Glossary of Financial Terms and Definitions
Before beginning my glossary, let me first define the scope of this glossary. Stock market terminology is a very vast subject that covers the bond market, stock market, trading, portfolios and even stock term slang or jargon. So, if you’re wondering what exactly this article contains, let me give you an insight. My article mainly contains all the stock terms, from all the general categories of stock market finance, and also includes the phrases and jargon that you should most specifically know, if you’re entering the stock markets. It includes all possible terms belonging to the categories of ‘investment finance’, ‘mutual funds’, ‘stock market regulatory policies’, ‘trading basics’, stock market basics and ‘stock market instruments’.
Before I start my stock terms glossary, let me tell you about the schematic progression of this article. It follows an alphabetical series, starting from the letter ‘A’, going all the way down to the letter ‘Z’. The list also defines some alphanumeric words. I hope that finding the stock term you are looking for, will be easy to locate in this really long list of stock terms and stock market definitions.
Stock Terminology – Glossary of Stock Market Terms and Definitions
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 |
| Stock Market Terminology | Stock Market Definitions |
|---|---|
| A Share | The words ‘a share’ has two meanings: (a) They are the calls of common or preferential shares that have increased voting rights on company issues. (b)In USA, mutual funds terminology states ‘a shares’ to have an upfront sales load of 5.75% of the amount invested. |
| Abnormal Return | Any return above (abnormal profit) or below (abnormal loss) the expected return on a stock or a portfolio is termed as abnormal returns. Any returns above the market returns or any returns below the market returns are also abnormal returns. |
| Absolute Priority | The distribution of a company’s net income is undertaken in accordance with the absolute priority rule, that specifies the order of disbursement as: (a)Interest to Creditors (b)Dividends to Preferred Stockholders and (c)Dividends to the Common Stockholders, in case of liquidation. |
| Acceleration Covenant | In a case of default or breach of contract, this covenant or clause matures the contract performance immediately, so that all dues are settled immediately. |
| Accommodation Trade | When a trader enters into non-competitive trades in order to avoid certain liabilities, the action is termed as an accommodation trade. This agreement is illegal in most countries. |
| Accrued Dividend | A normal dividend that is considered to be earned but is not really declared or immediately payable by the company. |
| Accumulated Earnings Tax | The federal tax that is levied on any retained earning that are in excess of the amount considered reasonable, is termed as accumulated earnings tax. |
| Acting in Concert | When two investors take similar actions (act together), to achieve a single common goal, they are said to be acting in concert. |
| Accounts Payable Turnover Ratio | This is ratio that measures the rate at which debts are discharged by a firm. It is calculated by dividing the total annual purchases with the total annual accounts payable. The higher the ratio is, the better it is for the firm. |
| Active Index Funds | These are funds where the managers try to track an index like S&P500. There is an attempt to beat the benchmarked index by using strategies, like adding stocks that have a superior performance in relation to the index and by using market timing, etc. |
| Actively Managed ETF | Actively Managed Exchange Traded Funds permit fund managers to trade outside the benchmarked index, deviate with respect to sector allocations and make other changes that are necessary to ensure increased returns. |
| Activity Ratio | This is the firm’s effectiveness indicator, for it shows the ease and speed of the company to convert various accounts and receivables, into sales and cash. |
| Adjustable-Rate Preferred Stock – ARPS | Unlike a fixed rate preferred stock, an adjustable-rate preferred stock pays dividends that fluctuate with the rate of interest on the benchmarked Treasury bill. |
| Adjusted Debit Balance | This is the final margin account balance, that is arrived at by netting all the balances owed or outstanding payments, with the on paper profits or losses. |
| Adjustment in Conversion Terms | Convertible preferred stock can be exchanged for a fixed number of common shares in accordance with the conversion terms. Adjustment in conversion terms can be made so that the holder of the convertible preferred stock does not get affected by events like common stock splits. |
| Advance Commitment | When someone promises to sell (or buy) something that he currently doesn’t own (or hasn’t bought yet), he is said to be making an advance commitment. |
| Affidavit of Loss | This is an oath which states that either the stock certificate or any other physical record of being the holder of the security has been lost on account of theft, fire, destruction or flood. |
| Affirmative Obligation | This is an obligation on specialists to post a bid or an ask, when there is insufficient market demand or supply to match orders, on the NYSE. |
| After-Hours Market Close | The final price attained by the security, in the after hours market, is called the after-hours market close. Although, this is not the price at which the market opens the next day, the investor can use this to gauge the upside potential of the stock. |
| After-Hours Trading – AHT | Trading that is conducted by both, individuals as well as institutions, after the regular trading hours on the major exchanges is called after-hours trading. |
| After-Market Performance | The performance of a stock after its initial public offering (IPO), which is measured during the lock-up period (3 to 9 months from the date of the IPO), is referred to as after-market performance of the stock. |
| Agency Cross | When a broker receives opposite orders for exactly the same security, in exactly the same quantity, he can act as an agent or broker for both the parties involved. This both party representation by one person, is called agency cross or dual agency. |
| All Or None – AON | Is a buy or sell trade order, that is placed to brokers, subject to the exact availability of supply or demand. Non availability on the particular day, renders the order as canceled. |
| All-Holders Rule | The all-holders rule requires a company to implement uniform policies (stock buybacks, stock splits, stock dividends) for shareholders belonging to the same class of shares. |
| Allied Member | Voting shareholders and officers may be granted access to the trading floor, as allied members, despite not being members of the New York Stock Exchange (NYSE), provided they clear the designated exam. |
| Alpha | This risk adjusted performance measure called alpha, is just the differential between the actual and expected returns of a stock or portfolio. |
| Alpha Generator | When a portfolio holder experiences excess returns on adding a security to the aforementioned portfolio, without having to undertake any additional risks, the particular security is known as an alpha generator. |
| Alphabet Rounds | The early rounds of funding that are required for the start up of a new company or firm, are termed as alphabet rounds. |
| Alternative Energy ETF | These are exchange traded funds that invest in companies engaged in the production of alternate energy, like ethanol, solar power and clean energy and research pertaining to the same. |
| American Depositary Receipts | When depository banks in the US economy issue negotiable certificate of deposits, known as American Depository Receipts (ADRs), to help foreign companies raise money in their markets, the certificate is known as an ADR. |
| American Depositary Shares | When foreign stock is issued in the US markets, it is termed as an American Depository Share (ADS). |
| Anderson Effect | Derived from Aurthur Anderson LLP, an accounting firm involved in many scandals, the term Anderson effect refers to the due diligence requirement needed by the auditors. |
| Ankle Biters | Stock issues with market capitalization of less than $500 million are popularly referred to as ankle biters, since they tend to gnaw at the ankles of large cap stocks that have a capitalization value of more than $10 billion. |
| Announcement Effect | When announcements, regarding changes in monetary and fiscal policy, create a ripple effect in the stock market (increased volatility and trading volumes) the phenomenon is known as an announcement effect. |
| Annual Report | This is a detailed document provided by public companies, providing the financial highlights, management discussions and analysis (MD & A), financial statements, auditor’s report, corporate information and other relevant information to the shareholders. |
| Annual Return | The annual return of an investment is its compounded annual growth rate, calculated with the help of a formula. |
| Anonymous Trading | This is when high profile investors are allowed to place bid and ask quotes anonymously, to eliminate unnecessary speculation. |
| Anti-Greenmail Provision | Greenmail is a defensive maneuver wherein a premium is paid to the majority shareholder to sell back shares to the company to thwart a potential takeover attempt. Anti-Greenmail provision ensures that the same repurchase offer is made to all shareholders or at least approved by a shareholder vote. |
| Anti-Martingale System | Martingale is a class of betting strategies (see martingale definition) and anti-martingale system is a system that thwarts the success of these strategies. |
| Anti-Takeover Measure | These are continuous and sporadic measures adopted by companies, to prevent the potential acquirer from making a hostile bid for the target company. |
| Anti-Takeover Statute | Anti-Takeover statutes are state regulations that aim at curtailing hostile takeovers. |
| Anti-Dilutive | This is a transaction that has the effect of increasing a company’s Earnings Per Share (EPS). |
| Any-and-All Bid | An any-and-all bid is the maximum price at which the acquirer is willing to purchase any shares of the target, up to the pre-determined amount. |
| Appraisal Right | This is a third party valuation demanded by the shareholders to ensure that mergers and acquisitions do not result in the acquirer paying less than the present value of the target company’s worth. |
| Approved List | This is the list of legal investments that limits the account manager’s or broker’s array of choices, as far as choosing appropriate stocks and securities for trust funds and mutual funds, is concerned. |
