Stock Market Glossary

Learn about the ins and outs of the stock market. Know your way around the basic stock market terms and be a wiser stock market investor. Here's a list from A-Z:

A
Accumulation
This refers to acquisition of stocks in large volumes by some institutions. Accumulation may be behind the rise in stock prices as the volume increases and the prices fall with the decrease in volume.

Advance/Decline Line
Also known as AD Line, it is used as an indicator for the extent of advancement or decline in the stock market. The measurement is based on the difference between the advancing issues and the declining issues. The AD Line may also indicate strength or weakness.

Agent
A securities firm or broker who trades stocks or other security instruments for a client is known as an agent.

All or None
This is an order for the trading of stocks that must be filled out so the buy and sell may take place.

Alpha
It is a statistical measurement of the actual performance based on the anticipated risk level. A negative Alpha means that the investment was not properly rewarded for the risks it has taken. A positive alpha, meanwhile, indicates a bigger return while normalizing for the risk of the investment.

Arbitrage
This involves the trading of securities with small price disparities in different markets. There are many variants of this strategy: stock index arbitrage, dividend arbitrage, fixed income arbitrage, capital structure arbitrage.

Ask
The price investors are asked to pay by market makers or simply the offer for buying stocks.

At The Close
Last price of the stock before the market closed, which may indicate the movement of the stock price at the end of the day.

At The Money
A term used to describe an option, which has the same strike price as the price of the underlying equity, commodity, or index.

At-The-Open
Price of stock soon as the market opened for trading, which may also indicate the movement of the stock price through the difference with the closing price.

B

Bear Market
It is a period of decline when stock prices are dipping in value usually defined as -20 percent loss.

Bear Spread
A option strategy used to maximize profit despite the price fall in underlying security. The option with lower strike price is sold, and the option with the higher strike price is sold.

Beta
It is a measurement of sensitivity between the prices of stocks and market performance, usually measured versus the S&P500 Index, a beta of 1.0 means the stock moves 1% for every 1% move in the market.

Bid
The price offered for selling a stock.

Breakout
A term used to describe the movement of a stock price that surpasses a previous high or make a new record for a low over a given time period.

Bull Trap
A misconception that the stock price or index is climbing its way up when it's not.

Bull Spread
A option strategy used to maximize profit with increase in teh price of the underlying security. The lower strike price is bought, while the ones with a higher strike price is sold.

Butterfly Spread
It is the combination of bull spread and bear spread option strategies. Two lower strike prices are subjected under the bull spread strategy, while two higher strike prices are placed under the bull spread option.

C

Call
It is an option that may be exercised by the holder as a right to buy a security at a certain price before expiration.

Channel
The parallel lines used when charting the high points and the low points. The channel can outline an upward or downward movement.

Consolidation
It is the term used for charting, which indicates that the price of stock for trading is not moving dramatically, either up or down.

Consumer Stock
These are companies, enlisted in the stock market, that manufacture and sell consumable products like food and beverages.

Convertible Security
This is a form of security, which may be converted into another form. It is used for convertible bonds or preferred stock, wherein a specific rate applies.

Cost Basis
The price measurement for buying a stock, which includes the amount you paid and the commission.

Confirmation
This occurs when indexes or indicators validate any change on the market. Stock traders use confirmation before they make decisions.

D

Day High
The peak or highest price the stock or security was able to achieve within the day.

Day Low
The lowest point the security or stock has reached within the day.

Day Order
It is a kind of order, which is only available for the day, used for a stock or option.

Delta
It refers to a ratio that indicates the sensitivity between the price movement of an option and the underlying security or interest.

Discount Broker
It is a kind of broker that offers equity execution services at a minimal cost. Good for experienced investors.

Distribution
This refers to sales of stocks in large volumes by some institutions. Distribution may be behind the volume expansion as the price of stocks falls.

Divergence
This happens when related indicators or indexes that normaly move togther don't provide confirmation with respect to each other, which also serves as a warning either for increasing or declining prices in the near future.

E

Equities
These are common or preferred stocks that establish part ownership of a company.

Ex Dividend
Shareholders with an ex dividend stock will not receive dividend checks or payment for the declared date, but are entitled for future dividend payouts.

