American Style Options
These are the options which can be exercised any time during their lifetime and are also referred to as ‘Open options’.
Arbitrage
It refers to buying and selling the same security in different markets to gain out of price differential.
Ask
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.
Beta
It measures the sensitivity or responsiveness of security return to a change in the market return.
Bid
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.
Book
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.
Delist
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.
Dividend
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.
Haircut
It is an extremely thin spread between the bid and ask prices of a given stock.
Hedge
It is a strategy used to limit investment loss by making a transaction that offsets an existing position.
Index
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.
Interest
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
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.
Neckline
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.
Portfolio
It is a collection of all investments an investor has holds at any given point of time.
Premium
It is the price of an option contract.
Private Placement
It is the private offering of a security to a small group of investors.
Rally
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.