| Arithmetic Index | This is an index that gives equal weighting to all the individual stocks that make up the index. This is basically an unweighted index, as all stocks have an equal weighting. |
| Ask | This is the price or quote, at which a trader is willing to sell his commodity or security. |
| Asset Mix | This refers to the various classes of assets, viz. stocks, bonds and real estate, that make up an investor’s portfolio. |
| Asset Performance | This is a measure of the company’s ability to generate revenues using productive resources, in relation to its peers. It is measured with the aid of Turnover ratios, Return on Asset (ROA) ratio and other indicators. |
| Asset Turnover Ratio | This is a ratio that measures the company’s ability to generate revenues using productive assets. |
| Asset Valuation | The process of determining the value of an asset, a company or a balance sheet item using relative valuation; quantitative valuation techniques like free cash flow model, dividend discount model and residual income model; financial statement analysis and other techniques is known as asset valuation. |
| Assimilation | A complete distribution of the new securities issued to the public, is known as assimilation. |
| At-The-Close Order | This refers to the execution of a market order or a limit order, at a price that almost matches the closing price. In case a last minute execution is not possible, the order stands canceled. |
| At-The-Open Order | Order to buy or sell a security at the opening price or at the start of the opening season, failing which, the order is canceled. |
| Atlas Options | This equity based exotic option, that belongs to the mountain rage option family, has a unique way of payout calculation. All the best and worst performing stocks are removed from the underlying equity portfolio and they payout is calculated on this figure. |
| Attribute bias | If a stock selecting technique produces results with similar fundamental characteristics (leading to obvious correlation), the technique is said to have an attribute bias. |
| Auction | This is a system where different buyers place potential bids to buy a particular product or security. There are various different types of auctions, like a Dutch auctions. |
| Auction Market | The bid price and the ask price are matched for the sake of executing an order, thus eliminating any scope for negotiations, in an auction market. |
| Authorized Capital Stock | This is the maximum number of shares that can be issued by a corporation, as listed in the capital accounts section of the balance sheet. |
| Automatic Stay | This is applied when a firm files for bankruptcy. It basically stops all creditor efforts to recover their liabilities, from the one filing for bankruptcy. |
| Average Cost Basis Method | When trying to make out the gains or losses made during the sale of some shares of the mutual fund, the average cost basis method is used to calculate the cost basis. |
| Average Down | This is an investor strategy that is used to bring down the average price of shares. |
| Average Qualitative Opinion – AQO | This is the number given by stock analysts to individual companies, depending on their opinions and stock ratings. |
| Average Up | An investor strategy that aims at getting the average cost to be lower than the average price for a group of shares by buying them collectively and in larger numbers. |
| Away from the Market | When a security order is not immediately available at the price required, the security is termed to be away from the market. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Back Up the Truck | A financial slang used to refer to a large purchase transaction made on a stock or financial asset with the backing of a bullish expectation. |
| Backing Away | When a market maker fails to uphold his end of a deal, i.e. fails to honor a posted bid or ask even though his price and quantity caveats are met, he is said to have backed away. |
| Badwill | Something that is opposite to goodwill, badwill is gained when the shareholders and others in the investment community find out that the company has indulged in something that cannot be considered a good business practice. |
| Bagel Land | When the stock price of a financial security is approaching 0 dollars, i.e, it has fallen from stock market favor due to unresolvable internal issues, the stock is said to have reached Bagel land. |
| Baptism by Fire | Difficult situations (like IPOs and hostile takeover attempts) are experiences by a company or an individual, it is said to be a ‘baptism by fire’ situation. This either strengthens the financial position of the subject or completely tramples it. |
| Barefoot Pilgrim | An unsophisticated investor who loses all his wealth because of stock trading (no knowledge of risks, return and predictions) is termed as a barefoot pilgrim. |
| Barometer Stock | When a security pricing pattern closely resembles the overall market, such that, it can accurately predict the market pattern through its own pricing, it is called a barometer stock. All bellwether stocks fall under this category. |
| Basket Trade | Basket trades are single order sales that entail the buying or selling of a set of 15 or more securities. |
| Batch Trading | When different orders are accumulated together and executed simultaneously, the transaction method is termed as batch trading. |
| Bear | A bear market is a market when the general price levels are spiraling downwards. A bear is a person holding pessimistic market views and hence invests in strategies that pay out when the price of the securities decline. |
| Bear CD | A CD (Certificate of Deposit) that carries an interest that inversely correlates with the market, is termed as a bear CD. |
| Bear Hug | If there exists a doubt that a target company’s management will not agree to sell its shares, bear hugs are used to make the sales lucrative. Bear hugs are when an offer is made to buy the shares of a company at a rate much higher than the market valuation. |
| Bear Raid | Bear raids are illegal attempts of pushing down the prices of a target security, either by making large short sales or by spreading unfavorable market rumors about it. |
| Bear Trap | When there is a false market signal of a rising stock or index and the downward trend hasn’t actually revered, it is termed as a bear trap. |
| Bearer Share | Any equity certificate that is totally owned by the person holding it in physical form, is known as a bearer share. |
| Beating the Gun | Beating the gun is a phrase given to individuals who have the knack of market timing and the ability to react before others. When a beneficial transaction is executed on the basis of information that the market is yet to react to, it is termed as ‘beating the gun’. |
| Below the Market | A transaction to buy or sell a security at a price lower than the going market price, is called a ‘below the market’ transaction. |
| Best Ask and Best Bid | The lowest quoted ask price and the highest quoted bid rate in a competitive market are termed as best ask and best bid rates respectively. |
| Bid | The offer price made for buying a security is its bid rate or price. |
| Bid Size | Bid size is the number of shares that are in demand at the quoted bid price. |
| Bid Tick | A bid tick tells a bidder whether his current bid is higher, lower or in line with the previous bids. |
| Bid-Ask Spread | This is the difference between the ask price and the bid price. |
| Big Bang | The day the London Stock Exchange (LSE) was deregulated into a private limited company (27th October 1986), is known in investment history as the Big Bang. |
| Big Bath | When the income statements are manipulated to make a poor performance look worse, to gain an artificial cushion for the next financial year, the act is termed as a big bath. |
| Big Uglies | These are unpopular stocks that belong to industries like mining, oil and steel. |
| Blind Brokering | Blind brokering helps in maintaining an anonymity between the buyer and the seller of a security. |
| Blowoff | A bearish sign for technical analysts, a blowoff is a sharp price increase after a long appreciation period. It is usually followed with a price fall. |
| Blue Collar Trader | This is a trader who has other sources of income and does not need the trader job as a means to survival. It is more like a bonus or a savings plan. |
| Blue Sheets | When requests are sent to market makers, to supply certain information to the Securities and Exchange Commission, they are known as blue sheet. |
| Blue-Chip Stock | These are stocks of financially strong companies who are tried and tested through their ability to pay dividends during both, the good and the bad times. |
| Boston Snow Indicator | This is a genuine market theory that says, a white Christmas in Boston indicates rising stock prices in the next year. |
| Bourse | Any European stock exchange can be termed as a bourse but the term is most often used in reference to Paris Stock Exchange. |
| Bubble | When no fundamental analysis backs a massive surge in the equity prices of a sector, it is termed as a bubble. The bubble usually bursts sooner or later, with a drastic price drop when sell off pressures increases. |
| Buy and Hold | This is a long term, passive strategy, where the trader buys stock and holds it over a certain period of time regardless of short term price movements. |
| Buy Break | When a stock makes a movement above a certain resistance, it is called a buy break and is a buy signal. Upwards momentum most often follows a buy break. |
| Buy, Strip and Flip | In a buy, strip and flip strategy, purchased target firms are held for a very short period of time before being let off through an IPO. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Cabinet Security | A stock that is not actively traded despite being listed on a major financial exchange. |
| Call Price | Price at which a preferred stock or a bond can be redeemed by the issuer. |
| Call Warrant | Certificate issued along with a preferred stock that entitles the shareholder to buy the underlying share for an agreed upon price on or before the specified date. |
| Callable Common Stock | Shares issued for a subsidiary company by the parent company wherein the latter reserves the right to redeem the issued shares at a pre-determined price on or after a specified date. |
| Clientele Effect | Changes in investors’ stock holdings on account of perceived positive or negative effects of changes in company policy. |
| Close Position | Going short in a security if long, and vice versa. |
| Closing Tick | The difference between the number of stocks that closed higher than their previous trade and those that closed lower. |
