A Reliance Capital Company

Glossary

A

Account balance:  Your account balance is the amount of money you have in one of your financial accounts.

Accounts payable: A record of all short-term invoices, bills and other liabilities yet to be paid.

Accounts receivable: A record of all short-term expected payments, from debtors that have already received the goods/services but are yet to pay.

Accrued Interest: Interest due from last coupon date to present on an interest bearing security. Buyer of security pays the quoted price plus accrued interest

Advance-Decline (A/D) Line: Advance-Decline (A/D) Line is a measurement of market breadth. It is calculated by subtracting the number of stocks that decline in price over a given period (weekly or daily) from the number that advance, and accumulating the differences. When advancing issues outnumber declining issues, the A/D line moves upward. Conversely, if the majority of issues fall in price the line trends downward. 

Amortization: An accounting method that allows a company to write-off intangible rights or assets over the period of their existence.

American Option: An option that can be exercised anytime during its life. American options allow option holders to exercise the option at any time prior to and including its maturity date, thus increasing the value of the option to the holder.

Annual Report: A financial report issued by a company to its shareholders at the end of financial year.

Arbitrage: It is the profit making market activity of buying and selling of same security on different exchanges or between spot prices of a security and its future contract.

Ask or Offer: "Ask" or "Offer" designates the price at which a Market maker is willing (offering) to sell a currency, a share, a bond, or any other type of financial instruments.

Assets: It represents e​verything that the company owns and what owed to it. There are two major categories of assets: Fixed assets and current assets

Asset Allocation: The process of dividing your funds among different classes of investments such as stock, bond, or real estate. You could further allocate your stock funds into value, growth, foreign, etc.

Asset Allocation Fund: A fund that spreads its portfolio among a wide variety of investments, including domestic and foreign stocks and bonds, government securities, gold bullion and real estate stocks.

Asset-backed securities: Bonds that represent pools of loans of similar types, duration and interest rates.

Assignment: The notification to the seller of an option by the clearing corporation that the buyer of the option is enforcing the terms of the option's contract.

At-the-Money: The price of the underlying equity equals to the strike price of the option.

Audit:  Evaluation carried out by an outside agency (such as an accountancy firm or the tax authorities) of a taxpayer's books and accountants and/or the general accuracy of returns and declarations, either as a routine operation, or where evasion is suspected.

Auditor: An auditor is an individual who conducts an examination and verification of a company's financial and accounting records and supporting documents.

Auction: A mechanism used by the Stock Exchange to fulfill its obligation to the buyer of a security. It is done when the seller is unable to deliver the scrips sold by him. The security in question is offered by a member who has ready possession of the scrips. 

Authorized Capital: The maximum equity capital a company can raise, which is mentioned in the Memorandum of Association and Articles of Association of the Company. However, share premium is excluded from the definition of authorized capital.

Averaging Down: Buying more of a security at a price that is lower than the price paid for the initial investment. The aim of averaging down is to reduce the average cost per unit of the investment.

B

Bad debts: Money owed to you that is unlikely to be paid to you in the foreseeable future.

Balance sheet: The summary of a company's assets, liabilities, and shareholders' equity. Since balance sheets do not list items at their current monetary value, they may overstate or understate the real value of certain corporate assets and liabilities.

Bank reconciliation: A cross-check that ensures the amounts recorded in the cashbook match the relevant bank statements.

Bankrupt: An individual is bankrupt when they cannot pay their debts and aren't able to reach an agreement with their creditors.

Bankruptcy: A process where an individual is legally declared bankrupt and their assets and financial affairs are administered by an appointed trustee.

Basis: It is the difference between the cash price of the underlying stock and the price of a futures contract based on the underlying. Cash price minus futures price equals basis

BASIS RISK: The risk of the basis between the cash price and the future price widening or narrowing between the time a hedge position is implemented and liquidated.

Bear market: It is described as a period of falling stock prices.

Bear spread: A bear spread is an options strategy that you use when you anticipate a decline in the price of the underlying instrument, such as a stock or an index.

Benchmark: An investment benchmark is a standard against which the performance of an individual security or group of securities is measured.

