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Saturday, January 14, 2017

25+ Stock Market Terms And Their Meanings

This post is a collection of important stock market terms and their meanings:



1. Beta: Beta is a measure of the sensitivity of the stock relative to the stock market.

2. Bull Market: A rising market where the overall market sentiment is positive.

3. Bear Market: Market condition characterized by falling prices and an overall negative sentiment among the investors. Opposite to that of a bear market.

4. Bid Price: The price at which an investor is willing to buy a security.

5. Basis Point: One-hundredth of a percentage point. .

6. Dividend: Portion of the company's profits distributed among the shareholders.

7. Derivative Contract: A contract whose value is 'derived' from the value of an underlying asset. Forwards, Futures, Options, and Swaps are all examples of a derivative contract.

8. Long and Short: Simply put, going 'long' means buying and going 'short' signifies selling.

9. Square off: Taking an opposite position from the one currently held to close out open trades. For example if you go long 100 shares of X Ltd @ Rs 100 per shares and then subsequently sell them @ Rs 105, you've squared off your long position.

9. Intraday Trading: A trading strategy where the trader 'squares of' his trades before the close of markets for the day.

10. Swing Trading: A trading strategy where overnight positions  are held for open for a few days in-order to capitalize on short term 'swings' in stock prices.

11. IPO: Initial Public Offer - a company offering its shares for the very first time for public subscription through a stock exchange.

12. Further Public Offer (FPO) - Any fresh offer of shares for public subscription post an IPO.

13. Rally: A rapid increase in the price of a stock and/or the overall market capitalisation (as measured by an index like the NIFTY).

14. Offer: The price at which an investor is willing to sell a stock held by him.

15. Spread: The difference between the bid price and the offer price.

16. Circuit Breaker: A measure deployed by stock exchanges to prevent extreme volatility in stocks by halting trade in a particular stock when the price of the said stock rises or falls by a certain percentage over the closing price of the previous trading session.

17. P/E Ratio: The ratio between the market price of a share and its earnings per share (EPS). [Read more about P/E Ratio]

18. Right Shares: Shares offered by a company to its existing shareholders.

19. Stock Split: A stock split occurs when a company increases the number of its shares by reducing the face value of its shares. For example in a 2:1 split, a company will issue 2 shares of Rs 5 each to every share-holder holding 1 share of the face value of Rs 10 in the company.

20. Bonus Issue: In a bonus issue a company will issue new shares free of cost to its existing shareholders by capitalizing its reserves.

21. Ex date: The date on which a security goes 'ex', the market price of the security is adjusted for the most recently announced corporate action with may be a dividend declaration, a bonus issue or a stock split.

22. Short Selling: Short selling involves selling a stock which you don’t own and then buying it back later in order to square your position.

23. Dematerialisation: Dematerialisation is the process of converting physical shares into an electronic format. Post conversion the shares are held in an account that the 'beneficial owner' maintains with a Depository Participant. 

24. Reverse Stock Split: Consolidation of two or more shares of a company into one share whereby the face face of the stock increases while the number of shares outstanding goes down. 

25. Earnings Per Share (EPS): EPS is arrived at by dividing the total profit of a company available to equity shareholders by the number of shares outstanding. You can find this information in the company's financial statements. 

26. Settlement: The process of exchanging securities and funds after a trade/deal is concluded.

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