Trading Glossary

Bear Market – A prolonged period of declining stock prices, typically defined as a drop of 20% or more from recent highs.

Bear Put Spread – A bearish options strategy involving the purchase of a put option and the sale of another put option with a lower strike price.

Beta – A measure of a stock’s volatility in relation to the overall market.

Bid Price – The highest price a buyer is willing to pay for a security.

Bull Market – A prolonged period of rising stock prices, generally indicating economic growth and investor optimism.

Bull Call Spread – A bullish options strategy that involves buying a call option while selling another call option at a higher strike price.

Backspread – A type of options spread in which a trader holds more long positions than short positions. The premium collected from the sale of the short option is used to help finance the purchase of the long options. This type of spread enables the trader to have significant exposure to expected moves in the underlying asset while limiting the amount of loss in the event prices do not move in the direction the trader had hoped for. This spread can be created using either all call options or all put options and is an advanced options strategy.

Barrier Options -Exotic options which comes into existence or goes out of existence when certain prices has been reached.

Bearish – An opinion that expects a decline in price, either by the general market or by an underlying stock, or both.

Blue-Chip Stock – Shares of large, well-established, and financially sound companies with a history of reliable performance and regular dividends. 

Buy Limit Order – An order to purchase a security at or below a specified price. It ensures the investor doesn’t pay more than a set amount. 

Block Trade – A large trade—typically involving 10,000 shares or more—that is often executed privately to avoid market disruption. 

Book Value – The net value of a company’s assets as shown on its balance sheet; calculated as total assets minus total liabilities. 

Breakeven Point – The stock price at which an options strategy neither makes nor loses money after factoring in premiums paid or received.

Buy to Open – An order type in options trading where a trader initiates a new long options position—either a call or a put. 

Buyback (Share Repurchase) – When a company buys back its own shares from the market, often to increase shareholder value or improve financial ratios.

Call Option – A contract that gives the buyer the right, but not the obligation, to purchase an underlying asset at a specified price before expiration.

Covered Call – A strategy where an investor holds a long position in a stock and sells a call option on the same stock to generate income.

Credit Spread – An options strategy that involves simultaneously buying and selling options with different strike prices, resulting in a net credit.

Candlestick Chart – A type of price chart that displays high, low, open, and close prices for a given period, used in technical analysis.

Call Broken Wing Butterfly Spread – To establish an options position by going long.

Call Broken Wing Condor Spread – A Butterfly Spread with a skewed risk/reward profile which makes no losses or even a slight credit when the underlying stock breaks to downside. This is achieved by buying further strike out of the money call options than a regular butterfly spread.

Call Ratio Backspread – A Condor Spread with a skewed risk/reward profile which makes no losses or even a slight credit when the underlying stock breaks to downside. This is achieved by buying further strike out of the money call options than a regular Condor spread.

Call Ratio Spread – A credit options trading strategy with unlimited profit to upside and limited profit to downside through buying more out of the money calls than in the money calls are shorted.

Call Time Spread – Another name for Call Calendar Spread. An Options Trading strategy where long term call options are bought and near term call options are written in order to profit from time decay.

Called Away – The process in which a call option writer is obligated to surrender the underlying stock to the option buyer at a price equal to the strike price of the call option.

Calendar Spread – A type of options trading strategy that uses a combination of options with different expiration dates in order to profit primarily from time decay.

Calendar Straddle or Combination – A complex neutral options strategy involving the purchase of a long term straddle and the sale of a short term straddle.

Calendar Strangle – A complex neutral options strategy involving the purchase of a long term strangle and the sale of a short term strangle.

Call Options – Options which gives the holder the right to buy the underlying security at a specified price for a certain, fixed period of time.

Capitalization – The total amount of securities issued by a corporation. This may include: bonds, debentures, preferred stock, common stock and surplus.

Cash Settlement / Cash Delivered – Options which, when exercised, delivers the profit in cash instead of an underlying asset.

CBOE – The Chicago Board Options Exchange; the first national exchange to trade listed stock options.