Beta: A measurement of the relationship between the price of a stock and the movement of the whole market

Bid: It is the price a market maker or broker is willing to pay for a security, such as a stock or bond, at a particular time. In the real estate market, a bid is the amount a buyer offers to pay for a property.

Bid and ask: Also known as a quotation or quote. Bid is the price a market maker or broker offers to pay for a security, and ask is the price at which a market maker or dealer offers to sell.

Blue Chip Stocks: Stocks of leading and nationally known companies that have large capitalizations and long records of profitable growth and dividend payments.

 Bonds: These are debt securities issued by corporations and governments.

Bonus: Shares allotted to the existing shareholders by capitalising the reserves into additional capital. When market expects a company to come out with a Bonus Issue, the price of the shares normally goes up.

Bookkeeping: The process of recording the financial transactions of a business.

Book Closure: A company closes its register of members for updating the records to facilitate payment of dividends or issue of rights of bonus shares. Book closure is the period during which this process is done and deliveries are not effected in the clearing house.

Book value: The value of individual asset as recorded in the accounting records of a taxpayer, calculated as actual cost less allowances for any depreciation.

Box Spread: Option arbitrage in which a profitable position is established with no risk. One spread is established with call options. The other spread is established using put options.

Breadth of Market: The percentage of stocks participating in a particular market move. If two thirds of the stocks listed on an exchange rise during a given trading day, it is generally considered good breadth. Analysts look to this as an indicator that the trend is probably more significant and longer-lasting than one with limited breadth.

Break-even point: The stock price(s) at which an option position generates neither a profit nor a loss. An option position's break-even point(s) are generally calculated for the options' expiration date. Option pricing models can be used to calculate a position's break-even point before the options' expiration date.

Breakout: The advance of a stock price above a resistance level, or the fall of a stock price below a support level. If a stock experiences a breakout on heavy volume, it indicates to market technicians that the stock is about to engage in a major price move in the direction of the breakout.

Broker or Brokerage Firm:  A securities firm or a registered investment advisor affiliated with a firm. Brokers are the link between investors and the stock market.

Budget: Listing of planned revenue and expenditure for a given period.

Bull Market: A rising market where buyers far outnumber the sellers

BULL SPREAD: It is any spread that theoretically profits when the market moves up. Specifically it refers to a vertical spread.

BUTTERFLY SPREAD: An option position composed of either all calls or all puts (with the exception of an iron butterfly), with long options and short options at three different strikes. The options are all on the same stock and of the same expiration, with the quantity of long options and the quantity of short options netting to zero. The strikes are equidistant from each other.

Buying Power: The amount of money available in an account to buy stocks or options. Buying power is determined by the sum of the cash held in the brokerage account and the loan value of any marginable securities in the account without depositing additional equity.

C

Call Option: An option which gives the holder the right, but not the obligation, to buy a fixed amount of a certain stock at a specified price within a specified time. Calls are purchased by investors who expect a price increase.

Capital: Wealth in the form of money or property owned by a business.

Capital cost: A one-off substantial purchase of physical items such as plant, equipment, building or land.

Capital gain: It is the amount gained when an asset is sold above its original purchase price.

Capital growth: It is an increase in the value of an asset.

Carry Forward: Settlement where positions are carried forward from one settlement to another settlement.

Cash: It includes all money that is available on demand including bank notes and coins, petty cash, certain cheques, and money in savings or debit accounts.

Cash Dividend: A dividend/distribution that is paid in cash

Cash flow: It is the measure of actual cash flowing in and out of a business.

Certificate: The physical document that shows ownership of a bond, stock or other security.

Circuit Breaker: A mechanism used to restrain the market when it gets overheated. The Exchange may relax the limit after a cooling off period of about half an hour.

Clearing House: It is a legal counter party to both legs of every trade. The netted purchase and sale positions of the trading Members are settled through the Clearing House.

Closed-End Fund: Investors buy shares from other shareholders, and sell shares to other investors. Share price is determined by supply and demand for fund shares (as opposed to Net Asset Value for open-end Funds).

Common Stock: Shares of a publicly held corporation, usually includes voting rights. Common stock has lower priority in event of liquidation than preferred shares.

