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Stock Market Glossary
A :
Analyst : A person with expertise in evaluating financial investments; he or she performs
investment research and makes recommendations to institutional and retail investors to buy,
sell, or hold; most analysts specialize in a single industry or business sector.
Assets : Any possession that has value in an exchange.
Average Daily Share Volume : The number of shares traded per day, averaged over a
period of time, usually one year.
Average Maturity : The average time to maturity of securities held by a mutual fund.
Changes in interest rates have greater impact on funds with longer average life.
Appreciate : An increase in any investment's value. For example, if shares of stock in a
company you own have risen from five to ten, it has "appreciated."
B :
Bull market : Term describing a long run, upward-moving securities market.
Bear Market : Term describing a long run, downward-moving securities market.
Blue-Chip Stock : Well-established and financially strong corporations, with little investment
risk and good records of earnings and dividend payments.
Bond : A bond is a debt instrument issued by an entity for the purpose of raising capital. A
bond can be issued by a corporation or other entities such as state or municipal governments
or the Central Bank of the country. Bonds normally have a set maturity (term) and interest
(coupon) rate associated with them.
Bottom line : The last line of a company's profit and loss ledger sheet. The bottom line
usually refers to the net profit or loss of a company at any given time.
Broker : An agent who handles the public's orders to buy and sell stocks, commodities or
other property. Full service brokers are those that provide a wide range of investment
services, research and advice. A full service account representative usually works on a
commission basis, thereby generating income on the number of their clients' trades. Discount
brokers are not in the business of giving investment advice. They usually work on salary, limit
their services to trade executions and collect substantially lower fees.
BSE Sensex : A stock index (one of many) commonly used as an indicator of changes in the
general level of the stock market or stock prices in India. In this index, there are 30 diversified
stocks thought to be representative of the market in general.
Buy Transaction : When you place an order for stock, it can be executed depending on which
type of exchange the stock is listed. There are two methods of execution, (i) the online
exchange which is connected via satellite or (ii) the outcry method, which is executed on the
floor of the exchange. The first method is instantaneous, whereas the second can be a little
time consuming. It takes time for a stock order to be sent by the broker to the stock exchange
floor. A person on the stock market floor bids to find a buyer for the stock. The stock is then
purchased or sold and the broker finally notified of the price and how much money to deduct
from the customer's account plus his broker fee. The total time is estimated at 20 minutes.
C :
Change in Stock Price : The change in stock price is recorded in points. The fraction amount
depends on the security being traded. The change in stock price is the difference between the
opening stock price and the current price the stock is selling at. For example, if stock XYZ
opened at 10, and was now selling for 11.50 it would be up +1.50. The +1.50 is the change in
stock price.
Close : The closing price is the last traded price for the stock. The previous close is the price
a stock closed at the previous day.
Commission : A fee charged by a broker for their service in facilitating an investment
transaction.
Common stock : Equity, or ownership in a corporation. Stockholders participate in a
company's profits or losses through dividends and changes in the stock's "market value."
Corporation : A business organization that, for tax purposes, is a legal entity. A corporation has
limited liability (owners can lose only what they invest), easy transfer of stock, and continuity of
existence.
Capital Gains Distribution : Payments to mutual fund shareholders of profits from the sale of
securities in a fund's portfolio. Capital gains distributions (if any) are usually made annually.
Consensus Rating : This method is prevalent in the USA. It is the average of analyst’s
recommendations for a single entity. As many brokers have different ratings systems, their
recommendations are standardized so that a consensus can be calculated. The I/B/E/S ratings
are calculated using a standard set of recommendations, maintained by I/B/E/S, each with an
assigned numeric value:
1. Strong Buy
2. Buy
3. Hold
4. Under perform
5. Sell
Each recommendation received from the analysts is mapped to one of the I/B/E/S standard
ratings. Assigning a numeric value to the broker text enables I/B/E/S to calculate a consensus
recommendation. This consensus recommendation appears as the mean (average) of the
assigned values.
Commodities : Articles of commerce or products that can be used for commerce. In a narrow
sense, products traded on an authorized commodity exchange. Types of commodities include
agricultural products, metals, petroleum, foreign currencies, financial instruments and indexes
to name a few.
D :
Debt to Equity Ratio : Long-term debt divided by shareholders' equity, showing relationship
between long-term funds provided by creditors and funds provided by shareholders; high ratio
may indicate high risk, low ratio may indicate low risk.
Diversification : The acquisition of a group of assets in which returns on the assets are not
directly related over time. Proper investment diversification is intended to reduce the risk
inherent in particular securities. An investor seeking diversification for a securities portfolio
would purchase securities of firms that are not similarly affected by the same variables. For
example, an investor would not want to combine large investment positions in airlines, trucking
and automobile manufacturing because each industry is significantly affected by oil prices and
interest rates.
Dip : A drop in the price of a stock that is temporary, making it the ideal time to buy the stock
Dividend : Payment made to the owners of common or preferred stock shares in a
corporation. Cash dividends are paid out of corporate earnings and the percentage of
earnings paid out varies from corporation to corporation. Generally, the percentage of
corporate earnings paid out runs from 40 to 80 percent, but many times is zero, where the
corporation keeps its entire earnings. A stock dividend pays the shareholders additional
shares of stock or a fraction thereof, rather than cash. It is not mandatory for a company to
distribute dividends.