Chain – A list of options quotes across multiple strike prices.

Class of Options – Option contracts of the same type and style that covers the same underlying asset.

Close – Period at the end of a trading day where final prices for the day are calculated.

Closing Order – The buying back or selling off of an option for which an option trader has the opposite position. An option trader who writes a call option will execute a closing order by “buying to close” that call option. An option trader who bought a call option will execute a closing order by “selling to close” that call option.

Condor Spread – A neutral option strategy that profits from a stock trading within a predetermined range.

Contango – A term originating from the oil market. This is when farther month implied volatility is higher than nearer month implied volatility. This is indicative of a normal market condition.

Contingent Order – An order to buy stock and sell a covered call option that is given as one order to the trading desk of a brokerage firm. Also called a “net order.” This is a “not held” order.

Correction – When a stock drops in price temporarily before rebounding later.

Contract Size – The amount of underlying asset covered by the option contract. This is generally 100. If an option is quoted for $2.50, then one contract would cost $2.50 x 100 = $250 and would cover 100 shares.

Contract Neutral Hedging – A static hedging technique involving buying 1 put option or selling 1 call option for every 1 share held.

Contrary Opinion – The belief opposite that of the general public and/or Wall Street. It is most significant at major market turning points. An overall consensus of opinion, whether bullish or bearish, usually marks an extreme. An investor taking a contrary view will usually benefit in time.

Conversiont – The transformation of a long stock position into a position which is short the stock using options, without closing the original long stock position, through the use of synthetic positions.

Consolidation – When stocks starts going sideways after a significant rise as investors start selling some of their holdings to take profit.

Contract Range – The highest and lowest price that an options contract has traded at. Find out more about

Cover – to buy back as a closing transaction an option that was initially written.

Covered Call Write – a strategy in which one writes call options while simultaneously owning an equal number of shares of the underlying stock.

Covered Put Write – a strategy in which one sells put options and simultaneously is short an equal number of shares of the underlying security.

Covered Straddle Write – the term used to describe the strategy in which an investor owns the underlying security and also writes a straddle on that security. This is not really a covered position

Covered Warrant – the term used for structured warrants that works almost exactly the same as call options and put options.

Credit – Money received in an account. A credit transaction is one in which the net sale proceeds are larger than the net buy proceeds (cost), thereby bringing money into the account.

Credit Spread – A Credit Spread position is an option spread in which the net sale proceeds are larger than the net buy proceeds (cost), thereby bringing money into the account.

Capital Gain – The profit made from selling an asset like a stock at a higher price than what it was purchased for. 

Capital Loss – The loss incurred when an asset is sold for less than its purchase price. 

Commission – A fee charged by a broker for executing a trade on behalf of a client. Many modern brokers now offer commission-free trading. 

Custodian – A financial institution or entity that holds a trader’s or investor’s assets for safekeeping. 

Circuit Breaker – A regulatory tool used to temporarily halt trading on an exchange to curb panic-selling during significant market declines. 

Current Ratio – A financial metric that measures a company’s ability to pay short-term obligations with its current assets (current assets ÷ current liabilities). 

Cash Account – A brokerage account in which all trades must be paid for in full with cash or long positions (no margin).

Debit Spread – An options strategy where the cost of purchasing one option exceeds the premium received from selling another, resulting in a net debit.

Delta – A Greek letter that measures the rate of change in an option’s price relative to a one-point change in the underlying asset’s price.

Derivative – A financial instrument whose value is derived from an underlying asset such as a stock, bond, or commodity.

Dividend – A portion of a company’s earnings paid to shareholders, usually in cash or additional shares.

Day Order – An order that expires at the end of the trading day if it is not executed.

Day trader – Traders who open and close option positions or multiple option positions all within the same trading day. This requires a $25,000 minimum account balance.

Day trading – Trading methodology that involves making multiple trades that are opened and closed all within the same trading day.

Debit – An expense, or money paid out from an account. A debit transaction is one in which the net cost is greater than the net sale proceeds.