| Collar | An options strategy that is implemented by purchasing an out-of-the-money put option and simultaneously writing an out-of-the-money call option once a long stock position has proved profitable. |
| Commodity ETF | A fund that tracks an index but is traded like a stock and invests in physical commodities, viz. agricultural goods, natural resources and precious metals. |
| Common Shareholder | An entity that has an ownership stake in a company in lieu of common shareholdings. |
| Common Stock | Securities that grant voting rights and participation rights in a company’s success through dividends and capital appreciation. |
| Composite Index | Grouping of equities using techniques, viz. price weighted and value weighted or unweighted, to arrive at a basket of securities that is representative of the overall market or sector. |
| Control Stock | Significant portion of the outstanding shares of a company owned by an entity allowing the latter to exercise controlling influence on the former. |
| Conversion Arbitrage | A risk neutral proposition which involves buying a put option and writing a covered call. |
| Conversion Price | The price at which a convertible preferred stock can be exchanged for common stocks. |
| Cooler | An individual or an institutional investor who has bad luck with equities and tends to transfer the same to other buyers. |
| Core Liquidity Providers | Market makers or underwriters who have significant security holdings and are thus able to provide the much desired liquidity. |
| Counter-Cyclical Stock | Stocks that have a negative correlation with the business cycle or the general state of the economy. |
| Covered Call | Having a long position in a stock and writing a call option on the same, with the expectation of the price of the security remaining flat or falling in the near term. |
| Covered Warrant | A certificate issued along with a preferred stock that allows the holder of the security to buy or sell a specified amount of common equity or other financial instruments at a specific price and time. |
| Cowboy Marketing | A situation wherein, a stock is promoted by unethical means without the knowledge of the issuer. |
| Cum Dividend | Stocks trade cum dividend when dividend has been declared but not paid. |
| Cum Rights | Stocks that are trading cum rights can be sold by the shareholder to others with rights attached. |
| Current Yield | The ratio between the dividend income and the current price of a security is known as current yield. |
| Cyclical Stock | A stock that moves in tandem with the economy or one whose price exhibits a positive correlation with the business cycle. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Daisy Chain | Daisy chain means when a group of fraudulent traders carrying out some kind of counterfeit trade superficially, inflate the price of a particular security, so that it gets sold at a good profit. |
| Dark Pool Liquidity | It is a slang term which means the volume of trade which is not available to the public and is created for institutional orders. It is called Dark Pool Liquidity because the details of the trade are hidden or concealed from the public. The block trades represent the bulk of dark pool liquidity which is expedited away from the central exchanges. |
| DAX | It is a stock index that represents 30 German companies which trade on the Frankfurt Exchange and are amongst the largest and the most liquid German companies. The prices which are used to calculate the DAX Index come from tan electronic trading system called Xetra. Index weightings with a measure of average trading volume are calculated by using the free- floating method. |
| Day-Around Order | This term is mainly by traders in the general equities market. Day-Around Order means an order which cancels and replaces the order placed on the previous day with altered price limit or volume. When the day order is placed the day around order will get canceled at the end of the business day. |
| Dead Money | It is a slang term used for money invested in a security with negligible aspiration of returns or profit. |
| Deal Ticket | A deal ticket is also known as “trading ticket” which is created after the dealing of shares, derivatives or futures contracts. It contains all the terms, conditions and fundamental information of the trade agreement. |
| Debt Load | Debt load refers to the amount of debt the company is carrying which is recorded in the books of the company. You can find the company’s debt in the balance sheet of the company which is produced on a quarterly basis. |
| Decimalization | Decimalization is the procedure of changing the prices from fractions to decimals, on which the securities trade. |
| Decline | Decline means when the price of a security falls down in value on a particular trading day and consequently closes at a value lower than its opening price. |
| Defensive Buy | Defensive buy is an attractive buy due to the lower amount of risks attached to it and not because of high returns or profits. |
| Defensive Company | Defensive company is a company whose sales and earnings remain stable during economic rising and economic downfall. |
| Deferred Share | Deferred share means a share which does not hold any rights on the assets of the company if going bankrupt until the preferred and the common shareholders are paid. These shares are mostly issued to the founders of the company and confines the right to receive dividends until the other shareholders are paid. |
| Delaware Corporation | Delaware Corporation means a corporation that can conduct its business in any state but has to be legally registered in the state of Delaware. |
| Deleted | Deleted refers to a security that is no longer included on a particular or a specified market. It is also known as “delisting”. |
| Delisting | Delisting means removing the security trading on the exchange because the company for which the stock is issued, whether voluntarily or involuntarily, is not in accordance with the listing requirements of the exchange. |
| Depository Receipt | Depository receipt is a negotiable financial instrument which is issued by the bank depicting a foreign company’s publicly traded securities. The depositary receipt dealing is done on a local stock exchange. |
| Designated Order Turnaround – DOT (SuperDOT) | Designated Order Turnaround – DOT (SuperDOT) is an electronic trading system which increases the efficiency and performance of the order by routing it directly to the experts on the trading floor rather than a broker. |
| Desk Trader | Desk trader means a trader who is confined or restricted to carry on trade with a firm’s clients and is unable to carry out transactions with his/her own firm’s accounts. |
| Direct Repurchase | Direct repurchase means when a company buys or repurchases its shares from the market, reducing the number of outstanding shares. |
| Dirty Stock | Dirty stock means a stock that is not given a good delivery status due to missing or wrong endorsements or documentation transfer. Dirty stock will mostly intrude the transaction procedure. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Early Exercise | American style options allow the option or other securities to be exercised prior to its maturity date. This process is known as early exercise. |
| Earnout | This is a provision included in a contract stating that the seller of a business will gain additional future compensation based on the business achieving certain financial goals in the future. |
| Eat Your Own Dog Food | This term describes a self-sustaining activity of a company wherein the company uses its own products to carry out its own daily operations. |
| Earning Before Tax (EBT) | It is an indicator of the financial performance of a company. It is calculated as: EBT = Revenue – Expenses (excluding tax). |
| Effective Tax Rate | It refers to the rate of tax that a taxpayer would be charged, if taxing was carried out at a constant rate instead of at a progressive rate. |
| Election Period | It is the time frame in which an investor can choose to extend or shorten his maturity date on an extendable or retractable bond. |
| Equity Linked Note (ELN) | This is a financial instrument whose rate of return depends on or is determined by the performance of a single equity security, a collection of equity securities or an equity index. |
| Employee Contribution Plan | It is a type of retirement plan that is sponsored by a company and requires the employees to make contributions to the fund. These contributions are deducted from his salary and employers also make an equal contribution to the fund. |
| Encumbrance | Also known as a lien, an encumbrance is a claim against a property. The transferability of the property is affected as a result. |
| Earnings Per Share (EPS) | This is a share of the company’s profit that goes towards the owner of each share of the company. It is an accurate indicator of the company’s profitability. It is calculated as: EPS = (Net Income – Dividends on Preferred Stock) / Average Outstanding Shares. |
| Equity | It refers to a vast amount of things related to a company’s finances. Equity can broadly refer to any item owned by a party that has no outstanding debts accrued against it. |
| Equity Income | Any investment in stocks (equity) will earn income in the form of dividends. This income is known as equity income. |
| Erasure Guarantee | Any changes being made to bonds and securities must be witnessed by an accredited financial institution to ensure legitimacy. The institution then provides what is known as erasure guarantee. |
| Escheat | It refers to the transfer of an individual’s estate or property to the Government in the event of his death, in case there is no written will or a predetermined heir to the estate. |
| Escrow Receipt | It is a guarantee issued by a bank stating that the security or deposit of an option writer actually exists, and if the option is exercised the aforementioned security or deposit will be readily available. |
| ETB | The Ethiopian Birr, the official currency of Ethiopia. |
| EUR | The currency code for the Euro. It is the currency commonly used in about 21 of the 27 countries that comprise the European Union (EU). |
| Euro InterBank Offer Rate (EURIBOR) | Within the EU InterBank market, the rate at which panel banks can borrow funds from other panel banks is the EURIBOR. |
| Eurocredit | A type of loan in which the lending bank extends the loan in a currency other than their own national currency. |
| Euroyen Bond | It refers to a eurobond which is denominated in Japanese Yen and are issued outside Japan by a non-Japanese company. |