Dow Jones Industrial Average (DJIA) : A stock index (one of many) commonly used as an
indicator of changes in the general level of the stock market or stock prices in the United
States. In this index, there are 30 industrial stocks thought to be representative of industrial
stocks in general. Dow Jones & Company, a financial and investment publisher based in New
York, also calculates averages for utility stocks, transportation stocks and bonds. Just a few of
the 30 companies in the DJIA are: American Express, AT&T, Bethlehem Steel, Boeing,
Chevron, Disney, Coca-Cola, General Motors and IBM.
E :
Equities : Another name for shares.
F :
Forex : An abbreviated name for foreign currency. See also FX
Futures Contract (Futures) : A futures contract is a legally binding agreement to buy or sell
commodities or financial securities at a fixed time in the future at a price agreed upon today.
The delivery period, quantity and quality of a futures contract is standardized and specified
while the price is set at the time a contract is opened and is negotiated between buyers and
sellers. Futures are traded either electronically or via open outcry on a trading floor on the
Exchange offering the particular contract
Fundamental analysis : A method of stock analysis based on the management of the
company, past and projected financials and profitability.
Fiscal Year : Any consecutive 12-month period of financial accountability for a corporation or
government. For example, in many English speaking countries, because of the Christmas rush
many department stores find it easier to wind up their yearly accounting on January 31 instead
of December 31. Fiscal year is often abbreviated FY with a date. For example, FY May 31
means that the company's fiscal year goes from June 1 to May 31 of the following year. In
India, the Fiscal Year of the Government is 1 st April to the 31 st March of the next year.
G :
Growth stocks : Stocks that pay low dividends, but are expected to grow.
H :
High : The highest price that was paid for a security during a certain time period. This can be
expressed daily, weekly, monthly, or for a 52-week period. For example, the high for the day
can be 20, but the high for the year can be 50.
Hedging : A practice of taking one market position to offset potential loses in another. For
example using a futures contract to reduce the impact of price fluctuations in a cash or
physical market.
Hot stock : A stock whose price rises quickly the day it goes public.
I :
Income stocks : Stocks that have consistently paid high dividends.
Inflation : Increase in the prices for goods and services.
Index/Indices : An index is managed and published either by a stock exchange or a
professional financial and investment body. It is representative of the market sentiment.
Normally the index components are the highly traded stocks of that exchange. Usually they
represent about 80 to 85% of the market capitalisation and trading. Sectored indices like
Industrial, Banking, Utilities etc are made up of the highly traded stocks in that particular sector.
Inflation Rate : An important economic indicator. The rate at which prices are rising
Issue : Any of a company's securities, or the act of distributing such securities.
Inside information : Any knowledge about a company, its products, or securities not generally
available to the public gained from a source inside the company. It is illegal in most countries
for anyone to makes a securities trade based on what they believe to be inside information.
Interest :
* Money charged by a lender to a borrower for the use of his or her money.
* Payment on an investment made at periodic intervals.
Investment : Anything of value purchased to provide capital appreciation and/or income.
Examples include stocks, bonds, mutual funds, unit investment trusts, certificates of deposit,
money market funds and collectibles. Investments may also include artwork, antiques and real
estate.
IPO : Initial Public Offering. An equity or other issue which is presented to the market for the
first time.
J :
Japanese CandleSticks : Japanese Candlestick patterns or charts are so called because the
lines look like candles. The Candlestick graphically represents where the market opened and
closed. The body represents that area of price range, between open and close where buying
and selling support was forthcoming.
L :
Load Fund : Mutual Fund that is sold for a sales charge by a brokerage firm or other sales
representative. Such funds may be stock, bond or commodity funds, with conservative or
aggressive objectives.
Long Term Gain : A gain on the sale of a capital asset where the holding period was twelve
months or more and the profit was subject to the long-term capital gains tax. The legal
definition of short term and long term capital gains vary from country to country. So are
taxation based on those classifications.
Liquidity : Depth of market to absorb buy and sell interest of even large orders at prices
appropriate to supply and demand. The market must also adapt quickly to new information and
incorporate that information into the stock's price. Liquidity is one of the most important
characteristics of a good market.
Liability : A financial obligation or debt.
Limit order : An order to a broker to buy a certain stock (future, etc.) only if its price falls to a
specified level or to sell a stock only if the price rises to a specified level.
Low (price) : The lowest price a security or commodity has reached in a certain period of time
such as a daily low or annual low. This can be expressed daily, weekly, monthly, or for a 52
week period. For example, the low for the day can be 10, but the low for the year can be 5.
Leverage : Any means of increasing value and return by borrowing funds or committing less
of one's own. For corporations, it refers to the ratio of debt (in the form of bonds and preferred
stock outstanding) to equity (in the form of common stock outstanding) in the company's
capital structure. The more long-term debt there is, the greater the financial leverage.
