While you might realize a profit from the premium you receive for selling the option, you could also suffer a loss, if in order to sell, you had to buy the investment at a market price that was higher than the strike price. And that's the situation under which the person holding the option would exercise it.

Similarly, the investments a mutual fund makes are considered the fund's underlying investments, since the net asset value (NAV) of the fund is based on the combined values of all of the investments the fund owns.

Some investors concentrate on identifying and investing in undervalued stocks, drawn by their bargain prices. However, there's no way to be sure when, if ever, the price will increase enough to justify the purchase.

Although you can technically be underwater with both call and put options, the term is used primarily to describe a situation that occurs when options you've received as part of an employee compensation package are currently worthless. For example, if you have options on your company stock with a strike price of $50, and the stock is currently trading at $30, you're $20 underwater on each option. You can see how the next step may be drowning financially speaking, of course.

Part of the underwriter's job is to weigh the risks involved in taking on the financial responsibility of finding buyers against the profit to be made on the difference between the price paid for the issue and the amount it will generate. Typically, a number of bankers join forces as a purchase group, or syndicate, to spread the risk around and to reach the widest possible market.

Insurance policies also need an underwriter. In this case, the term refers to a company that is willing to take the risk of insuring your life, property, income, or health in return for a premium, or payment.

To avoid owing gift tax, however, you may want to limit what you add each year to an amount that qualifies for the annual gift tax exclusion. That's $10,000 per contributor in 2002..

One advantage of an UGMA custodial account is that you can transfer assets that you expect to increase in value into the account. That way, any capital gains occur in the account, increasing the account's value, and you avoid potential capital gains or estate taxes that might have been due had you continued to own the asset.

One potential disadvantage of a custodial account may be that any gift to the account is irrevocable. That means the assets become the property of the minor from the moment they go into the account, even though the minor cannot legally take control until the age of 18 or 21, depending on state law. At that point, called majority, the child can use those assets as he or she wishes.

In addition, if you are both the donor and the custodian, and die while the child is still a minor, the assets are considered part of your estate. That could make the estate's value large enough to be vulnerable to estate taxes.

In addition, in all 50 states, the child must be 21 to gain control of the assets in the account. In some states, the UTMA has replaced the UGMA, while in others, both are available.

UITs resemble mutual funds in the sense that they offer the opportunity to diversify your portfolio without having to purchase a number of separate securities. You buy units, rather than shares, of the trust, usually through a broker. However, most UITs trade more like stocks than mutual funds in the sense that you trade them in the secondary market if you want to sell rather than redeeming your holding by selling your units back to the issuing fund.

Further, the price of a UIT fluctuates constantly throughout the trading day, just as the price of an individual stock does, rather than being repriced only once a day, after the close of trading. As a result most UITs (though not DIAMONDS or Spiders (as SPDRs are known) trade at prices higher or lower than their net asset value (NAV).

Series EE bonds pay interest for 30 years at a rate that's readjusted every six months. Series HH bonds, which you can buy at face value only through an exchange for Series EE bonds, pay a fixed rate of interest for up to 20 years. With both types of bonds you earn less if you keep the bonds for fewer than five years.

In addition, Series I bonds, which are sold at face value, are indexed for inflation. The interest rate you earn varies, based on changes in the consumer price index (CPI).

The interest on US savings bonds is exempt from state and local taxes and is federally tax-deferred until the bonds mature or are cashed in. At that point, the interest may be tax-exempt if you use the bonds to pay college expenses, provided that your adjusted gross income (AGI) falls in the range set by federal guidelines.

Since in order to be listed, a company has to have a certain market capitalization, a minimum number of outstanding shares, or comparable indication of staying power, many unlisted stocks are those of small companies that may someday meet those requirements and be listed.

In most cases, unlisted stocks are thinly traded because they do not get much attention from the media or financial analysts, and are judged to be too risky for many investors.

One reason you might choose to sell at a loss, other than needing cash at that moment, is to prevent further losses in a security that seems headed for a still-lower price.