareholder, and due to the corporation’s profits.
- By selling their shares at a profit.
A stockholder is separate from the corporation and as a result, will have limited liability as far the corporation’s obligations.
The owner of a corporation’s common stock means a common stockholder. The common stockholders elect the corporation’s board of directors. And also, will vote on very significant transactions such as merging the corporation with another corporation. Generally, it is the common stockholders who become wealthy when a corporation becomes increasingly more successful.
In addition to common stock, some corporations also issue preferred stock. An owner of these shares is known as a preferred stockholder or preferred shareholder. Such stockholder usually accepts a fixed cash dividend that the corporation will pay before it pays the common stockholders a dividend. In exchange for this preferential treatment of dividends, the preferred stockholder will forego the potential financial gains that may occur for the common stockholder.
The bondholders are lenders. Also, bondholders cannot vote and they are not entitled to dividends.
But perhaps most important is the fact that bondholders rank senior to shareholders. This means that the bondholders are among the first in line to be repaid in the event the issuer liquidates. Shareholders might receive some proceeds from the liquidation after this point if there is anything left. This seniority provides an extra level of security for bondholders, and this is one reason corporate bonds are generally considered “safer” investments than stock.
HOW TO USE
If you want to delve into the underlying meaning of the terms, “stockholder” technically means the holder of stock, which can be construed as inventory, rather than shares. Conversely, “shareholder” means the holder of a share, which can only mean an equity share in a business. Thus, if you want to be picky, “shareholder” may be the more technically accurate term, since it only refers to company ownership. Anyway, you are the holder.