Shareholders benefit from this financial leverage to the extent that the return on the borrowed
money exceeds the interest costs of borrowing it. The market value of the company rises and
so do its shares. Because of this effect, financial leverage is popularly called "trading on the
equity." For individuals, leverage can involve debt, as when an investor borrows money from
his broker "on margin" and so is able to buy more stock than he otherwise could. If the stock
goes up, he repays the broker the loan amount and keeps the profit himself. By borrowing
money he has achieved a higher return on his investment than if he had paid for all the stock
himself. Rights, warrants, futures and option contracts also provide leverage, not through debt
but by offering the prospect of a high return for little or no investment.
M :
Mutual Fund : A portfolio of stocks, bonds, or other securities administered by a team of one
or more managers from an investment company who make buy and sell decisions on
component securities. Capital is contributed by smaller investors who buy shares in the mutual
fund rather than the individual stocks and bonds in its portfolio. The return on the fund's
holdings is distributed back to its contributors, or shareholders, minus various fees and
commissions. This system allows small investors to participate in the reduced risk of a large
and diverse portfolio that they could not otherwise build themselves. They also have the
benefit of professional managers overseeing their money who have the time and expertise to
analyse and pick securities. There are two types of mutual funds, open and closed-ended.
Units in closed-end funds, some of which are listed on Stock Exchanges, are readily
transferable in the open market and are bought and sold, like other stock. These funds do not
accept new contributions from investors, but only reinvest the return on the existing portfolio.
Open-end funds sell their own new shares to investors, stand ready to buy back their old
shares, and are not normally listed on exchanges. Open-end funds are so called because their
capitalization is not fixed; they issue more units as people want them. Many open-ended funds
allow contributors extra perks, such as the ability to write cheques against their units. Also
there are several open ended mutual funds which are insurance linked. Its basically marketing
with added benefits.
Market Open/Close Price : It is the last price a particular stock sold for the previous day.
Market Price : It is the price a particular stock is currently selling for during the operating
hours of the stock market.
Moving Average : A rolling set of averages calculated over a time series of values. A Moving
Average represents data in a manner that smoothens fluctuations and highlights possible
trends.
N :
New York Stock Exchange (NYSE) : The NYSE marketplace blends public pricing with
assigned dealer responsibilities. Aided by advanced technology, public orders meet and
interact on the trading floor with a minimum of dealer interference. The result is competitive
price discovery at the point of sale. Liquidity in the NYSE market is provided by individual and
institutional investors, member firms trading for their own accounts, and assigned specialists.
The NYSE is linked with other markets trading listed securities through the Intermarket Trading
System (ITS).
Nasdaq Composite Index : The Nasdaq Composite Index measures all Nasdaq domestic and
non-U.S. based common stocks listed on The Nasdaq Stock Market. The Index is market value
weighted. This means that each company's security affects the Index in proportion to it's
market value. The market value, the last sale price multiplied by total shares outstanding, is
calculated throughout the trading day, and is related to the total value of the Index.
Today the Nasdaq Composite includes over 5,000 companies, more than most other stock
market indexes. Because it is so broad-based, the Composite is one of the most widely
followed and quoted major market indexes.
New York Stock Exchange : The New York Stock Exchange is located on Wall Street in New
York City. It is the largest securities exchange in the United States.
O :
Opening Price : Opening price is normally determined by the price a stock finished selling at
the previous day. Most exchanges have limits of how high or low the stock can trade on the
following day. It is like a limit or circuit, and is based on a percentage of the last traded price of
the previous day. For example, if the stock exchange has a upper or lower limit of 10%, and if
XYZ stock finished selling at 20.00 the previous day then the maximum or minimum opening
price the following day will be 22.00 and 18.00.
Overbought : Refers to a stock that has risen sharply in price or to the market as a whole
after a period of vigorous buying which, it is sometimes said, has left prices "too high".
Oversold : The reverse of over-brought. A single security or a market which, it is believed,
has declined to an unreasonable level.
P :
Portfolio : A collection of stocks that is owned by an investor.
Publicly held corporation : A corporation that allows anyone in the public to purchase their
stock.
Penny Stocks : Term is typical to the USA stock markets. Low-priced issues, often highly
speculative, selling at less than $1 a share. Frequently used as a term of disparagement,
although some penny stocks have developed into investment-calibre issues.
Preferred/Preferential stock : Stock that receives preferential treatment over common stock
with respect both to dividends and claims on assets in the event that the corporation goes out
of business. Mostly this type of stock that pays a fixed dividend regardless of corporate
earnings, and which has priority over common stock in the payment of dividends. However, it
carries no voting rights, and should earnings rise significantly the preferred holder is stuck with
the same fixed dividend while common holders collect more. The fixed income stream of
preferred stock makes it similar in many ways to bonds.
Price change for stocks : The change in stock price is recorded in points. Each full point is
measured by the price unit. The change in stock price is the difference between the opening
stock price and the current price the stock is selling at. For example, if stock XYZ opened at 10
even and is now selling for 11.50 it would be up +1.50 (1 and a half). The +1.50 is the change
in stock price.
Premium : For bonds and preferred stock, the premium is the amount by which the price
exceeds the face, or par, value. For options markets, the premium is synonymous with the
option's price.
Q :
Quote : The highest bid to buy and the lowest offer to sell any stock at a given time.
Quantity : The quantity of a person's order is the number of shares a person is buying. If the
quantity is 50 then the person is buying 50 shares of that stock.
S :
S & P 500 ( Standard & Poor's 500 Stock Index) : An index of 500 stocks widely traded on
the New York Stock This index is used as a measure of performance of the overall market.