CONDOR SPREAD: An option position composed of either all calls or all puts (with the exception of an iron condor), with long options and short options at four different strikes. The options are all on the same stock and of the same expiration, with the quantity of long options and the quantity of short options netting to zero. Generally, the strikes are equidistant from each other, but if the strikes are not equidistant, the spread is called a pterodactyl.

Contract Note: This is a printed confirmation letter from any broker indicating a bargain which is carried out.

Convertible Bond: A bond that can be exchanged for shares of stock.

Convertible Security: A security of an issuer (for example - bonds, debentures, or preferred shares) that may be converted into other securities of that issuer, in accordance with the terms of the conversion feature.

Coupon Rate: The interest rate on a bond.

Credit: The promise to pay in the future in order to buy or borrow in the present.

Creditor: A person or business that allows you to purchase a good or service with an agreement to pay at a later date. A creditor is also anyone who you owe money to, such as a lender or supplier.

Credit limit: An amount that cannot be exceeded on a credit card or the maximum lending amount offered for a loan.

Credit rating: It is a ranking applied to a person or business based on their credit history that represents their ability to repay a debt

Credit history: It is a report detailing an individual's or business' past credit arrangements. A credit history is often sought by a lender when assessing a loan application.

Cross-Hedging: Hedging a stock using a different but related futures contract when there is no futures contract for the underlying being hedged.

Current asset: It is an asset in cash or that can be converted into cash within the next 12 months.

Current liability: It is a liability that is due for payment in the next 12 months.

Current Yield: A measure of an investor's return on a bond calculated by dividing the annual interest on the bond by the market price. It is the actual income rate or the yield to maturity as opposed to the coupon rate (the two would be the same if a bond was purchased at par).

D

Daily Price Range: The maximum price advance or decline permitted for a stocks/ futures contract in one trading session compared to the previous day's settlement price.

Day Order: The quantity that remains untraded is not cancelled until the end of the day.

Debenture: The stock that a company issues which are backed by assets.

Debtor: A person or business that owes you money.

Default: A failure to pay a loan or other debt obligation.

Delta: A ratio that measures an option's price movement compared to the underlying interest's price movement. Delta values have a range of 0 to 1. Deep in-the-money options have deltas that approach 1.

Depreciation: The process of expensing an asset over a period of time. An asset is depreciated to spread the cost of the asset over its useful life.

Derivative: A financial instrument whose value is based on the performance of an underlying financial asset, index, or other investment. For example, as Option is a derivative because its value changes in relation to the performance of an underlying stock.

Disclosed Quantity: An order entered in the system wherein only a fraction of the order quantity is disclosed to the market.

Discount: A reduction applied to a full priced good or service.

Diversification: Limiting investment risk by purchasing different types of securities from different companies representing different sectors of the economy.

Dividend: Portion of profits that a company or a mutual fund distributes to its shareholders or unit holders.

Dividend Reinvestment: In a dividend reinvestment plan, the dividend is reinvested in the scheme itself. Hence instead of receiving dividend, the unit holders receive units.

Dividend Yield: Equal to the indicated annual dividend rate per share divided by the security's price. For example, if the indicated dividend rate is Re. 1 and the closing price is Rs. 50, Re. 1 divided by Rs. 50 equals 2%.

Distribution: Pay out to shareholders resulting from a mutual fund's realised capital gains, interest, or dividend income. A mutual fund dividend, or distribution, may be physically paid to the investor, or it may be reinvested in the fund, giving the investor more shares.

E

Earnings per Share (EPS): After tax 12-month's earnings divided by the number of shares outstanding.

EBIT: Earnings before interest and taxes. Also known as operating income.

EBITDA: Earnings before interest, taxes, depreciation and amortization. Add these items back to the reported earnings to more accurately reflect real cash earnings of company.

Encumbered: An encumbered asset is one that is currently being used as security or collateral for a loan.

Equity: The value of ownership interest in the business, calculated by deducting liabilities from assets.

Ex-Dividend: The holder of shares purchased ex-dividend is not entitled to an upcoming already-declared dividend, but is entitled to future dividends.

Exchange-Traded Fund (ETF): A special type of financial trust that allows an investor to buy an entire basket of stocks through a single security, which tracks and matches the returns of a stock market index.