| Enterprise Value (EV) | Sometimes, instead of considering market capitalization, a company’s value can be measured using EV. It is calculated as: Market Capitalization + (Debt + Minority Interest + Preferred Shares) – (Total Cash and Cash Equivalents). |
| Ex-legal | These are the municipal bonds that get delivered without a legal endorsement from a reputed bond law firm. |
| Exchange Distribution | It is a form of trade that occurs on a securities exchange floor in which many transactions are pooled together and are recorded as one single transaction. |
| Exclusion Ratio | It is that part of the return on investments (ROI) that is exempt from the income tax. Instead of capital gains, it represents the repayment of capital gains. |
| Exit Strategy | An exit strategy is a plan made by an investor to get out of an investment made by him. It is also known as a “harvest strategy” or a “liquidity event”, and is a way of cashing out an investment. |
| Extendable Bond | This is a bond whose maturity period can be extended at the discretion of the issuer. |
| Extrinsic Value | The difference between the price of an option and its intrinsic value. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Fair Weather Fund | This is a mutual fund that will perform extremely well when the market is high, but will perform very poorly when the market is down. These funds are generally very active in bullish market conditions. |
| Fairway Bond | This is a bond which will accrue interest when the embedded index or interest-rate option underlying the bond remains within a specified range. It is also known as corridor bond or index floater. |
| Family of Funds | When one investment company or fund company offers a group of mutual funds, it is known as a family of funds or simply a fund family. |
| Free Asset Ratio (FAR) | This is the market value of the assets of an insurance company which are over and above its policy liabilities. |
| Fast Market | When there is a great imbalance of trades in the market (especially if the number of sells greatly outnumber the number of buys) it results in a fast market that is highly volatile and sees heavy trading. |
| Fast Tape | A fast tape gives a range of prices instead of one steady price due to the fast movement of the futures market, which happens as a result of a large number of transactions. |
| Featherbedding | This term implies the hiring of more workers than are necessary to complete a certain task, due to the pressure by the labor unions. |
| Feeder Fund | This is a fund whose investing is carried out through another fund (known as the master fund). |
| Fifty Percent Principle | This principle predicts that prior to the present trend continuing forward in the market, there will occur a price correction of around 1/2 or 2/3 of the change in price. |
| Fighting the Tape | Any action that goes against the ticker tape. If the market is falling and a person is continuously buying, he is said to be fighting the tape. |
| Fill | It is the basic task of fulfilling or completing an order for any security or commodity. |
| Fill or Kill (FOK) | This is an order placed for a very large amount of stock and it must be fulfilled either immediately or not at all. |
| Final Prospectus | This is the absolute final version of a prospectus that is offering securities to the general public. It is also known as statutory prospectus. |
| Financial Asset | Financial assets have value due to contractual claims. Stocks, shares, bonds and bank deposits are some financial assets. |
| Financial Risk | The risk that a company will be unable to meet its financial obligations. Companies dealing in debt instruments have a higher financial risk than companies dealing mostly in equity. |
| Financing | Any activity of a financial institution or a bank that results in providing funds for investing or making purchases is financing. |
| Fire Sale | This refers to a situation in the market where the prices are very low. This is considered a very good time to buy. |
| Firm Quote | This is the price quote on a security (by a dealer or a market maker) that allows a bid up till the amount of the firm quote. There is no negotiation here unlike in the case of a nominal quote. |
| Fixed Annuity | This is an insurance contract wherein the insurance company makes fixed payments to the annuitant for the duration of the contract. The insurance company provides capital as well as earnings to the annuitant. |
| Fixed Interest Rate | A rate of interest that is fixed (not changing), for the entire duration of the loan or the mortgage. |
| FJD | The abbreviation for the Fijian dollar, which is the currency of the Republic of the Fiji Islands. |
| FKP | The abbreviation for the official currency of the Falkland Islands, the Falkland Islands Pound. |
| Flat Tax | A system in which every person is charged the same amount of tax, irrespective of their bracket of income. |
| Flexible Exchange Option (FLEX) | When a clearing house writes an option whose strike price, expiration date and exercising style can be modified. |
| Floating Interest Rate | Unlike fixed interest rate, floating interest rate is flexible and can rise or fall depending upon the market conditions. |
| Fortune 500 | Using the latest financial figures and revenue numbers, a list of 500 of the largest companies in the United States is drawn, on an annual basis. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Gadfly | A gadfly is a term used for a person who attends shareholders meetings just to ask difficult and embarrassing questions and criticize the company management. |
| Gap Risk | Gap risk is the exposure to adverse price movements external of trading factors, like price movements because of adverse news announcements. |
| Gather In The Stops | This is a stock trading strategy aimed at triggering stop loss orders by selling large amounts of stocks and bringing the company’s stock price down. |
| Gazelle Company | A company that increases its sales revenue at a growth rate of 20 percent or more is called a gazelle company. |
| Ghosting | Ghosting is an illegal practice wherein corrupt market makers make colluded trades to affect a change in the market price of a stock. |
| Glide Path | The glide path is a formula for conservative asset allocations for a target date fund and is based on the number of years left to the target date. |
| Global Depository Receipt (GDR) | This is a financial instrument used to raise funds in US dollars or Euros. It is issued in more than one country, for shares in a foreign company. |
| Godfather Offer | A takeover offer made on very generous terms and prices, thus making it irrefutable for the target company. |
| Goldbrick Shares | A stock conferring to the age-old adage, ‘all that glitters is not gold’, for though it appears of quality and worth, is in fact not so. |
| Golden Cross | This signifies a stock crossover by breaking the resistance level i.e. when the stock’s short term moving average breaks above its long term moving average. |
| Gray List | This is a list of stocks that cannot be traded in by a bank’s risk arbitrage division, on account of the fact that these are working with the bank on matters of mergers and acquisitions. |
| Gray Market | This is an unofficial market that trades in newly issued shares, that are yet to be officially available on the stock exchanges. |
| Great Depression | The Great Depression is a decade long economic recession, that began on 29th October 1929 and caused worldwide poverty, hunger, unemployment, and political unrest. |
| Greater Fool Theory | This is a stock market theory that states that there will always be a bigger or greater fool out there willing to buy a security at a higher price from you in the future, even if you’ve bought the security today not knowing whether it is overvalued or undervalued. The point of this theory is that no matter how high your stock buying price is, you’ll always get someone to sell it to, at an even higher rate, giving you a profit. |
| Green Investing | When investment activities focus on green objectives, like natural energy conservation, alternative energy source discoveries, clean water and air technologies and other environmentally oriented businesses, the investment process is termed as green investing. |
| Green Tech | Green tech is the term used to denote a large company that utilizes an environmentally friendly production process and supply chain. |
| Greenmail | When a large block of a company’s stock is held by a threatening company and needs to be brought back by the company at very high premiums to avoid a takeover, the stock repurchase is called greenmail. |
| Gross Spread | This is the difference between the received underwriting price and the actual publicly offered price for an issuing company. |
| Growth Stock | Also known as glamor stocks, these stocks are the stocks of the company that is growing at a rate significantly higher than the market growth rate. |
| Gun Jumping | Jumping the gun is an illegal practice that involves the execution of share buying orders before the IPO has been approved by the Securities and Exchange Commission (SEC). |
| Gunslinger | These are portfolio managers who are so highly focused on earning high returns that they become foolhardy and invest in very high risk stocks. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| H-Shares | These are the shares listed on the Hong Kong Stock Exchange and that come under the purview of the Chinese Law. These are denominated in Hong Kong dollars and are traded in the same way as other equities. |
| Half Stock | This is either a common stock or a preferred stock that is denominated at a par value of $50. |
| Hammering | A stock is said to be getting a hammering if investors and speculators indulge in a rapid and concentrated sale of it, thinking that it is overinflated in the market. |
| Hanging Man | This is a candlestick pattern at the end of an uptrend that signifies a bearish market sentiment. |
| Hard-Coded Stock | This is a company’s unique stock symbol or ticker symbol that allows the investors to check up on its share price, anywhere on the globe. |
| Headline Effect | Whether justified or not, this is the effect of a negative news headline on the company’s stock or even the economy as a whole. |
| Heavy Industry | Industries with the typical characteristics of high initial investments (capital), high entry barriers and low transportability are termed as heavy industries. |
| Hedged Tender | A tender offer wherein an investor short sells his shares to hedge the risk of the tender not going through, is termed as a hedged tender. |
| Held at the Opening | A halt or restriction to trading a particular stock when the stock exchange opens, to protect investors, is termed as held at the opening. |