Considered by many to be a much more accurate picture of the market in general.
Secondary Market : When stocks or bonds are traded or resold, they are said to be sold on
a secondary market. The majority of all securities transactions take place on a secondary
market. They are normally conducted through the relevant exchange.
Shareholder : A person who buys stock in a corporation, and therefore becomes a part owner
of the corporation.
Short Covering : Buying stock to return stock previously borrowed to make delivery on a
short sale.
Short Position : Stock options, or futures contracts sold short and not covered as of a
particular date. On the NYSE, a tabulation is issued once a month listing all issues on the
Exchange in which there was a short position of 5,000 or more shares and issues in which the
short position had changed by 2,000 or more shares in the preceding month. Short position
also means the total amount of stock an individual has sold short and has not covered, as of a
particular date. Most stock exchanges have rigid rules regarding short selling. The reader
should ascertain these rules from a registered broker of the exchange.
Stag : An investor, who buys and sells stocks rapidly, usually to make profits quickly.
Stock certificate : The actual piece of paper that is evidence of stock ownership, usually
watermarked and patterned to make itself hard to forge.
Short Term Gain : The profit realized from the sale of securities or other capital assets held
twelve months or less.
Sales charge : A transaction fee or commission paid for an investment instrument. Commonly
referred to as the "load" in a mutual fund.
Selling short : The reverse of the usual stock market technique, short selling is based on the
anticipation that a particular security price will go down. The practice of short selling involves
borrowing shares of a security from your broker and immediately selling them at the current
price. Then, as the price of that security declines, you buy back an equal number of shares on
the open market and use them to cover the shares you borrowed from your broker, and make
a profit. For instance, if you sell short 100 shares of XYZ Corporation at 50.00 a share and the
price of the stock drops to 35.00, your profit is 15.00 a share, or 1500.00. Short sellers lose
when the price of the stock ascends rather than descends. Theoretically, there is more risk
involved with short selling because a stock price could continue to rise forever. A stock
purchased at 10.00 a share can only fall to zero. A stock sold short at 10.00 could go to 20.00,
30.00, 40.00, etc.
Share : A unit representing a measure of ownership in a corporation.
Stock Exchange : An organized marketplace for securities featured by the centralization of
supply and demand for the transaction of orders by member brokers for institutional and
individual investors.
Stock Split : An increase in the number of outstanding shares in a corporation. This is usually
brought about by the division of existing shares. For example, a two-for-one split means that
shareholders will receive two new shares for each old share, making a total of three.
Alternately, a reverse stock split brings about the decrease in the numbers of shares in a
corporation.
Stock symbol : A unique lettering system assigned to a particular stock or mutual fund. For U.
S. securities, one, two and three letter symbols indicate that the security is listed and trades on
an exchange. NASDAQ traded securities have a four or five letters assigned to them. If a fifth
letter appears on a NASDAQ security, it identifies the issue as other than a single issue of
common stock or capital stock. Stock symbols are used so people can easily and quickly
identify stocks without having to look or write sometimes long or similar company names. The
Bombay Stock Exchange has numeric stock codes whereas the National Stock Exchange has
only alphabetical codes.
Stop Order : An order to buy or sell a security conditioned on a specific price. This order is
very often referred to as a "stop loss" order, because it prevents the security from falling below
a certain price.
T :
Technical analysis : An analysis of a stocks or future based strictly on numbers. The method
includes analysis of price patterns.
Tick : The tick is the direction in which the price of a stock moved on its last sale. An up-tick
means the last trade was at a higher price than the one before it and a down-tick means the
last sale price was lower than the one before it. A zero-plus tick means the transaction was at
the same price as the one before, but still higher than the nearest preceding different price.
The tick becomes especially important when large market movements trigger the
implementation of certain circuit breakers meant to stabilize the market
Ticker : A ticker is a trading screen information display showing the current price, volume, etc.
of a particular stock, option, future, etc.
Ticker symbol : A ticker symbol represents a particular security (company, option, etc.) on the
exchange it is trading on and is used to retrieve information about that security from that
exchange. For example: the symbol "f" on the New York Stock Exchange (USA) will bring you
information about Ford Motor Company. “ONGC” will show you the information of the Oil and
Natural Gas Commission on the National Stock Exchange of India. Ticker symbols can be used
to retrieve information from a financial publication such as your daily paper's business section.
Today, ticker symbols can be submitted to an electronic ticker quote retrieval system to find
information about a particular security instantly.
Trader : An employee of a broker/dealer or other financial institution who specializes in
handling purchases and sales of securities for the firm or its clients.
V :
Volume : The total number of shares, bonds, or other units of a security traded in a certain
time period.
Value Traded : This is the total monetary value of all trading in a security for the market day. It
is calculated by multiplying the volume traded by the average sale price.
W :
Warrant : A warrant is a financial instrument issued by a bank or other financial institutions,
which is traded on a Stock Exchange's equity market. Warrants may be issued over securities
such as shares in a company, a currency, an index or a commodity
Wall Street : A street in the city of Manhattan, New York where several major brokerage firms
and stock exchanges are located.
Y :
Yield : In stocks and bonds, the amount of money returned to investors on their investments.