Exercise: The act of an option holder who chooses to take delivery (calls) or make delivery (puts) of the underlying interest against payment of the exercise price.

Expiration Date: The date and time after which a writer of an option cannot exercise his rights.

F

Face Value: The cash denomination of the individual debt instrument. It is the amount of money that the holder of a debt instrument receives back from the issuer on the debt instrument's maturity date. Face value is also referred to as par value or principal.

Financial statement: A summary of a business' financial position for a given period. Financial statements can include a profit & loss, balance sheet and cash flow statement.

Fixed asset: A physical asset used in the running of a business.

Fixed cost: A cost that cannot be directly attributed to the production of a good or service.

Fixed Income Security: A security that pays a fixed rate of interest such as a "bond" but do not offer an investor much potential for growth.

Fixed interest rate: When the interest rate of a loan remains the same for the term of the loan or an agreed timeframe.

Float: Float is when a private company offers shares in the company to the public for the first time.

Forecast: A prediction of future financial transactions. Forecasts are often used to help plan a more accurate budget.

Foreign Institutional Investor (FII): FII means an institution established or incorporated outside India which proposes to make investment in India in securities and is registered with SEBI.

Fringe benefits: It is a non-monetary benefit such as company cars and mobile phones, included as part of a salary package.

Futures Contract: An agreement between parties for a specified asset for performance on a fixed date in future.

G

Government securities: Securities that are sold to the public by the government, for example, bonds.

Gross income: The total money earned by a business before expenses are deducted.

Gross profit: It is the difference between sales and the direct cost of making the sales.

Growth funds: Mutual funds with a primary investment objective of long-term growth of capital.

Growth investing: A style of investing that invests in fundamentally sound businesses with the belief that they will go up in price.

Growth scheme: A scheme where investments are made in equity and convertible debentures. The objective is to provide capital appreciation over a period of time.

H

Hedge: A strategy used to limit investment loss by making a transaction that offsets an existing position thereby reducing risk

High-Yield Bond: A bond which pays a high yield due to significant credit risk.

Holding Company: A company that owns enough shares of another company to secure voting control.

I

IOC:  An Immediate Or Cancel (IOC) order is an order to buy or sell a stock that must be executed in its entirety, or cancelled if not executed. 

Indexing: An investment strategy that consists of the construction of a portfolio of stocks. It is designed to track the total return performance of an index of stocks.

Inflation: An overall increase in prices for goods and services, usually measured by the percentage change in the Consumer Price Index.

Initial public offering (IPO): When a company first offers shares on the stock market to sell them to the general public. Also known as floating on the stock market.

Interest: The cost of borrowing money on a loan or earned on an interest-bearing account.

Interest rate: A percentage used to calculate the cost of borrowing money or the amount you will earn. Rates vary from product to product and generally the higher the risk of the loan, the higher the interest rate. Rates may be fixed or variable.

Intrinsic Value: The difference between the current market value of the underlying interest and the strike price of an option. In-the-money is a term used when the intrinsic value is positive.

Investment: An asset purchased for the purpose of earning money such as shares or property.

Issue: Any of a company's securities or the act of distributing the securities. Issued shares refer to the portion of a company's shares that have been issued for sale. A company does not have to issue the total number of its authorized shares.

J

Jurisdiction: The power, right, or authority to interpret and apply tax laws or decisions.

K

Know Your Client guidelines: The process that has to be undertaken by banks and other financial institutions to ensure that proper check is made of the investors transacting with them.

L

Last Trading Day: According to the Chicago Board of Trade rules, the final day when trading may occur in a given futures or option contract month.

LEAP: A long-term put or call option (as long as three years).

Leveraged Buy Out: The purchase of a company by a small group of investors largely financed by debt. Most often, the target company's assets serve as security for the loans taken out by the acquiring firm, which repays the loan out of cash flow of the acquired company..

Limit Order: A limit order sets the maximum price the client is willing to pay as a buyer, and the minimum price they are willing to accept as a seller.

Liquidity: A security is liquid when there are enough units outstanding for large transactions to occur without a substantial change in price.