F

Fair Value
It outlines the value or worth of options as well as the futures contracts.

Flag
It is the price pattern that describes the sudden rise and pull back, creating a narrow price range.

Float
It refers to the available number of shares of stocks or security for trading, which are still open to the public.

G

Good Till Canceled
It is an open order that may only be executed once it's filled or canceled before expiration.

Good-Till-Date
It is a kind of open order that will only be executed by the broker once it's filled or until the system may automatically cancel the order based on the date specified.

H

Hedging
A strategy used to offset investment risks by taking several positions in securities.

Holding Period Return (HPR)
It refers to the rate of return for holding an investment within the given time period.

Holder
A term used for people who purchased an option.

I

Implied Volatility
market based pricing measure that measures the option volatility or anticipated change in market volatility over a period of time.

Index Option
It is an option that uses a stock index as the underlying security.

Inside Day
It refers to a trading day that sets a total price range within the previous day's range.

Insiders
These refer to individuals who have access to corporate insider information which may affect the stock price of a company, e.g. CEO, CFO, Board of Directors.

Insider Trading
It takes place when officers and members of the company trade their shares.

L

Limit Order
It is a form of instruction or request the investor puts on the order form to buy or sell stocks within a limited price.

Long
This refers to buying a security, e.g. stock, option, FX futures contract, etc.

M

Margin
This allows investors to use funds loaned by a brokerage / financial institution to trade securities.

Margin Account
To use the margin or borrowed money from the broker, an account should be made or registered with the broker.

Margin Call
This is an instruction from a broker o deposit more funds into a margin account in order to mainatin the positions due to mark to market losses, otherwise all securities will be liquidated to cover losses.

Market Maker
This refers to licensed traders that help facilitate the buying and selling of stocks or other securities.

Market Not Held Order
This is an order from the investor that gives the floor trader full control on whether or not he will place the order or put it on hold.

Market Order
This is a formal instruction by the client to trade securities at a current price by placing an order.

N

Naked Puts
Naked puts are sold without taking into consideration whether or not the underlying security is owned by the investor.

O

Open
This indicates the price of a security at the opening of the trading hours.

Open Order
This is a blank order to trade securities that may be canceled at the end of the day.

Option
This is also known as the right to trade securities for a specific price within a period of time.

Overbought
This term is used to describe market prices that have risen at an rate of ascent that is considered an extreme.

Oversold
This refers to market prices that have fallen deeply at a rate of descent that is an extreme.

P

Pay Date
It is a specified date wherein the company must pay the shareholders their dividend or stock split out.

Preferred Shares
This is another type of stock that provides a fixed dividend to the company's shareholders.

Premium
This is the rate or price of option, listed on the exchange.

R

Record Date
It is a period of time wherein the stock must be included in your account or you won't be paid a dividend or a spinoff security.

Relative Strength
This indicates the strength of a stock compared to other forms of securities.

Resistance
This refers to a difficult technical level wherein traders beleive a stock may have trouble pushing through.

Right Offering
Shareholders with the right, but not the obligation to buy future company issues at a given price in the offering documentation. May be at a discount to the current market price.

S

Settlement Date
This is a period of time where in trading of securities must be done or executed before expiration.

Spread
This refers to the disparity between the ask prices and bid offers for stocks and other securities.

Stock Split
This is an action taken by the company to increase the amount and number of shares through splits.

T

Technical Analysis
It is an evaluation tool used to outline the price, volume, and other indexes that may affect trading options and decisions.

Tick
It measures the performance of stocks trading within a period of time.

Trend Lines
These outline the movement of stock prices based on performance.

Trending Market
It describes a market wherein prices tend to move in a similar pattern or direction.

U

Upside Breakout
This term is used to describe what happens when a stock exceeds resistance even when it has consolidated or formed its own base.

V

Volatile
It describes a condition wherein rates may fluctuate or change at a rapid rate.

Volatility
It measures the change in market rates or security fluctuations that extend over a period of time.

Volume
It is the total number of shares of a stock or security, which are traded daily.

W

Warrant
It is a form of long-term security that allows purchase of shares at a fixed rate within a certain period, similar to an option but with long dated expirations.

Write
Write means to sell an option, wherein the seller of the options is also known as the writer.