Also known as rate of return.
A :
Analyst : A person with expertise in evaluating financial investments; he or she performs
investment research and makes recommendations to institutional and retail investors to buy,
sell, or hold; most analysts specialize in a single industry or business sector.
Assets : Any possession that has value in an exchange.
Average Daily Share Volume : The number of shares traded per day, averaged over a
period of time, usually one year.
Average Maturity : The average time to maturity of securities held by a mutual fund.
Changes in interest rates have greater impact on funds with longer average life.
Appreciate : An increase in any investment's value. For example, if shares of stock in a
company you own have risen from five to ten, it has "appreciated."
B :
Bull market : Term describing a long run, upward-moving securities market.
Bear Market : Term describing a long run, downward-moving securities market.
Blue-Chip Stock : Well-established and financially strong corporations, with little investment
risk and good records of earnings and dividend payments.
Bond : A bond is a debt instrument issued by an entity for the purpose of raising capital. A
bond can be issued by a corporation or other entities such as state or municipal governments
or the Central Bank of the country. Bonds normally have a set maturity (term) and interest
(coupon) rate associated with them.
Bottom line : The last line of a company's profit and loss ledger sheet. The bottom line
usually refers to the net profit or loss of a company at any given time.
Broker : An agent who handles the public's orders to buy and sell stocks, commodities or
other property. Full service brokers are those that provide a wide range of investment
services, research and advice. A full service account representative usually works on a
commission basis, thereby generating income on the number of their clients' trades. Discount
brokers are not in the business of giving investment advice. They usually work on salary, limit
their services to trade executions and collect substantially lower fees.
BSE Sensex : A stock index (one of many) commonly used as an indicator of changes in the
general level of the stock market or stock prices in India. In this index, there are 30 diversified
stocks thought to be representative of the market in general.
Buy Transaction : When you place an order for stock, it can be executed depending on which
type of exchange the stock is listed. There are two methods of execution, (i) the online
exchange which is connected via satellite or (ii) the outcry method, which is executed on the
floor of the exchange. The first method is instantaneous, whereas the second can be a little
time consuming. It takes time for a stock order to be sent by the broker to the stock exchange
floor. A person on the stock market floor bids to find a buyer for the stock. The stock is then
purchased or sold and the broker finally notified of the price and how much money to deduct
from the customer's account plus his broker fee. The total time is estimated at 20 minutes.
C :
Change in Stock Price : The change in stock price is recorded in points. The fraction amount
depends on the security being traded. The change in stock price is the difference between the
opening stock price and the current price the stock is selling at. For example, if stock XYZ
opened at 10, and was now selling for 11.50 it would be up +1.50. The +1.50 is the change in
stock price.
Close : The closing price is the last traded price for the stock. The previous close is the price
a stock closed at the previous day.
Commission : A fee charged by a broker for their service in facilitating an investment
transaction.
Common stock : Equity, or ownership in a corporation. Stockholders participate in a
company's profits or losses through dividends and changes in the stock's "market value."
Corporation : A business organization that, for tax purposes, is a legal entity. A corporation has
limited liability (owners can lose only what they invest), easy transfer of stock, and continuity of
existence.
Capital Gains Distribution : Payments to mutual fund shareholders of profits from the sale of
securities in a fund's portfolio. Capital gains distributions (if any) are usually made annually.
Consensus Rating : This method is prevalent in the USA. It is the average of analyst’s
recommendations for a single entity. As many brokers have different ratings systems, their
recommendations are standardized so that a consensus can be calculated. The I/B/E/S ratings
are calculated using a standard set of recommendations, maintained by I/B/E/S, each with an
assigned numeric value:
1. Strong Buy
2. Buy
3. Hold
4. Under perform
5. Sell
Each recommendation received from the analysts is mapped to one of the I/B/E/S standard
ratings. Assigning a numeric value to the broker text enables I/B/E/S to calculate a consensus
recommendation. This consensus recommendation appears as the mean (average) of the
assigned values.
Commodities : Articles of commerce or products that can be used for commerce. In a narrow
sense, products traded on an authorized commodity exchange. Types of commodities include
agricultural products, metals, petroleum, foreign currencies, financial instruments and indexes
to name a few.
D :
Debt to Equity Ratio : Long-term debt divided by shareholders' equity, showing relationship
between long-term funds provided by creditors and funds provided by shareholders; high ratio
may indicate high risk, low ratio may indicate low risk.
Diversification : The acquisition of a group of assets in which returns on the assets are not
directly related over time. Proper investment diversification is intended to reduce the risk
inherent in particular securities. An investor seeking diversification for a securities portfolio
would purchase securities of firms that are not similarly affected by the same variables. For
example, an investor would not want to combine large investment positions in airlines, trucking
and automobile manufacturing because each industry is significantly affected by oil prices and
interest rates.
Dip : A drop in the price of a stock that is temporary, making it the ideal time to buy the stock
Dividend : Payment made to the owners of common or preferred stock shares in a
corporation. Cash dividends are paid out of corporate earnings and the percentage of
earnings paid out varies from corporation to corporation. Generally, the percentage of
corporate earnings paid out runs from 40 to 80 percent, but many times is zero, where the
corporation keeps its entire earnings. A stock dividend pays the shareholders additional
shares of stock or a fraction thereof, rather than cash. It is not mandatory for a company to
distribute dividends.