Lock-In Period: Period during which an investor is restricted from selling a particular investment.

Long Position: An investors position where the number of contracts bought exceeds the number of contracts sold. He is a net holder.

M

Margin: Margin allows investors to buy securities using borrowed money from a broker. The investor is charged interest for the loan.

Margin account: An account that allows leverage buying on credit and borrowing on currencies already in the account.

Margin Call: This is a demand for a client to deposit money or securities into a margin account.

Mark to Market: A notional profit or loss of a long or short position as compared to the current market price.

Market Capitalization: Latest stock price multiplied by number of shares outstanding (shares issued).

Maturity: This is the time at which the amount in the fixed deposit has to be returned to the investor.

Maturity Risk Premium (MRP): Risk associated with interest rate uncertainty. The longer the time to maturity, the higher the premium.

Mid-Cap: Company with market capitalization between USD 2 billion and USD 7 billion.

Minimum Price Fluctuation: The smallest allowable increment of price movement for a contract.

Money Market: Part of the capital market established to buy and sell short-term financial obligations. These include Government treasury bills, short-term Government bonds, commercial paper, bankers' acceptances and guaranteed investment certificates.

Moving Average: A tool used in technical analysis and charts. It is the average prices of securities or commodities constructed over a given period and showing trends for the latest interval. For example, a thirty-day moving average includes yesterday's figures; tomorrow the same average will include today's figures and will no longer show those for the earliest date included in the average. Thus, every day the average includes figures for the latest day and drops figures for the earliest day.

Mutual Fund: A Mutual Fund (MF) is a form of trust that pools the funds of a whole lot of investors to make more money by investing in an array of financial instruments.

Mutual Fund Liquidity Ratio: The ratio of cash (and equivalents) to total assets held by mutual funds (excluding money market funds).

N

Naked Put: The writer of a put option contract who is not short the underlying security.

Naked Writer: A seller of an option contract who does not own a position in the underlying security.

National Securities Depository Limited (NSDL): This is an organization, which is an intermediary between the Registrar and the company for dematerialisation of shares.

Near-the-Money: An option with a strike price close to the current price of the underlying tradable.

Net Asset Value (NAV): NAV represents the value of a unit in the scheme and is the main performance indicator for a mutual fund.

Net income: Net income is gross income less deductible income-related expenses. Many countries levy income tax on this basis.

Net operating loss: Amounts by which business expenses exceed income in a tax year.

Net profit: Difference between receipts from business transactions and deductible business expenses, subject to any adjustments for tax purposes.

Net profit margin: Ratio of operating profits to gross income (or revenue).

Net Worth: The difference between a company's or individuals total assets and its total liabilities.

New Listing: A security issue that is newly added to the list of tradable security issues of an exchange. It is accompanied with a new listing date.

Nomination: A provision by which a policyholder can designate any person to receive the policy money in the event of his death.

O

Odd Lot: A block of stock consisting of less than 100 shares. When odd lots trade, a premium is usually tacked on by the specialist or market maker.

Offer document: Offer document means Prospectus in case of a public issue or offer for sale and Letter of offer in case of a rights issue, which is filed with the Registrar of Companies (ROC) and Stock Exchanges.

Offer price: Lowest price at which a dealer is willing to sell a stock.

Offset: To take a second futures or options position opposite to the initial or opening position.

Open Interest: The net open positions of a futures or option contract.

Open Market: The reopening of the market after the close of the session, weekends and holidays.

Open Order: An order that remains in the system for more than a day.

Open-Ended Schemes: Mutual fund schemes that continuously offer new units to the public are called open-ended schemes.

Operating Cash Flow: Surplus cash generated from company's basic operations without regard to income tax entries such as depreciation and amortization.

Option:  A contract that provides the right but not the obligation to buy or sell a specified amount of a security within a specified time period.

Option Spread: The simultaneous purchase and sale of one or more option contracts, futures, and/or cash positions.

Option Writer: The person who sells an option in return for a premium and is obligated to perform when the holder exercises his right under the option contract.

Order: The number of days of past price history used to predict the following day's price.

Over-the-Counter Market: A market where products such as stocks, foreign currencies, and other cash items are bought and sold by telephone and other means of communication.