| Held Order | A market order that requires prompt executions to fill an immediate request, is termed as a held order. |
| Hiccup | This is an aberration to a larger trend or a short term disruption within a longer term plan or goal. |
| High-Frequency Trading – HFT | High frequency trading involves the use of powerful computers to transact and execute a large number of orders at very high speeds. |
| Himalayan Option | This is a mountain range option that is based on a basket of securities, unlike a plain vanilla option that has just one underlying security. |
| Historical Volatility – HV | Also known as statistical volatility, this is the market realized volatility of a financial instrument over a given period of time. Standard deviation is usually used to calculate the historical volatility of a security. |
| Hit the Bid | This phrase is used when a broker agrees to sell a security at the highest price at which another broker is willing to buy it for. |
| Holding the Market | There are two meanings to this term. This phrase is used to refer to a practice of placing pending orders on a security to keep holding a steady price for it in the market. Another way to use this phrase is to refer to a person holding a general market index portfolio. |
| Hot IPO | Oversubscribed IPOs that are in hot demand with investors are called hot IPOs. |
| House Call | Also called a ‘margin call’, this is an intimation to a customer that his margin account balance has fallen below the maintenance requirement level. |
| Hybrid Market | This is a blend of both, an automated electronic trading market and a traditional floor broker system. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Imbalance Of Orders | Also known as an order imbalance, this is a term used when one sided orders are received, i.e. a lot of demand, no sales and vice versa. There may be many buy, sell or limit orders on a listed stock but nothing matching that particular order on the stock exchange. |
| Impact Day | When a firm makes a secondary offering of shares to the public, that usually results in a downward price movement due to excess supply, it is termed as the impact day. |
| In Street Name | When a brokerage account holds securities in the name of the brokerage firm and not in the name of the actual investor who’s bought the security, it is said that the asset has been bought in street name. |
| Income Deposit Security – IDS | This is a security that provides regular income to the security holder, by combining common stock with the issuer’s notes. |
| Income Stock | Income stocks are equity securities that pay off steadily increasing dividends and offer high yield to security holders. |
| Index Divisor | This is number with no mathematical rationale, is consistent and is used to compare items within the index, over a period of time. |
| Index Hugger | Also known as closet tracker or pseudo tracker, an index hugger is a managed mutual fund that matches its performance with the benchmarked index. |
| Indicated Yield | This is a rough forecasting technique, quoted as a percentage, calculated by dividing the indicated dividend of the company with its current share price. |
| Industry Life Cycle | This is a theoretical explanation of the stages an industry goes through, from the time it comes up with its first product, to the time of its eventual decline. |
| Initial Margin | Also called ‘the initial margin requirement’, this is a security’s purchase price percentage that the investor must pay for with his own cash or marginal securities. |
| Inside Quote | Also known as the inside spread, this is the highest possible bid price and the lowest possible offer price (ask price) for a particular security among all the market makers. |
| Insider Trading | When someone who is trading has access to insider information, i.e. information that is material and is not available to the public at large, he is said to be indulging in the illegal activity of profiting through insider trading. |
| Interest Sensitive Stock | Any stock of a company that has a high debt load and is sensitive to interest rate changes, such a stock is known as an interest sensitive stock. |
| Intraday Intensity Index | This is a volume based indicator that depicts the daily flow of funds for a security. It uses the high and low range of the security and aims to track the activity of institutional block owners. |
| Investing Sage | Like Warren Buffet, these are investors that are extremely knowledgeable and are known to consistently beat the market and make abnormal returns through good stock research. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| January Barometer | The January Barometer is a predictive tool which postulates that the market movement for the whole year can be predicted from the movement of the S&P500 Index during the month of January. |
| January Effect | A general increase in stock prices due to buying pressures, seen in the month of January, is called the January effect. |
| Jobber | This is a slang for a market maker and its usage is limited to the London Stock Exchange. |
| Joint Stock Company | An organization that falls in between a partnership and a corporation on the business continuum as stockholders of joint stock companies are liable for company’s debts. |
| Junior Security | When a security ranks lower than other securities, at the time of staking claims on assets in the event of liquidation, it is called a junior security. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Key Performance Indicators – KPI | KPIs are company specific indicators that are used to gauge the success of strategic and operational goals and are also called key success indicators (KSI). |
| Key Rate | This is the chief interest rate that determines the bank’s interest rates and the costs of credit for the borrowers. Discount rate and Federal funds rate are the two key rates in the U.S. |
| Killer Application | Also called the ‘kill app’, this is a buzzword for software applications that surpass all of its competitors. |
| Killer Bees | These are companies that help a company in trouble to keep takeover attempts at bay, with the use of defensive takeover strategies like poison pills, people pills, white knights, shark repellents, lobster traps, sandbags, whitemails, etc. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Laggard | This is an underperforming stock or security, for it gives out lower than average returns, unlike the leader. |
| Large Cap – Big Cap | When a company has a market capitalization of more than $10 billion, the company is termed as large cap; cap is short for market capitalization. |
| Law of Large Numbers | This is a statistical claim that suggests that as the sample numbers increase, the average is the samples tends towards the mean of the whole population. This means that when a company grows, the possibility of it sustaining a large percentage in growth lessens. |
| Leasehold | This is an accounting term, used to classify the leased assets (operating lease not capital lease) of a company on its balance sheet. |
| Legacy Hedge | This is a hedge that provides price guarantees, as the hedge position is held over an extended period of time by the holding company. |
| Letter of Comment | This is a letter, sent to a company by SEC, in response to the company’s filing registration statement. |
| Leverage Ratios | These are the ratios used to get a glimpse into the company’s financial leverage, its methods of financing and the future ability to meet financial obligations. |
| Leverage ETF | This is an ETF that attempts to amplify the returns on an index by using financial derivatives and debt instruments. |
| Limit Order | Buy limit orders and sell limit orders are limit orders placed with a brokerage to buy or sell a set number of shares at the predetermined price or more, respectively. The order time limit is also specified, after which they get canceled. |
| Limit-on-Close Order | Unlike a limit on open order, a limit on close order is a limit order to buy or sell a security at a market close, if it is trading better than the limit price. |
| Linkage | Linkages happen when an investor can buy a security on one financial exchange and sell it on another, but differs from arbitrage. |
| Liquidating Dividend | When a firm makes payments to its owners, from capital rather than from earnings, it is known as liquidating dividend. |
| Liquidity Premium | This is the premium that investors demand for an illiquid asset, that cannot be easily converted to cash without taking a big price fall. |
| Listing Requirements | These are stock exchange standards that need to be met by the company looking to get a listing. |
| Lockdown | This is a period of time when an employee of a public limited company is barred from buying or selling his company’s stock for a particular period of time. |
| Long Squeeze | As opposed to a short squeeze, a long squeeze is the selling pressure that builds up on long holders of the stock when a sudden price drop incites further sales and price drops. |
| Low Volume Pullback | A technical correction of the stock price that signifies that the trend is not actually reversing but is just weak due to low trading volumes. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Macro Hedge | This is an investment strategy that is used to eliminate or lessen the risk of an entire portfolio, i.e. it advocates a position that offsets the entire portfolio. |
| Mad Hatter | This term refers to a CEO or company head or even a whole managerial team that has suspect abilities to lead a company. |
| Maintenance Margin | Also referred to as ‘minimum maintenance’ or ‘maintenance requirement’, this is the minimum equity amount that has to be compulsorily maintained in a margin account. |
| Management Buy-In (MBI) | A management buy-in entails an outsider company or team purchasing ownership stake in an undervalued (due to management incompetence) company and replacing the entire management team with efficient and capable managers of their own. |
| Manufactured Payment | This is a payment made by the borrower of a stock to a lender of a stock, equivalent to the dividend payment declared on the stock. |
| Market Basket | A market basket is the clubbing together of products and securities in such a way that they replicate the market performance and can be used to track things such as inflation, prices and performance levels. |
| Market Capitalization Rule | This is a standard value rule set by the NYSE in 2004, that stated that companies must maintain a minimum value of $25 million over 30 consecutive days to continue their listing with the stock exchange. |
