Glossary of Stock Market Terms

 Glossary of Stock Market Terms

After-hours Deal: The stock market usually closes at 4:00pm. After this scheduled time, deals can also be made but the transaction is dated the next day, known as an after-hours deal.

Annual Report: An audit report to shareholders produced yearly. This report is produced by all publicly quoted companies.

Balance Sheet: The financial statement which shows the liabilities and assets of a company.

Bargain: Regarding sale or purchase in the stock market, bargain is a common word.

Bearer Stocks: This is the stock that is unregistered with the owner’s name.

Bed and Breakfast Deal: This refers to the sale of share and repurchase on another day. It’s done to set up profit or loss for the purpose of tax.

Bid Price: This term indicates the sale price of stocks or shares.

Blue Button: Refers to the stockbroker’s clerk. Only a blue button is allowed on the trading floor.

Blue Chip: These are shares of big and reputed companies.

Book Value: The net worth of the company as listed on the balance sheet.

Bull: A person who considers the share price of the stock exchange to be on the rise.

Call: An extra installment due on shares.

Capital: The amount of money used for setting up a new business.

Cash Settlement: In the stock exchange, there are certain deals like Gilts which are rendered for
cash and not for account settlement. They are settled the next day of the deal.

Contract Note: This is a printed confirmation letter from any broker indicating a bargain which is carried out.

Coupon: Refers to interest amount payable only for fixed interest stock.

Cum Dividend: These are shares that are sold, allowing the buyer to receive the following dividend.

Dawn Raid: Refers to the buying of a huge amount of shares in the morning at the opening of stock market.

Dealing: This means the purchase and sale of shares.

Debenture: The stock that a company issues which are backed by assets.

Depreciation: The amount of money set aside for replacement of the assets.

Dividend: The part of the company’s profits which is usually distributed to company’s shareholders, normally on regular basis.

Equities: These are the ordinary shares. They are different from debenture and also from loan stock.

Ex-dividend: The share which is bought without any right for receiving the next dividend. This is usually retained by sellers.

Final Dividend: This is the dividend which is declared according to the company’s annual results.

Financial Ratio: Various ratios that indicate the health of a business and value in the stock.

Futures: Contracts that allow any holder the legal right to buy or sell Indexes and Commodities in the future at a price set today.

Gross: The interest paid without deducting of tax.

Hedge: This means to insure the risk.

Initial Public Offering: The issue of new shares by a previously private company as it becomes a public company.

Limit Order: This is an order to any stockbroker specifying any fixed price limit.

Liquidation: Converting the prevailing assets to cash.

Loan Stock: The stock that bears a fixed interest rate. It’s different from debenture stock because it’s not required to be secured by any asset.

Nominee: The term refers to a person acting on the behalf of another in the stock market in documentary as well as financial affairs.

Offer Price: Refers to the specific price at which one can buy stocks and shares.

Options: The term means the right to purchase (call option) and sell (put option) a particular share at a particular price within a particular period.

Ordinary Share: This is a share where the dividends usually vary in the amount.

Over the Counter Market (OTC): Refers to a marketplace outside the main stock market.

PLC: This means Public Limited Company (formerly Ltd). In the stock market, some public limited companies are not always quoted.

Portfolio: A selection of shares usually held by a person or fund.

Proxy: Anybody who votes on another person’s behalf if the person is unable to attend a shareholders’ meeting.

Stock: Also referred to share or equity, stock is the basic ownership unit of a company.

Stock Warrants: An instrument that conveys the right to buy additional stock within a fixed time period at a set price. Warrants differ from stock options in the way they are exercised.

Value Stocks: Stocks that appear to be trading at a discount to their intrinsic worth, as measured by various different valuation metrics.

Yearlings: Bonds issued for twelve-month term, mainly by local authorities.

Yield: The gross dividend presented as the percentage of the share price.