Ownership: All rights, benefits and privileges under life insurance policies are controlled by their owners. Policy owners may or may not be the insured.

P

P/E: This is an abbreviation of a stock's price-to-earnings ratio. The price-to-earnings ratio is a stock's share price divided by earnings per share for the company's most recent four quarters.

Paid Up capital: The part of the issued capital of a company that has been paid up by the shareholders.

Paid-in capital: The capital received by a corporation from investors for stock, as distinguished from capital generated by earnings or donated.

Par Value: A security's nominal face value.

Partial Fill: An order receives a partial fill when it trades only part of its total committed volume.

Pay In: The designated day on which the members pay securities and funds to the clearing house

Pay Out: The designated day on which the Clearing House effects payment and deliveries to the members

Penny Stock: Low-priced speculative issues of stock selling at less than Re. 1 a share.

Portfolio: Holdings of securities by an individual or institution. A portfolio may include various types of securities representing different companies and industry sectors.

Portfolio Manager: A professional hired by the mutual fund advisor to make investment decisions concerning the purchase and sale of securities for the mutual fund portfolio in accordance with the fund's objectives.

Position: A market commitment. A buyer of a futures contract is said to have a long position and, conversely, a seller of futures contracts is said to have a short position.

Preferred Stock: A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock.

Premium: The amount by which the price at which an issue is trading or is auctioned exceeds the par value of the issue.

Price Band: It sets up the upper and lower limits for a share's movement on any given day. It is based on the previous trading day's closing price. The system will not accept the orders that are out of bound.

Price Rigging: A process where persons collude to artificially increase or decrease the price of a security

Primary Market: Market of new issues of securities.

Profit Margin: Bottom line (after tax) earnings divided by sales.

Promissory note: An unconditional written promise to pay a specified sum of money on demand or at a specified date to, or to the order of, a specified person, or to bearer.

Put Option: An option where the buyer gets the right to sell the underlying security at a specified future date.

Put/Call Ratio: The ratio of put trading volume divided by the call trading volume.

Q

Quote: Information on the last trade, and current bid and asked prices.

R

Rally: A brisk rise in the general price level of the market or price of a stock.

Range (Price): The price span during a given trading session, week, month, year, etc.

Rate Of Return:  A measure of investment performance.

Ratio: The relation that one quantity bears to another of the same kind, with respect to magnitude or numerical value.

Real-Time Quotes: Stock trading price reports that have not been artificially delayed.

Record Date: The date on which the beneficial owner of the Corporate Benefits is determined.

Rematerialisation: Process of converting the shares from electronic form to physical form

Repo Rate: The rate at which the RBI lends money to commercial banks is called repo rate.

Resistance: This is a level where a stock has a difficult time moving through. Resistance levels can be caused by former tops, breakout prices, moving averages, or just price levels where a stock has spent a lot of time in the past.

Return: Declaration of income, sales and other details made by or on behalf of the taxpayer. Forms are often provided by the tax authorities for this purpose.

Revenue: The total amount of funds generated by a business.

Revolving credit: It's one in which, after notice of drawing against it is received by the issuing bank, the balance available for drawing again reverts back or 'revolves' to its original amount, providing the credit has not expired in the meantime.

Reward-Risk Ratio: Monthly excess return to risk comparison, calculated by dividing alpha by standard deviation.

Rights: A temporary privilege that lets shareholders purchase additional shares directly from the issuer at a stated price.

Rights Issue: In order to avoid dilution of stake of existing shareholders, company issues "rights" shares in proportion to their current holding. This is done when the company plans to tap the market after their IPO.

Risk management: The employment of financial analysis and use of trading techniques to reduce and/or control exposure to financial risk.

Roll Over: Taking new positions from funds received from contract near to expiry

Rupee Cost Averaging: Investing a fixed amount in a specific security at regular set intervals over a period of time. Rupee cost averaging results in a lower average cost per share, compared with purchasing a constant number of shares at set intervals. The investor buys more shares when the price is low and buys fewer shares when the price is high.

S

Savings bank account: An account opened with a bank that allows the account holder to deposit and withdraw funds for their requirements.