| Market is Up | This is the opposite of ‘market is down’ or ‘market is off’ and is a common phrase used to denote a market segment or index that is trading higher than the previous close. |
| Market Overhang | This is an observational trend that shows high selling pressures in the market and can last for weeks, months or even longer. It is usually triggered by institutional investors holding large share blocks that wish to divest. |
| Market Swoon | A negative investor market sentiment that triggers a general decline in the overall value of the stock market is called a market swoon. The first signs of a market swoon come in the form of significant price drops in indexes such as the DJIA (Dow Jones Industrial Average). |
| Market-With-Protection Order | If there is a heavy price movement in an asset after an investor places his order, he can cancel his order and re-submit it as a limit order, placed around the current market price. This protective measure is termed as a ‘market with protection order’. |
| Marlboro Friday | This is a term coined for the Friday of April 2nd 1993, when Philip Morris (maker of Marlboro cigarettes) caused a $10 billion market cap loss in a single day, by making an announcement to cut product prices so that it could compete with generic cigarettes. |
| Mean Return | Also known as expected return in security analysis, this is the expected value or mean return of all the individual investments in a portfolio. In capital budgeting terminology, mean return stands for the mean value of the probability distribution of possible returns. |
| Member Short-Sales Ratio | This is a measure to gauge the sentiment of market professionals by segregating the ‘pro’ trades from the noise trades of less informed public traders. This ratio compares the number of short sales made by NYSE members with the total number of short sales transacted on the exchange. |
| Merger Deficit | When a company uses funds raised through new stock issues to purchase the stock of another company, due to which the total share capital value used to purchase another company is less than the total value of equity bought, there is said to be a merger deficit. |
| Merger of Equals | When two equal sized firms merge together to form a single company, with both side’s shareholders surrendering their shares and receiving newly issued securities of the newly formed firm in return, it is called a merger of equals. |
| Mergers and Acquisitions | Mergers and acquisitions, M&As, is a general term used to refer to the consolidation of two companies to form one company. |
| Micro Hedge | An investment technique that entails taking an offsetting position to eliminate the risk of a single asset is called a micro hedge. |
| Minority Interest | When any investor or company holds a less than 50 percent, significant but non-controlling interest in a company, he said to be holding a minority interest in the company. |
| Minsky Moment | After a long-lasting period of market speculation, when a market fails or falls, the phenomenon is termed as a Minsky moment. |
| Misappropriation Theory | This is a type of insider trading wherein confidential information is stolen from an employer and trading is done based on the ‘misappropriated insider knowledge’. |
| Monoline | This is a term used for a business that picks one line and focuses in only that one specific financial area. |
| Mosaic Theory | Mosaic theory is an analytical method that security analysts use to gather information about a company. |
| Multiples Approach | This is a theory that states that a firm’s valuation can be done based on another, if the two firms are comparable. It is based on the premise that similar assets should sell at similar prices. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Naked Option | Naked options (naked put or naked call) are option positions held by a buyer or seller, without holding the underlying security. |
| Naked Position | As opposed to a covered position, a naked position (naked long or naked short) is an unhedged security position, i.e. a position uncovered from market risk. |
| Nano Cap | Even smaller than a micro cap, a nano cap is a small company with a less than $50 million market capitalization. |
| Narrow Moat | An economic moat opposite of a wide moat, a narrow moat represents a slight competitive advantage that a firm enjoys over other competing firms in the same industry. |
| Nasdaq Composite Index | A weighted index of more than 3000 common equities trading on the Nasdaq stock exchange, that uses market capitalization as weights, is called the Nasdaq composite index. |
| Near Term – NT | Another term for short term, this is used to recommend stocks that need to be held for short periods. |
| Negative Carry | This is a situation, opposite of positive carry, that arises when the cost of financing a security or futures position, far exceeds the yield earned from it. |
| Negative Obligation | The opposite of affirmative obligation, a negative obligation is when NYSE specialists who are supposed to play market makers, stay on the sidelines and refrain from acting as principal when there is less market demand or supply, to match pending orders. |
| Neglected Firm Effect | This is the phenomenon of abnormally high returns on stocks that are relatively less known, due to higher risks and lower liquidity. |
| Net Interest Margin Securities – NIMS | These are securities that allow holders to access the cash flows that result from securitized mortgage loan pools. |
| Net Long | Opposite of a net short position, a net long position entails an investor having more long positions than short positions in the market or his portfolio. |
| Net Volume | This is a security’s uptick volume minus its downtick volume over a period of time and is measured by the ‘money flow index’. |
| Net-Net | This is a value investing technique introduced by Benjamin Graham which uses only the net current assets to value a company. |
| Nil-Paid | This represents a security that is tradeable despite having incurred no original cost to the seller. |
| No-Par Value Stock | This is an issued stock that has no par value specification, neither in the company’s articles of incorporation, nor on the stock certificate itself. |
| NYSE Composite Index | This is a good indicator of general market strength for it incorporates all common stocks listed on the NYSE and the four subgroup indices, namely industrial, transportation, utility and finance in its calculation. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Off Board | This is a stock trade that either does not involve a stock that’s traded on a major stock exchange (over-the-counter stock) or involves a stock that’s listed on a major exchange but is still traded over-the-counter between two institutions or an institution and its customer. |
| Oil ETF | This category of exchange traded funds invest in oil and gas companies. |
| One To Many | A one-to-many platform is a trading platform where many buyers and sellers interact with only one, sole market operator. |
| One-Cancel-All Order | When several limit orders are placed on one company stock with the caveat that all others get canceled when one gets filled, is called a one-cancel-all order. |
| One-Way Market | This is a common slang used for a market that is only moving in one direction with strength and little or no resistance. |
| Operating Netback | This is a non-GAAP measure of oil and gas sales, net of royalties, production and transportation expenses. |
| Opt-Out Vote | This is a shareholder vote taken to decide on whether certain takeover laws and regulations need to be waived to suit a particular favorable corporate action. |
| Option Premium | This is either the current price of an option that is yet to expire or is the income received by an option writer or seller, for selling an option contract to another party. |
| Oracle of Omaha | This is a nickname earned by the great investor Warren Buffet, for his market beating stock picks, investment strategies and asset management fundas. |
| Order Protection Rule | Also known as the ‘R 611’ rule or the ‘trade-through rule’, the order protection rule is a regulation NMS provision that states that investors receive an execution price that’s equivalent to the prices quoted for the security on the other exchanges. |
| Order Splitting | The Small Order Execution System (SOES) qualifies orders to be automatically executed. Order splitting involves splitting off larger orders into smaller ones that fit in with the SOES. |
| Over-The-Counter Bulletin Board OTCBB | This is an electronic trading service that is offered and regulated by NASD (National Association of Securities Dealers), that shows real time quotations, last-sale prices and volume information over the counter. OTCBB traded stocks have the ‘OB’ suffix. |
| Overbought | This is a technical analysis term, opposite to oversold, that is used for an asset that has unjustifiably high prices that are driven by excessive demand and not by the company fundamentals. |
| Overreaction | This is a market hypothesis that’s inconsistent with the efficient market hypothesis, for it states that investors and traders may react disproportionately to new information on a security. |
| Oversubscribed | Contrary to being undersubscribed, the term oversubscribed applies to a situation where the public demand for an IPO far exceeds the actual number of shares issued. |
| Oversubscription Privilege | This is a special right or privilege conferred on existing shareholders when the company makes a rights or warrants offering. |
| Ovoboby | This is a market condition where there’s excessive upward pressure on Treasury yields due to the market being considerably overbought, overly bullish and overvalued. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| P/E 10 Ratio | A price earnings ratio is a company valuation ratio that is calculated by dividing a company’s market value per share by the company’s earnings per share. P/E 10 signifies that a company’s stock is trading at 10 times the value of the company’s earnings per share. |
| Pac-Man Defense | This is a defensive tactic against hostile takeovers that has the targeted firm turning around and trying to acquire the company that is attempting the hostile takeover. |
| Painting the Tape | This is an illegal action taken by market manipulators to cause a price movement that is favorable to their positions and gains them hefty profits. |
| Paired Shares | Also known as Siamese shares, these are stocks of two different companies, often having the same management that are sold as one unit and appear on one certificate. |