Debit Spread – Option spreads which you have to pay money to put on.

Decay – Time Decay in Options.

Deliverables – The financial assets that are delivered to the options holders when options are exercised.

Delta – The numerical value by which an option’s price will change for a corresponding change in price of the underlying entity. Call options have positive deltas, while put options have negative deltas. The delta on an option is an instantaneous measure of the option’s price change, and is the best way to measure your outstanding risk on a position. Being Long (+) 100 deltas is the same as being long 100 shares of stock and same thing with being short (-) 100 deltas is the same as being short 100 shares of stock.

Delta Neutral – When positive delta options and negative delta options offset each other to produce a position which neither gains nor decreases in value as the underlying stock moves slightly up or down. Such a position will return a profit no matter which way the underlying stock eventually moves as long as the move is significant.

Delta Spread – A ratio spread that is established as a neutral position by utilizing the deltas of the options involved. The neutral ratio is determined by dividing the delta of the purchased option by the delta of the written option.

Derivatives – A financial instrument whose value is derived in part from the value and characteristics of another financial instrument. Examples of derivatives are options, futures and warrants.

Diagonal Spread – An options spread on the same underlying but with a different expiration month and strike.

Discount – An option is trading at a discount if it is trading for less than its intrinsic value. A future is trading at a discount if it is trading at a price less than the cash price of its underlying index or commodity.

Discount Broker – A brokerage firm that offers low commission rates.

Dividend – When a company pays a share of the profit to existing shareholders.

Downside Protection – Generally used in connection with covered call writing, this is the cushion against loss, in case of a price decline by the underlying security, that is afforded by the written call option.

Dynamic Hedging – A hedging technique which requires constantly rebalancing in order to maintain the hedge ratio.

Dark Pool – Private exchanges where institutional investors can trade large blocks of shares anonymously to avoid influencing market prices. 

Discretionary Trading – A trading style that involves using judgment and experience to make trades, rather than relying strictly on systems or algorithms. 

Deep In the Money (DITM) – An option with a strike price significantly below (for calls) or above (for puts) the current stock price, providing high intrinsic value. 

Double Bottom – A bullish reversal chart pattern where a stock hits the same support level twice before trending upward. 

Double Top – A bearish reversal chart pattern where a stock hits the same resistance level twice before trending downward. 

Dollar-Cost Averaging (DCA) – An investing strategy where you invest a fixed amount regularly, regardless of market conditions, to reduce the impact of volatility. 

Drawdown – The reduction in an investment or trading account from a peak to a trough, often used as a measure of risk. 

Dividend Yield – A financial ratio showing how much a company pays in dividends each year relative to its stock price (Dividend ÷ Stock Price).

Earnings Report – A company’s financial statement detailing revenue, expenses, and profits over a specific period.

Expiration Date – The date on which an options contract becomes void if not exercised.

Exchange-Traded Fund (ETF) – A type of investment fund that holds a diversified portfolio of assets and trades on a stock exchange like a regular stock.

Early Exercise (assignment) – The exercise or assignment of an option contract before its expiration date.

Employee Stock Options – Stock options granted to employees by their companies as a mean of compensation and incentive

Equity Option – An option that has common stock as its underlying security

ETF – Exchange Traded Funds. Open ended funds tradable over an exchange just like a stock. ETFs are a great way to get industry or sector exposure such as a basket of financials, gold, or emerging markets.

Exercise – A feature of an option that stipulates that the option may only be exercised at its expiration. Therefore, there can be no early assignment with this type of option.

Exercise Limit – To manifest the right granted under the terms of a listed options contract. A holder is the only person able to exercise an option. Call holders exercise to buy the underlying security, while put holders exercise the right to sell the underlying security.

Exercise Price – The limit on the number of contracts which a holder can exercise in a fixed period of time. Set by the appropriate option exchange, it is designed to prevent an investor or group of investors from “cornering” the market in a stock.