Settlement: The process that follows a transaction when the seller delivers the security to the buyer and the buyer pays the seller for the security.

Short Selling: The selling of a security that the seller does not own (naked or uncovered short) or has borrowed (covered short). Short selling is a trading strategy. Short sellers assume the risk that they will be able to buy the stock at a lower price, cover the outstanding short, and realize a profit from the difference.

Special Trading Session: A session during which trading in a listed security is limited to the execution of transactions at a single price.

Speculator: Someone prepared to accept calculated risks in the marketplace for attractive potential returns..

Split Shares: Capital and preferred shares issued by a split-share corporation. A split-share corporation holds common shares of one or more companies.

Spot market: Market where people buy and sell actual financial instruments (currencies) for two-day delivery.

Spread: The spread is the gap between bid and ask prices of a stock, option, or other security. This term is also used to generally describe a number of strategies that make use of different spreads between calls, puts and the underlying stock.

Stop Loss: An order placed with a 'trigger price'. It is placed to minimise the losses and the order can be either for a purchase or a sale.

Support Level: An area or price level where a price decline may be expected to be halted (or to slow) by an increase in demand.

Swaps: The sale of one security to purchase another with similar features.

T

Tick: Slang used for minimum spread. Depending on the stock price it could be a half-cent, one cent or five cents.

Time Value: The difference between an option's premium and its intrinsic value.

Trade date: The date on which a trade is executed for a specified value date.

Trend: A move in price either upward or downward, characterized by a series of higher lows and higher highs (uptrends) or lower highs and lower lows (downtrend).

Turnover: The total volume of all executed transactions in a given time period.

U

Underpricing: Issue of securities below their market value.

Underwriter: An investment banking firm which enters into a contract with the issuer of new securities to distribute them to the investing public.

Unlisted: A security not listed on a stock exchange, but traded on the over-the-counter market.

Upside Volume: The total volume of all advancing stocks over a given time period.

Uptick: A stock is said to be on an uptick when the last trade occurred at a higher price than the one before it.

Underlying Interest: The specific security, index or financial instrument that an option or futures contract is traded.

V

Valuation: The process of making an estimate of worth of real property or real property or other assets for a particular purpose.

Value: The price that might an interested in property or some other asset might reasonably be expected to fetch if disposed of at right.

Value added tax (vat): Specific type of turnover tax levied at each stage in the production and distribution process.

Value Investor: One who looks for out of favor (value priced) stocks.

Value Stocks: Companies currently out of favor with investors. These companies usually have low valuation ratios.

Vertical equity: Doctrine which holds that differently situated taxpayers should be treated differently, i.e. taxpayers with more income and/or capital should pay more tax.

Vertical Spread: Buying and selling puts or calls of the same expiration month but different strike prices.

Volatility: The measurement of how much an underlying security fluctuates over a period of time.

Volume: Volume is the daily number of shares of a security that are traded.

W

Warrant: A company-issued certificate that represents an option to buy stock shares at a given time.

Withdrawals: When income or goods are withdrawn from a business by the entrepreneur to his private household (without a consideration), the income or the value of such goods normally constitutes a taxable event in the hands of the recipient for income tax purposes.

Working Capital: Current assets minus current liabilities.

Writer: The person who sells an option in return for a premium and is obligated to perform when the holder exercises his right under the option contract.

Y

Yield: This is the measure of the return on an investment and is shown as a percentage. A stock yield is calculated by dividing the annual dividend by the stock's current market price.

Yield Curve: A chart in which the yield level is plotted on the vertical axis and the term to maturity of debt instruments of similar creditworthiness is plotted on the horizontal axis.

Yield to Maturity: The rate of return an investor receives if a fixed-income security is held to maturity.

Z

Zero Coupon Bond: A bond that has no coupon payments. It pays only a single cash flow at maturity.

Zero rate: The term is used in relation to VAT, where the rate of tax which is in principle levied but at a rate of 0% so that in effect no tax is payable, but will result in refunds of input tax credits.

Zigzag: In a bull market, an Elliott three-wave pattern that subdivides into a 5-3-5 pattern with the top of wave B noticeably lower than the start of wave A. In a bear market, this pattern will be inverted.