| Paper Millionaire | An individual who has large amounts of paper profits because his portfolio of marketable assets has suddenly been bid up to really high prices. |
| Parity Price | Also referred to as conversion parity price or market conversion price, a parity price is a asset price that’s directly linked to another price. |
| Pass-Through Certificate | These are fixed income securities based on the undivided interest pool of federally insured mortgages, that are put together by the Government National Mortgage Association (Ginnie Mae). |
| Pathfinder Prospectus | This is a pre-prospectus statement giving a picture of the company’s financial condition, supplied to a limited group of potential underwriters and institutional investors to test the waters before an IPO filing. |
| Payment for Order Flow | This is the compensation or payments received by a brokerage firm for directing the orders to different parties, for execution. |
| Peer Perform | A peer perform is a neutral assessment indicator that predicts that a security will move in line with the securities of other similar companies. |
| Penny Stock | A penny stock is a stock with low market capitalization and low price, that is usually traded outside the major stock exchanges. |
| Performance Drag | If transaction costs negatively influence the performance of an investment, the phenomena is called a performance drag. |
| Piggyback Warrants | These are additional warrants that can be acquired with the exercise of primary warrants and act as sweeteners to prompt additional investment in the company. |
| Pink Sheets | This is a daily publication that gives details on OTC stocks (like bid ask prices, market makers, etc.) and is compiled by the National Quotation Bureau. Initially printed on pink paper, and hence the name, pink sheet listings end with the suffix ‘PK’. |
| Pitchbook | This is a sales book compiled by an investment bank or firm, with the intention of selling its products and issues and generating new clients by giving them the details of its main attributes. |
| Plus Tick | Also known as an ‘uptick’, a plus tick is a designation given to a stock that is trading higher now as compared to its previous sale. |
| Poison Pill | This is a hostile takeover discouragement strategy. The two types of poison pills are: flip-in: allows existing shareholders to buy shares at discount thus making acquirer’s share weaker through capital dilution, and flip-over: allows existing shareholders to buy acquirer’s shares at discounted prices post the merger. |
| Pot is Clean | Also known as ‘fully subscribed’, this is a slang for an underwriter that has managed to offload all of its available issues of a public offering. |
| Power Ratio | This measures a media company’s revenue performance in comparison to its audience share. |
| Price Continuity | This is a liquid market characteristic that suggests that the price movements between transactions are minimal. |
| Price Talk | This is a discussion within the investment community regarding the appropriate price suitable for an upcoming security issue. |
| Pricing Power | This is a term used in conjunction with the price elasticity of demand and suggests the effect on the product quantity demanded with a company making a change in the product price. |
| Profit Warning | A profit warning is a company’s intimation that its profits are not likely to meet the expectations of analysts. |
| Pullback | This is a brief reversal (fall in price) in a prevailing upward trend or peak which is just a slight pause in upward momentum and not a cause of concern. |
| Pure Play | This term symbolizes a company who is only in one line of business and its stock price is highly correlated with the outcomes of one investing theme or strategy. |
| Put Warrant | It is just a warrant (as opposed to an option) that gives the holder the right to sell an underlying share at an agreed price, on or before a predetermined date. |
| Puttable Common Stock | This is a common stock that gives its holders the right to sell it back to the company at a predetermined price. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| QOQ | QOQ is the acronym for quarter-on-quarter. |
| QQQQ | QQQQ is the ticker symbol for the Nasdaq 200 trust. |
| QTD | QTD is the acronym for Quarter to Date. |
| Quadrix | A Quadrix divides the 100 variables that are used to value a stock into 7 main categories namely, momentum, quality, value, financial strength, forecasted earnings, performance, and volume. |
| Qualified Dividend | Qualified Dividends are ordinary dividends which are taxed at a lower long-term capital gains tax. |
| Qualifying Disposition | Qualifying Disposition is a transfer, sale or exchange of stock that is obtained through a qualified stock option incentive plan. |
| Quarterly Earnings Report | Quarterly earnings report is the report of the performance of a company which is given every 3 months. |
| Quote | A quote is the last traded price of a share or a commodity |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Random Walk Theory | According to this theory, stock market prices follow a random path independent of other stock price distributions and cannot be predicted using historical trends data. |
| Ratings | These are evaluations of a corporate or municipal bond, based on the issuer’s ability to honor them with principal and interest payments. They range from AAA (Highest Rating) to D (Defaulter). |
| Real-Time Quote | These are instantaneous price quotations at that particular moment of time. |
| Record High | As opposed to a record low, a record high is the highest historical trading price reached by a security in its entire trading history. |
| Rectangle | Also known as a bounded range, a rectangle is a technical analysis signal that the trend will continue in the direction that the price takes to breaks out of the bounded range. |
| Red Chip | These are Chinese companies that are listed on the Hong Kong Stock Exchange but are incorporated internationally. |
| Red Flag | A red flag security is a security that has some undesirable characteristics. |
| Regulation T – Reg T | This is Federal Reserve Board regulation that allows for a 50% of purchase price borrowing that can be purchased on an initial margin. |
| REIT ETF | These are exchange traded funds that mostly invest in the equity of real estate investment trusts. |
| Restricted Stock | Also known as ‘letter stock’ or ‘section 1244 stock’, restricted stocks are insider holdings that come with some kind of sale restrictions. |
| Retired Securities | When securities are purchased back by the issuer out of the company’s retained earnings and are canceled according to the SEC regulations, the canceled stocks are known as retired securities. |
| Reverse Stock Split | Without affecting the market capitalization of a company, a reduction in the number of shares outstanding results in an increase in the par value of the remaining shares, and this is called a reverse stock split. |
| Ringfencing | Ringfencing occurs when a regulated public utility separates itself from the parent company and engages in a non-regulated business to protect the consumers of essential services. |
| Runner | This is a broker employee that delivers market orders as he gets them, to the broker’s floor trader, to be executed. |
| Runoff | This is the procedure of printing on a ticker tape, all the end of the day prices on a stock exchange. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Saitori | This is a Tokyo Stock Exchange member that facilitates trading by matching buy and sell orders. |
| Santa Claus Rally | This is a stock price surge seen between Christmas and New Years. |
| Scale In | Opposite of scale out, scale in is the process of shares being purchased as the share prices fall. |
| Scale Order | These are a bunch of several limit orders that follow an increasing or decreasing price range. |
| Scalping | This is a trading strategy that attempts to profit from small price changes. |
| Scrip | Written documents that acknowledge the existence of debt are known as scrips. |
| Sector Analysis | This is a study or review of the future prospects of a particular market segment or sector. |
| Securities Fraud | This is a serious crime where vital investor information is misrepresented. |
| Seed Capital | This is a financial term used for the initial capital that is required to start up a business. |
| Sell to Close | As opposed to a sell to open, this phrase is used to represent sales that are made to close long positions in option transactions. |
| Shareholder Activist | This is a term used for a shareholder who is using his shareholder rights to bring about a social change in an organization. |
| Shark Repellent | Also known as a porcupine provision, this is a common term that refers to any measures that a company takes to avoid hostile takeovers. |
| Sheep | An investor who is prone to rash, emotional decisions as he lacks a proper trading strategy, is known as a sheep in financial lingo. |
| Short Squeeze | This is a situations where stock prices are pushed upwards due to lack of supply and very high demand. |
| Short-Swing Profit Rule | This is an SEC regulation that makes it mandatory for insiders to return any trading profits they make on the company’s stock if two or more transactions happen within a 6-month time span. |
| Single-Digit Midget | This is a stock with the stock price of below $10 per share. |
| Small Firm Effect | This is a financial theory that predicts the small firms (with smaller market caps) to outperform the larger firms because of greater growth opportunities. |
| SOES Bandits | These are traders that aim for small profit through rapid buy and sell transaction routed through the SOES system. |
| South Sea Bubble | This is a UK based company driven stock scam that can be claimed as the largest in history with thousands losing their entire life savings. |
| Speculative Stock | When a stock has higher relative risk than others, it is known as a speculative stock. |
| Split-Off | This is a type of corporate restructuring wherein a subsidiary’s stock is exchanged for stock of the parent company. |
| Spoo | This is a financial slang that denotes a S&P500 contract that is trading on the CME (Chicago Mercantile Exchange). |
| Stated Value | A value that has no relation with the stock’s market price and is neither in line with the par value, but is still taken as a par value for accounting purposes, is called the stated value. |
| Stock Cycle | The stock cycle is a buy and sell cycle seen in a stock’s price, over a several year’s period. |
| Stock Screener | This is a financial tool that can help investors to screen stocks based on criteria that they require. |
