Financial Glossary

American Style Options

These are the options which can be exercised any time during their lifetime and are also referred to as ‘Open options’.


It refers to buying and selling the same security in different markets to gain out of price differential.


It is the price at which one would be willing to sell the share.

At the Money

When the price of the underlying equity, index or commodity equals the strike price of the option, it is referred to as at-the-money.

Authorized capital

The maximum equity capital that a company is authorized to raise as per its Memorandum of Association is called ‘Authorized capital’.

Bank Nifty

It is an index that comprises the 12 most liquid and large capitalized Indian banking stocks.

Basis Point

It is one-hundredth of a percentage point.

Bear market

When the stock prices in the market are generally falling, it is called a bear market.


It measures the sensitivity or responsiveness of security return to a change in the market return.


It is the amount at which one is willing to buy the share.

Bid-Ask Spread

It is the difference between the price people are willing to pay to buy a share and the price at which the shareholders are willing to sell a share.

Black Box

A proprietary, computerized trading system whose rules are not disclosed or readily accessible to everyone.

Black Scholes Model

It is a mathematical model used to calculate the theoretical price of an option.

Block trade

These are large transactions of a particular stock sold as a unit.

Blue-chip shares

These are the shares of large, well-established and financially strong companies with an impressive record of earnings and dividends.

Bond / Debenture

A long-term debt security issued by the company to raise borrowed capital at a fixed rate of interest and has a predetermined date of redemption.

Bonus Shares

These are the additional stocks issued to existing shareholders free-of-cost in proportion to their existing shareholding.


It is an electronic record of all pending buy and sell orders for a particular stock.

Bull market

When stock prices in a market are generally rising, it is called a bull market.

Call Option

It is an option that gives holder the right, but not the obligation, to buy a fixed amount of a certain stock at a specified price within a specified time.

Cyclical shares

These are the shares of companies that move up and down with business cycles.

Day Order

It is an order that is valid only for the day it is entered into.

Defensive shares

These are the shares of companies that are relatively unaffected by the ups and downs in the general economic conditions.


It is the removal of a security’s listing on a stock exchange.

Demat account

An electronic account in which shares are held in the name of the account holder.


It is that part of profit earned by the company which is distributed amongst its shareholders.

European Style Option

These are the option contracts that can be exercised only on their expiration date.

Exchange Traded Funds

These are mutual funds that can be traded like shares on the stock exchange.

Expiration Date

The date at which an option contract expires is referred to its expiration date.

Govt bonds

Also called Risk Free Gilt Edged securities, these are tradable securities issued by Central or State Government, for a tenor up to 30 years.

Growth shares

These are the shares of companies that are a part of the growing market, enjoying an above average rate of growth as well as profitability.


It is an extremely thin spread between the bid and ask prices of a given stock.


It is a strategy used to limit investment loss by making a transaction that offsets an existing position.


A benchmark used by investors and portfolio managers to measure stock market performance.

Inside Information

It is an important undisclosed piece of information, pertaining to the key business affairs of a company, that can affect the company’s share price should it be made public.


It is the return paid at a fixed rate periodically over the entire life of borrowed capital.

Intraday trading

It is the buying and selling of stocks on the same day so that all positions are closed before the close of trading hours for the day.

IPO (Initial Public Offering)

It is the first time offer by the company for its share subscription to be subsequently listed on the stock exchange for trading.

Issued Share Capital

That portion of the company’s authorized capital which has been offered to investors through the issuance of equity shares.

Limit order

An order to sell shares above a set price or buy shares below a set price is called a limit order.

Linked bank account

It is the bank account which is linked to one’s trading account to ensure seamless flow of money while one trades.


Liquidity refers to how easily a security can be sold off and converted back into cash.

Market capitalization

It is the value of the company as per the stock market at a given point in time. It is calculated as Market Price of Share multiplied by number of shares outstanding.

Market order

An order to sell/buy shares at the market price is called a market order.

Naked Writer

A seller of an option contract who does not own a position in the underlying security is called a naked writer.


A trendline drawn along the support or resistance levels of reversal or consolidation patterns like head and shoulder, double top, double bottom, triple top, triple bottom etc.

Net asset value

The total market value of all securities contained in a mutual fund on a per unit basis is referred to its NAV (Net Asset Value).

Nifty 50

It is a diversified 50 stock index accounting for 13 sectors of the economy which is used to benchmark fund portfolios, index based derivatives and index funds.

Nifty 100

It is a diversified 100 stock index representing major sectors of the economy, constituted of top 100 companies based on full market capitalization from Nifty 500.

Nifty Auto

It is an index that gauges the performance of automobiles sector i.e. manufacturers of cars & motorcycles, heavy vehicles, auto ancillaries, tyres etc. and comprises 15 stocks that are listed on the National Stock Exchange.

Nifty Next 50

It represents 50 companies from Nifty 100 after excluding the Nifty 50 companies.

Nifty 100 ESG

It reflects the performance of companies within Nifty 100 index based on Environmental, Social and Governance (ESG) scores.

Open Interest

It is the net open position of a futures or option contract.

Over-the-Counter (OTC) Market

It is the market maintained by securities dealers for issues not listed on a stock exchange.

P/E Ratio

It is the market price of share divided by earnings per share.

Penny Stock

These are low priced speculative issues of stock selling at less than INR 1 per share.


It is a collection of all investments an investor has holds at any given point of time.


It is the price of an option contract.

Private Placement

It is the private offering of a security to a small group of investors.


It is a brisk rise in the general price level of the market or price of a stock under consideration.

Rights Issue

It is an offer by the company to its existing shareholders to subscribe to new shares, in proportion to their existing shareholding, before the same is offered to the public in general.

Share Certificate

It is a paper certificate that represents the number of shares an investor owns.

Stock exchange

It is a platform where shares of companies are available for purchase and sale.

Subscribed Share Capital

That portion of the issued capital which has been subscribed by investors.

Sweat Equity 

These are the shares issued to an employee of the company as a reward for the significant contribution made by him/her.

Trading account

It is the account used to trade (buy and sell) securities on the stock market.

Trading volume

The number of shares being traded on a given day is referred to as its trading volume.