Dow Jones Industrial Average (DJIA) : A stock index (one of many) commonly used as an
indicator of changes in the general level of the stock market or stock prices in the United
States. In this index, there are 30 industrial stocks thought to be representative of industrial
stocks in general. Dow Jones & Company, a financial and investment publisher based in New
York, also calculates averages for utility stocks, transportation stocks and bonds. Just a few of
the 30 companies in the DJIA are: American Express, AT&T, Bethlehem Steel, Boeing,
Chevron, Disney, Coca-Cola, General Motors and IBM.
E :
Equities : Another name for shares.
F :
Forex : An abbreviated name for foreign currency. See also FX
Futures Contract (Futures) : A futures contract is a legally binding agreement to buy or sell
commodities or financial securities at a fixed time in the future at a price agreed upon today.
The delivery period, quantity and quality of a futures contract is standardized and specified
while the price is set at the time a contract is opened and is negotiated between buyers and
sellers. Futures are traded either electronically or via open outcry on a trading floor on the
Exchange offering the particular contract
Fundamental analysis : A method of stock analysis based on the management of the
company, past and projected financials and profitability.
Fiscal Year : Any consecutive 12-month period of financial accountability for a corporation or
government. For example, in many English speaking countries, because of the Christmas rush
many department stores find it easier to wind up their yearly accounting on January 31 instead
of December 31. Fiscal year is often abbreviated FY with a date. For example, FY May 31
means that the company's fiscal year goes from June 1 to May 31 of the following year. In
India, the Fiscal Year of the Government is 1 st April to the 31 st March of the next year.
G :
Growth stocks : Stocks that pay low dividends, but are expected to grow.
H :
High : The highest price that was paid for a security during a certain time period. This can be
expressed daily, weekly, monthly, or for a 52-week period. For example, the high for the day
can be 20, but the high for the year can be 50.
Hedging : A practice of taking one market position to offset potential loses in another. For
example using a futures contract to reduce the impact of price fluctuations in a cash or
physical market.
Hot stock : A stock whose price rises quickly the day it goes public.
I :
Income stocks : Stocks that have consistently paid high dividends.
Inflation : Increase in the prices for goods and services.
Index/Indices : An index is managed and published either by a stock exchange or a
professional financial and investment body. It is representative of the market sentiment.
Normally the index components are the highly traded stocks of that exchange. Usually they
represent about 80 to 85% of the market capitalisation and trading. Sectored indices like
Industrial, Banking, Utilities etc are made up of the highly traded stocks in that particular sector.
Inflation Rate : An important economic indicator. The rate at which prices are rising
Issue : Any of a company's securities, or the act of distributing such securities.
Inside information : Any knowledge about a company, its products, or securities not generally
available to the public gained from a source inside the company. It is illegal in most countries
for anyone to makes a securities trade based on what they believe to be inside information.
Interest :
* Money charged by a lender to a borrower for the use of his or her money.
* Payment on an investment made at periodic intervals.
Investment : Anything of value purchased to provide capital appreciation and/or income.
Examples include stocks, bonds, mutual funds, unit investment trusts, certificates of deposit,
money market funds and collectibles. Investments may also include artwork, antiques and real
estate.
IPO : Initial Public Offering. An equity or other issue which is presented to the market for the
first time.
J :
Japanese CandleSticks : Japanese Candlestick patterns or charts are so called because the
lines look like candles. The Candlestick graphically represents where the market opened and
closed. The body represents that area of price range, between open and close where buying
and selling support was forthcoming.
L :
Load Fund : Mutual Fund that is sold for a sales charge by a brokerage firm or other sales
representative. Such funds may be stock, bond or commodity funds, with conservative or
aggressive objectives.
Long Term Gain : A gain on the sale of a capital asset where the holding period was twelve
months or more and the profit was subject to the long-term capital gains tax. The legal
definition of short term and long term capital gains vary from country to country. So are
taxation based on those classifications.
Liquidity : Depth of market to absorb buy and sell interest of even large orders at prices
appropriate to supply and demand. The market must also adapt quickly to new information and
incorporate that information into the stock's price. Liquidity is one of the most important
characteristics of a good market.
Liability : A financial obligation or debt.
Limit order : An order to a broker to buy a certain stock (future, etc.) only if its price falls to a
specified level or to sell a stock only if the price rises to a specified level.
Low (price) : The lowest price a security or commodity has reached in a certain period of time
such as a daily low or annual low. This can be expressed daily, weekly, monthly, or for a 52
week period. For example, the low for the day can be 10, but the low for the year can be 5.
Leverage : Any means of increasing value and return by borrowing funds or committing less
of one's own. For corporations, it refers to the ratio of debt (in the form of bonds and preferred
stock outstanding) to equity (in the form of common stock outstanding) in the company's
capital structure. The more long-term debt there is, the greater the financial leverage.
Shareholders benefit from this financial leverage to the extent that the return on the borrowed
money exceeds the interest costs of borrowing it. The market value of the company rises and
so do its shares. Because of this effect, financial leverage is popularly called "trading on the
equity." For individuals, leverage can involve debt, as when an investor borrows money from
his broker "on margin" and so is able to buy more stock than he otherwise could. If the stock
goes up, he repays the broker the loan amount and keeps the profit himself. By borrowing
money he has achieved a higher return on his investment than if he had paid for all the stock
himself. Rights, warrants, futures and option contracts also provide leverage, not through debt
but by offering the prospect of a high return for little or no investment.