| Stock Watcher | This is an NYSE run computer program that monitors daily trading activities on the stock exchange, in order to locate any illegal trades. |
| Stock-Limit Order | This is a combination order that combines a stop order with a limit order. |
| Story Stock | This is stock that has a stock value that projects its future potential rather than any current fundamentals backing it. |
| Stuckholder | This is a stockholder that holds a stock that cannot be sold anymore (has no buyer or the price is so low that the holder does not wish to sell and has nothing to lose by holding rather than selling at that price). |
| Sucker Rally | Also known as the dead cat bounce or a bull trap, a sucker rally is a temporary hike in the specific stock price or even the market as a whole. |
| Supernormal Growth Stock | When a stock has continuously grown more than the economy over a period of one year or more, it is called a supernormal growth stock. |
| Swap Ratio | This is ratio for swapping the stocks of an acquiring company with the target company’s shares. |
| Synthetic Dividend | This is an income that is synthetically created by using certain financial security to produce a dividend-like cash flow stream that yields periodic receipts. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Take a Flier | Take a flier means investing in a highly speculative investment. |
| Takeover | A takeover is a situation where one company takes a controlling stake over another. |
| Tangible Common Equity | Tangible Common Equity is a measure of the company’s capital and is used to evaluate a company’s ability to deal with losses. |
| Target Firm | A target firm is a company targeted by another for a takeover. |
| Target Risk Fund | A target risk fund is a fund which declares the amount of risk associated with it. |
| Taxable Preferred Securities | A taxable preferred security is a security which does not qualify for dividends-received deductions for corporations of typical preferred securities. |
| Tech Street | Tech Street is a term that refers to the companies in the technology sector. |
| Technical Bankruptcy | A technical bankruptcy is a situation where a company’s liabilities exceed its assets, but hasn’t been declared bankrupt by the court. |
| Technical Correction | A technical correction is to decrease the value of the share of a company or the value of an entire index after a sudden extensive increase in the prices. |
| Tender | The term ‘tender’ may refer to any of the following
|
| Term | A term refers to the lifespan of an asset or a liability. |
| Theoretical Dow Jones Index | A theoretical Dow Jones Index is a method of calculating the Dow Jones Index which assumes that all the components to an index hit their highest and lowest points at the same time during the day. |
| Ticker Tape | A ticker tape is a computerized device which gives the financial information to the investors. |
| Time Waited Rate of Return | A time waited rate of return measures the compound rate of growth in an investment portfolio. |
| Tipping | Tipping is to provide non-publicly given information to a person who is not authorized to have that information. |
| Today’s High | Today’s high refers to the highest intra day price at which a stock is traded. |
| Today’s Low | Today’s low is the lowest price intra day at which a stock was traded. |
| Total Return Index | A total return index is a type of equity index which tracks both capital gains of a group of stocks over time and assumes that any cash distributions are reinvested back into the index. |
| Trading Floor | Trading floor is the actual floor where all the trading activities are conducted. |
| Trading Session | A trading session is the amount of time during the day when the transactions are carried out. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Unbundling | This is the activity of taking over a company with many subsidiaries and selling off some of the subsidiaries in order to fund the takeover. |
| Unchanged | A situation where, over any time period, the rate or the price of a security or a stock does not change. |
| Underperform | It is a term that is generally associated with a stock or a security performing lower than the market. |
| Undersubscribed | A situation in which the demand for the shares offered to the general public is lesser than the number of shares actually offered. |
| Undervalued | Any stock or security that is valued and is trading below its real value is said to be undervalued. |
| Unissued Stock | Any authorized stock of a company that is not yet issued to the public, is called unissued stock. |
| Unlisted Security | Some securities cannot be listed on an exchange since it cannot meet some requirements. These are called unlisted securities. |
| Unpaid Dividend | Any dividend amount that is unpaid to the dividend holders but will be paid on the dividend payment date is unpaid dividend. |
| Unrealized Gain | Any profit realized by simply being in possession of an asset is unrealized gain. |
| Unrealized Loss | A loss that results from the possession of an asset, is known as unrealized loss. |
| Unseasoned Security | A stock that has newly started trading is an unseasoned security. |
| Unsecured Creditor | A creditor that deals in unsecured loans. This creditor does not insist on collateral for extending a loan, and thus faces a lot of risk. |
| Unsecured Debt | Any loan that is not secured by any asset or collateral is an unsecured debt. |
| Upgrade | Any positive change that occurs in the valuation of a security is an upgrade. |
| Upstream | The initial stages in the industries dealing with oil and gas, wherein the exploration or discovery of the resources is underway. |
| Uptick | Any transaction that occurs at a price above the previous transaction. |
| Usury | If any loan is extended at an interest rate that is higher than the rate permitted legally, it is called usury. |
| Utilities Sector | A collection of stocks pertinent to the utilities sector. This sector includes companies dealing with electricity, gas and water firms. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Value Stock | A stock that is not very efficient and trades in the market at a price lower than its value is called a value stock. A value investor would consider such a stock undervalued. |
| Variable Cost | As a company grows, the costs incurred by it to maintain operations also grow. These costs are called the variable costs. |
| Vendor Financing | A company may sometimes extend money to a customer in order to allow the customer to purchase the company’s products. This is known as vendor financing. |
| Vertical Merger | When two companies that produce different products for the manufacture of one final product, undergo a merger, it is called a vertical merger. |
| Vice Fund | A mutual fund that focuses on ‘vices’ and are considered as immoral investments. Vice funds focus on casino operators, alcohol, tobacco and defense sectors. |
| Visibility | The measure of the extent to which future projections can be made. High visibility implies a higher degree of projections. |
| Voting Shares | The shares of the company that provide the stockholders with the rights to vote on matters of company policy. |
| Voting Trust | The shareholders create a legal trust in order to combine their voting powers known as voting trust. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Wall of Worry | If stock prices are consistently on the rise, despite the market facing some negative trends like political or economic risks, the trend is called climbing the wall of worry. |
| Wallpaper | Stocks, bonds and securities that have lost monetary value and become worthless are termed as wallpaper. |
| War Babies | Securities of companies that function as defense contractors are known as war babies. They are also called ‘defense stocks’. |
| War Chest | Any money that a company regularly sets aside to either fund a takeover or to combat a takeover, goes into what is called a war chest. |
| Warehousing | When a company wishes to take over another company and over a period of time, gradually builds up their share by purchasing the shares of that company, it is called warehousing. |
| Wash Sale | An investor can show that he is conducting some activity. He does so by buying and selling shares simultaneously from two different brokers. This is called a wash sale. |
| Watch List | For the purpose of spotting irregularities, a brokerage will monitor a list of securities. This list is called a watch list. |
| Watered Stock | Any stock which is issued with a greater value than the company’s assets is known as a watered stock. |
| White-Shoe Firm | Any firm that opposes hostile takeovers is called a white-shoe firm. |
| Written-Down Value | The value of any asset after depreciation or amortization have been accounted for is called written down value. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| XD | This is a symbol that is used to denote that a security is being traded ex-dividend. |
| Xetra | It is an electronic trading system that originated in Frankfurt, Germany in 1997. Xetra offers trading facilities for stocks, bonds, funds, warrants and commodity contracts. |
| XRT | This is a symbol that a security is trading ex-rights. It is specifically denoted on the consolidated tape. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Yellow Knight | A company that begins with the intention to take over another company but ends up discussing a possible merger with it. |
| Yield Elbow | It is that point on the yield curve which indicates the year where the economy’s highest rates occur. |
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| Stock Market Terminology | Stock Market Definitions |
|---|---|
| Zaraba Method | It is a method that uses an auction to trade securities. As soon as a bid matching the order price is received for a security, the order is carried out. |
| Zero-Dividend Preferred Stock | Any preferred share that does not require any payment to be mandatorily made to the holder is a zero-dividend preferred stock. |
| Zero-Sum Game | Any situation wherein there is no net change in total wealth among the participants. One person’s losses are compensated by another person’s gains. |
| Zombies | Companies that continue to operate even though they are near bankruptcy or insolvency. In most cases, zombie companies are expected to be unable to meet their financial obligations. |
| Zoning | Zoning areas are the areas that are regulated by the Government and must meet the rules and regulations passed with those areas in mind. |
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Hope you find this stock terms glossary useful and helpful in building your own stock market strategies.