Glossary of Stock Market Terms

Common Stock Market Terms you must Know

Common Stock Market Terms you must Know

Averaging Down: This is when an investor buys more of a stock as the price goes down. This makes it so your average purchase price decreases.

Bear Market: This is trading talk for the stock market being in a down trend, or a period of falling stock prices. This is the opposite of a bull market.

Beta: A measurement of the relationship between the price of a stock and the movement of the whole market. If stock XYZ has a beta of 1.5, that means that for every 1 point move in the market, stock XYZ moves 1.5 points and vice versa.

Blue Chip Stocks: These are the large, industry leading companies. They offer a stable record of significant dividend payments and have a reputation of sound fiscal management. The expression is thought to have been derived from blue gambling chips, which is the highest denomination of chips used in casinos.

Bull Market: This is when the stock market as a whole is in a prolonged period of increasing stock prices. Opposite of a bear market.

Broker: A person who buys or sells an investment for you in exchange for a fee (a commission). Here is Tim’s favorite broker. (LINK)

Day Trading: The practice of buying and selling within the same trading day, before the close of the markets on that day. This is what Tim typically does, although he does have a long-term portfolio as well. Traders that participate in day trading are often called “active traders” or “day traders.”

Dividend: this is a portion of a company’s earnings that is paid to shareholders, or people that own hat company’s stock, on a quarterly or annual basis. Not all company’s do this.

Exchange: An exchange is a place in which different investments are traded. The most well-known in the United States are the New York Stock Exchange and the Nasdaq.

Execution: When an order to buy or sell has been completed. If you put in an order to sell 100 shares, this means that all 100 shares have been sold.

Hedge: This is used to limit your losses. You can do this by taking an offsetting position. For example, if you hold 100 shares of XYZ, you could short the stock or futures positions on the stock.

Index: An index is a benchmark which is used as a reference marker for traders and portfolio managers. A 10% may sound good, but if the market index returned 12%, then you didn’t do very well since you could have just invested in an index fund and saved time by not trading frequently. Examples are the Dow Jones Industrial Average and Standard & Poor’s 500.

Initial Public Offering (IPO): The first sale or offering of a stock by a company to the public, rather than  just being owned by private or inside investors.

Margin: A margin account lets a person borrow money (take out a loan essentially) from a broker to purchase an investment. The difference between the amount of the loan, and the price of the securities, is called the margin.

Moving Average: A stock’s average price-per-share during a specific period of time. Some time frames are 50 and 200 day moving averages.

Order: An investor’s bid to buy or sell a certain amount of stock or option contracts. You have to put an order in to buy or sell 100 shares of stock.

Portfolio: A collection of investments owned by an investor. You can have as little as one stock in a portfolio to an infinite amount of stocks.

Quote: Information on a stock’s latest trading  price. This is sometimes delayed by 20 minutes unless you are using an actual broker trading platform.

Rally: A rapid increase in the general price level of the market or of the price of a stock.

Sector: A group of stocks that are in the same business. An example would be the “Technology” sector including companies like Apple and Microsoft.

Spread: This is the difference between the bid and the ask prices of a stock, or the amount someone is willing to buy it and someone is willing to sell it.

Stock Symbol: A one-character to three-character, alphabetic root symbol, which represents a publically traded company on a stock exchange. Apple’s stock symbol is AAPL.

Volatility: This refers to the price movements of a stock or the stock market as a whole. Highly volatile stocks are ones with extreme daily up and down movements and wide intraday trading ranges. This is often common with stocks that are thinly traded, or have low trading volumes. This is also common with the stocks that Tim trades.

Volume: The number of shares of stock traded during a particular time period, normally measured in average daily trading volume.

Yield: This usually refers to the measure of the return on an investment that is received from the payment of a dividend. This is determined by dividing the annual dividend amount by the price paid for the stock. If you bought stock XYZ for $40-a-share and it pays a $1.00-per-year dividend, you have a “yield” of 2.5%

Common Stock Market Terms you must Know