M :
Mutual Fund : A portfolio of stocks, bonds, or other securities administered by a team of one
or more managers from an investment company who make buy and sell decisions on
component securities. Capital is contributed by smaller investors who buy shares in the mutual
fund rather than the individual stocks and bonds in its portfolio. The return on the fund's
holdings is distributed back to its contributors, or shareholders, minus various fees and
commissions. This system allows small investors to participate in the reduced risk of a large
and diverse portfolio that they could not otherwise build themselves. They also have the
benefit of professional managers overseeing their money who have the time and expertise to
analyse and pick securities. There are two types of mutual funds, open and closed-ended.
Units in closed-end funds, some of which are listed on Stock Exchanges, are readily
transferable in the open market and are bought and sold, like other stock. These funds do not
accept new contributions from investors, but only reinvest the return on the existing portfolio.
Open-end funds sell their own new shares to investors, stand ready to buy back their old
shares, and are not normally listed on exchanges. Open-end funds are so called because their
capitalization is not fixed; they issue more units as people want them. Many open-ended funds
allow contributors extra perks, such as the ability to write cheques against their units. Also
there are several open ended mutual funds which are insurance linked. Its basically marketing
with added benefits.
Market Open/Close Price : It is the last price a particular stock sold for the previous day.
Market Price : It is the price a particular stock is currently selling for during the operating
hours of the stock market.
Moving Average : A rolling set of averages calculated over a time series of values. A Moving
Average represents data in a manner that smoothens fluctuations and highlights possible
trends.
N :
New York Stock Exchange (NYSE) : The NYSE marketplace blends public pricing with
assigned dealer responsibilities. Aided by advanced technology, public orders meet and
interact on the trading floor with a minimum of dealer interference. The result is competitive
price discovery at the point of sale. Liquidity in the NYSE market is provided by individual and
institutional investors, member firms trading for their own accounts, and assigned specialists.
The NYSE is linked with other markets trading listed securities through the Intermarket Trading
System (ITS).
Nasdaq Composite Index : The Nasdaq Composite Index measures all Nasdaq domestic and
non-U.S. based common stocks listed on The Nasdaq Stock Market. The Index is market value
weighted. This means that each company's security affects the Index in proportion to it's
market value. The market value, the last sale price multiplied by total shares outstanding, is
calculated throughout the trading day, and is related to the total value of the Index.
Today the Nasdaq Composite includes over 5,000 companies, more than most other stock
market indexes. Because it is so broad-based, the Composite is one of the most widely
followed and quoted major market indexes.
New York Stock Exchange : The New York Stock Exchange is located on Wall Street in New
York City. It is the largest securities exchange in the United States.
O :
Opening Price : Opening price is normally determined by the price a stock finished selling at
the previous day. Most exchanges have limits of how high or low the stock can trade on the
following day. It is like a limit or circuit, and is based on a percentage of the last traded price of
the previous day. For example, if the stock exchange has a upper or lower limit of 10%, and if
XYZ stock finished selling at 20.00 the previous day then the maximum or minimum opening
price the following day will be 22.00 and 18.00.
Overbought : Refers to a stock that has risen sharply in price or to the market as a whole
after a period of vigorous buying which, it is sometimes said, has left prices "too high".
Oversold : The reverse of over-brought. A single security or a market which, it is believed,
has declined to an unreasonable level.
P :
Portfolio : A collection of stocks that is owned by an investor.
Publicly held corporation : A corporation that allows anyone in the public to purchase their
stock.
Penny Stocks : Term is typical to the USA stock markets. Low-priced issues, often highly
speculative, selling at less than $1 a share. Frequently used as a term of disparagement,
although some penny stocks have developed into investment-calibre issues.
Preferred/Preferential stock : Stock that receives preferential treatment over common stock
with respect both to dividends and claims on assets in the event that the corporation goes out
of business. Mostly this type of stock that pays a fixed dividend regardless of corporate
earnings, and which has priority over common stock in the payment of dividends. However, it
carries no voting rights, and should earnings rise significantly the preferred holder is stuck with
the same fixed dividend while common holders collect more. The fixed income stream of
preferred stock makes it similar in many ways to bonds.
Price change for stocks : The change in stock price is recorded in points. Each full point is
measured by the price unit. The change in stock price is the difference between the opening
stock price and the current price the stock is selling at. For example, if stock XYZ opened at 10
even and is now selling for 11.50 it would be up +1.50 (1 and a half). The +1.50 is the change
in stock price.
Premium : For bonds and preferred stock, the premium is the amount by which the price
exceeds the face, or par, value. For options markets, the premium is synonymous with the
option's price.
Q :
Quote : The highest bid to buy and the lowest offer to sell any stock at a given time.
Quantity : The quantity of a person's order is the number of shares a person is buying. If the
quantity is 50 then the person is buying 50 shares of that stock.
S :
S & P 500 ( Standard & Poor's 500 Stock Index) : An index of 500 stocks widely traded on
the New York Stock This index is used as a measure of performance of the overall market.