Expiration Date – The price at which the option holder may buy or sell the underlying security, as defined in the terms of his option contract.

Expiration Time – The day on which an option contract becomes void. The expiration date for listed stock options is the Saturday after the third Friday of the expiration month. All holders of options must indicate their desire to exercise, if they wish to do so, by this date.

Extrinsic Value – The time of day by which all exercise notices must be received on the expiration date. The expiration time is currently 5:00 PM on the expiration date, but public holders of option contracts must indicate their desire to exercise no later than 5:30 PM on the business day preceding the expiration date. The times are Eastern Time

Earnings Per Share (EPS) – A company’s profit divided by the number of outstanding shares. It’s a key indicator of a company’s profitability.

Entry Point – The price level at which a trader or investor decides to enter a position in a stock or asset. 

Equity – The ownership value in an asset or company after deducting liabilities. In trading accounts, it refers to total account value. 

Ex-Dividend Date – The cutoff date to qualify for a company’s dividend. Buyers of a stock on or after this date are not entitled to the declared dividend. 

Exit Strategy – A predetermined plan for closing a trade, whether at a profit or a loss. 

Economic Indicator – A statistic that provides insights into the overall health of an economy, such as GDP, unemployment rate, or inflation. 

Efficient Market Hypothesis (EMH) – A theory suggesting that stock prices fully reflect all available information, making it impossible to consistently outperform the market. 

Elliott Wave Theory – A technical analysis concept that suggests market prices move in predictable wave patterns driven by investor psychology. 

European-Style Option – An option contract that can only be exercised at its expiration date, not before. 

Execution – The completion of a buy or sell order in the market.

Futures Contract – A legal agreement to buy or sell an asset at a predetermined price at a future date.

Fill Price – The price at which a trade is executed.

Fundamental Analysis – A method of evaluating securities by analyzing financial statements, industry trends, and economic conditions.

Fair Value – Also known as “Premium Value” or “Time Value”. It is the difference between an option’s price and the intrinsic value.

Fiduciary Call – An option trading stratey which buys call options as a replacement for a protective put or married put in the same proportion

Financial Instrument – A physical or electronic document that has intrinsic monetary value or transfers value. For example, cash, shares, futures, options and precious metals are financial instruments..

Fundamental Analysis – A method of analyzing the prospects of a security by observing accepted accounting measures such as earnings, growth, sales, assets, etc.

Face Value – The nominal or stated value of a bond or stock, usually printed on the certificate. For bonds, it’s the amount paid back at maturity. 

Fill – The execution of a buy or sell order. A full fill means the entire order was executed; a partial fill means only some shares/contracts were filled.

Float – The number of a company’s shares that are available for trading by the public, excluding closely held shares by insiders or major stakeholders. 

Fill or Kill (FOK) – A type of order that must be executed immediately in its entirety or not at all. If it can’t be filled completely, it’s canceled. 

Flat Market (Sideways Market) – A market with little price movement up or down, lacking strong trends in either direction. 

Float Rotation – A concept used in momentum trading where the stock’s entire float is traded multiple times within a short period, often a sign of intense speculation. 

Federal Reserve (The Fed) – The central bank of the United States, which regulates monetary policy, interest rates, and money supply. 

Fibonacci Retracement – A technical analysis tool that identifies potential support and resistance levels based on the Fibonacci sequence (e.g., 38.2%, 50%, 61.8%). 

Flash Crash – A very rapid and deep drop in asset prices within minutes or seconds, often triggered by algorithmic trading or market imbalances. 

Front Month – The nearest expiration date for an options or futures contract that is currently available to trade. 

Free Cash Flow (FCF) – The cash a company generates after accounting for capital expenditures. It’s a measure of financial flexibility and health. 

Fear and Greed Index – A sentiment indicator that gauges the overall emotion driving the market — fear or greed — based on various factors like volatility, demand, and momentum.

Gamma – A Greek letter that measures the rate of change of delta in relation to changes in the price of the underlying asset.

