Understanding Ticker Symbols Is Like Knowing What Tattoo Is Going On Your Backside

Written By
Paul Tracy
Updated January 16, 2021

It's a well-known fact that most tattoos, particularly those involving arcane symbols, are the spawn of tequila. Asian languages are common hunting grounds for trendy material to place on one's buttocks, neck, or lower back, but in many cases, the result is not "body art" -- it's a life-long lesson on the merits of understanding the meaning of symbols.

Take, for example, Jane and the word "free." After a few margaritas, Jane may think it's a good idea to let everyone know she's not going to be weighed down by society, the jerks at work, or that no-show cable guy. Why not tattoo it on her butt in Chinese? It seems more exotic and meaningful that way, no?

Jane quickly looks up the Chinese translation for "free" on her phone and then staggers over to the tattoo parlor conveniently located next to the bar. She asks the guy to stab her with a needle until   


 

appears on her butt, and she goes home happy.

This all seems harmless until Jane learns that she's got the wrong symbol on her bottom. You see,   


 

means "free of charge," which is not exactly what a woman wants to advertise. She had the wrong symbol -- what Jane really wanted was the symbol for "freedom":  


 

If you're an investor, let Jane's butt be a lesson to you: Using the wrong ticker symbols is (almost) as bad as tattooing solicitations on yourself, and it might be a long time before someone sees you naked and points out your unintended investment.

Many companies have several different types of securities listed, and their ticker symbols (and symbol extensions) help investors understand which securities are which. So don't make Jane's mistake -- learn how to read a ticker symbol before you commit. It's trickier than it seems. Here are a few tips.

Ticker Symbol Basics
A ticker symbol -- also known as a stock symbol -- is a string of letters used to identify a stock, bond, mutual fund, ETF or other security traded on an exchange.

When a company goes public or issues securities to the public, it selects an exchange on which those securities will trade and a ticker symbol that will identify those securities. In some cases, companies try to make their ticker symbols "memorable" (such as TAP for Molson Coors, or DNA for Genentech).

The Length of the Symbol Denotes the Exchange
The New York Stock Exchange uses ticker symbols with three letters or fewer (such as NYT for the New York Times Co., or T for AT&T). Ticker symbols with four or more letters generally denote securities traded on the Nasdaq.

Extensions Denote the Security Type
There are also a series of special symbols that appear either as an additional letter in the symbol or, for NYSE stocks, after a dot to denote special types of securities. Symbols ending in X denote mutual funds. Tickers ending in Q denote issuers who are in bankruptcy; Y denotes that the security is an ADR. Z denotes that the security is either a special class of preferred stock, a stub security, represents a limited partnership interest, or is a special class of warrants.

Extensions Denote Whether You're Getting Extra Stuff
The XDIS extension indicates that a security is trading ex-dividend (or ex-distribution, as the abbreviation suggests). If you buy a stock before it goes XDIS, then you will receive the next upcoming dividend payment. If you purchase the stock after it goes XDIS, you will not receive the dividend. This is important, because with a large dividend, the price of a stock may move up by the dollar amount of the dividend as the ex-dividend date approaches and then fall by that amount after the ex-dividend date. In turn, the buyer of an XDIS stock does not receive the dividend; the seller gets it.

These glitches in dividends are exactly what Amy Calistri's Daily Paycheck newsletter research team looks for. In fact, they have  uncovered a dividend trick we call "Hidden High-Yielders," which pay up to seven times more than the financial media are reporting. Get the team's report on this secret here.

Then there is the XW, a ticker-symbol extension that signifies that a stock is trading ex-warrant. Warrants are securities that give the holder the right, but not the obligation, to buy a certain number of securities (usually the issuer's common stock) at a certain price before a certain time.

When the warrant window closes, the stock starts trading ex-warrant, and the ticker symbol carries an XW after it. In McDonalds's case, for example, the ticker would change from MCD to MCD-XW if and when the stock goes ex-warrant. If the stock were trading with warrants attached in the first place, the ticker would have WW at the end (like this: MCD-WW). Like XDIS stocks, when a stock starts trading ex-warrant, its price typically dips.

The XRT extension denotes that the security is trading without rights. Stock rights are instruments that allow shareholders to buy more shares of the company, usually within one or two months and for below the current market price. Stocks that have just gone ex-rights often trade lower.

The Investing Answer: Ticker symbols are key to facilitating the huge number of trades that occur every day around the world. Without them, brokers and investors would likely confuse issuers, securities and different securities from the same issuer. Ticker symbols, via their additional-letter codes, also communicate important information to investors about the trading status of the security or the issuer.

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