Considered by many to be a much more accurate picture of the market in general.
Secondary Market : When stocks or bonds are traded or resold, they are said to be sold on
a secondary market. The majority of all securities transactions take place on a secondary
market. They are normally conducted through the relevant exchange.
Shareholder : A person who buys stock in a corporation, and therefore becomes a part owner
of the corporation.
Short Covering : Buying stock to return stock previously borrowed to make delivery on a
short sale.
Short Position : Stock options, or futures contracts sold short and not covered as of a
particular date. On the NYSE, a tabulation is issued once a month listing all issues on the
Exchange in which there was a short position of 5,000 or more shares and issues in which the
short position had changed by 2,000 or more shares in the preceding month. Short position
also means the total amount of stock an individual has sold short and has not covered, as of a
particular date. Most stock exchanges have rigid rules regarding short selling. The reader
should ascertain these rules from a registered broker of the exchange.
Stag : An investor, who buys and sells stocks rapidly, usually to make profits quickly.
Stock certificate : The actual piece of paper that is evidence of stock ownership, usually
watermarked and patterned to make itself hard to forge.
Short Term Gain : The profit realized from the sale of securities or other capital assets held
twelve months or less.
Sales charge : A transaction fee or commission paid for an investment instrument. Commonly
referred to as the "load" in a mutual fund.
Selling short : The reverse of the usual stock market technique, short selling is based on the
anticipation that a particular security price will go down. The practice of short selling involves
borrowing shares of a security from your broker and immediately selling them at the current
price. Then, as the price of that security declines, you buy back an equal number of shares on
the open market and use them to cover the shares you borrowed from your broker, and make
a profit. For instance, if you sell short 100 shares of XYZ Corporation at 50.00 a share and the
price of the stock drops to 35.00, your profit is 15.00 a share, or 1500.00. Short sellers lose
when the price of the stock ascends rather than descends. Theoretically, there is more risk
involved with short selling because a stock price could continue to rise forever. A stock
purchased at 10.00 a share can only fall to zero. A stock sold short at 10.00 could go to 20.00,
30.00, 40.00, etc.
Share : A unit representing a measure of ownership in a corporation.
Stock Exchange : An organized marketplace for securities featured by the centralization of
supply and demand for the transaction of orders by member brokers for institutional and
individual investors.
Stock Split : An increase in the number of outstanding shares in a corporation. This is usually
brought about by the division of existing shares. For example, a two-for-one split means that
shareholders will receive two new shares for each old share, making a total of three.
Alternately, a reverse stock split brings about the decrease in the numbers of shares in a
corporation.
Stock symbol : A unique lettering system assigned to a particular stock or mutual fund. For U.
S. securities, one, two and three letter symbols indicate that the security is listed and trades on
an exchange. NASDAQ traded securities have a four or five letters assigned to them. If a fifth
letter appears on a NASDAQ security, it identifies the issue as other than a single issue of
common stock or capital stock. Stock symbols are used so people can easily and quickly
identify stocks without having to look or write sometimes long or similar company names. The
Bombay Stock Exchange has numeric stock codes whereas the National Stock Exchange has
only alphabetical codes.
Stop Order : An order to buy or sell a security conditioned on a specific price. This order is
very often referred to as a "stop loss" order, because it prevents the security from falling below
a certain price.
T :
Technical analysis : An analysis of a stocks or future based strictly on numbers. The method
includes analysis of price patterns.
Tick : The tick is the direction in which the price of a stock moved on its last sale. An up-tick
means the last trade was at a higher price than the one before it and a down-tick means the
last sale price was lower than the one before it. A zero-plus tick means the transaction was at
the same price as the one before, but still higher than the nearest preceding different price.
The tick becomes especially important when large market movements trigger the
implementation of certain circuit breakers meant to stabilize the market
Ticker : A ticker is a trading screen information display showing the current price, volume, etc.
of a particular stock, option, future, etc.
Ticker symbol : A ticker symbol represents a particular security (company, option, etc.) on the
exchange it is trading on and is used to retrieve information about that security from that
exchange. For example: the symbol "f" on the New York Stock Exchange (USA) will bring you
information about Ford Motor Company. “ONGC” will show you the information of the Oil and
Natural Gas Commission on the National Stock Exchange of India. Ticker symbols can be used
to retrieve information from a financial publication such as your daily paper's business section.
Today, ticker symbols can be submitted to an electronic ticker quote retrieval system to find
information about a particular security instantly.
Trader : An employee of a broker/dealer or other financial institution who specializes in
handling purchases and sales of securities for the firm or its clients.
V :
Volume : The total number of shares, bonds, or other units of a security traded in a certain
time period.
Value Traded : This is the total monetary value of all trading in a security for the market day. It
is calculated by multiplying the volume traded by the average sale price.
W :
Warrant : A warrant is a financial instrument issued by a bank or other financial institutions,
which is traded on a Stock Exchange's equity market. Warrants may be issued over securities
such as shares in a company, a currency, an index or a commodity
Wall Street : A street in the city of Manhattan, New York where several major brokerage firms
and stock exchanges are located.
Y :
Yield : In stocks and bonds, the amount of money returned to investors on their investments.
Also known as rate of return.