Good Till Canceled (GTC) Order – A trade order that remains active until it is either executed or manually canceled by the trader.

Gap Up/Gap Down – A situation where a stock opens at a higher (gap up) or lower (gap down) price than its previous closing price due to after-hours market activity.

Hedge – A strategy used to offset potential losses in an investment by taking an opposite position in a related asset.

High-Frequency Trading (HFT) – A trading method that uses algorithms and powerful computers to execute large numbers of orders at extremely high speeds.

Horizontal Spread – An options strategy involving the simultaneous purchase and sale of options with the same strike price but different expiration dates.

Hedge – Transactions that will protect against loss through a compensatory price movement.

Historical Volatility – Volatility of past price movement of the underlying asset.

Horizontal Call Time Spread – An option strategy in which longer term at the money call options are bought and short term at the money call options are written in order to profit when the underlying stock remains flat.

Horizontal Put Time Spread – An option strategy in which longer term at the money put options are bought and short term at the money put options are written in order to profit when the underlying stock remains flat.

Horizontal Spread – An option strategy in which the options have the same strike price, but different expiration dates. This is also referred to the more common term: calendar spread.

Head and Shoulders – A chart pattern used in technical analysis that signals a potential trend reversal. A “head” is flanked by two “shoulders,” forming a peak and two smaller peaks. 

Holding Period – The length of time an investor owns a security before selling it. Can affect tax treatment and strategy (short-term vs long-term). 

Home Bias – An investor’s tendency to favor domestic over international investments, potentially reducing diversification. 

Halt (Trading Halt) – A temporary suspension of trading on a particular stock or the entire market, often due to news, volatility, or regulatory concerns. 

Hard-to-Borrow List – A list of securities that are difficult for brokers to locate for short selling due to limited supply or high demand. 

High-Water Mark – The highest peak in value an investment fund or portfolio has reached. Often used to calculate performance-based fees. 

Hypothetical Trading – Simulated or paper trading meant for practice, backtesting, or education, using virtual money rather than real capital. 

Hybrid Security – A financial instrument that combines characteristics of both debt and equity — e.g., convertible bonds or preferred shares.

High Beta Stock – A stock with greater volatility compared to the overall market. These stocks tend to move more aggressively during market swings. 

Haircut – A reduction applied to the value of an asset when used as collateral, reflecting the risk of holding or liquidating that asset. 

Heavy Volume – Unusually high trading volume in a stock or security, often signaling strong investor interest or a major news event. 

House Call – A margin call issued by a brokerage firm (as opposed to a regulatory body) when a client’s margin account falls below the required level.

Implied Volatility (IV) – The market’s forecast of a stock’s potential movement based on option prices.

Index Option – An option contract where the underlying asset is a stock market index rather than an individual stock.

Intrinsic Value – The portion of an option’s price that is in-the-money, meaning the difference between the underlying asset’s price and the option’s strike price.

Iron Condor – A neutral options strategy that involves selling an out-of-the-money put and call while simultaneously buying further out-of-the-money options for protection.

Implied Volatility – A measure of the volatility of the underlying stock, it is determined by using prices currently existing in the market at the time, rather than using historical data on the price changes of the underlying stock.

Incremental Return Concept – A strategy of covered call writing in which the investor is striving to earn an additional return from option writing against a stock position aiming to sell at higher prices.

Index – A compilation of the prices of several common entities into a single number.

Index Option – An option whose underlying asset is an index instead of a hard asset such as stocks. Most index options are cash-based.

In-the-Money – A term describing any option contract that has intrinsic value. A call option is in-the-money if the underlying security is higher than the strike price of the call. A put option is in-the-money if the security is below the strike price.

Intrinsic Value – The value of an option if it were to expire immediately with the underlying stock at its current price; the amount by which an option is in-the-money. For call options, this is the difference between the stock price and the striking price, if that difference is a positive number, or zero otherwise. For put options it is the difference between the striking price and the stock price, if that difference is positive, and zero otherwise.

Initial Public Offering (IPO) – The first time a company offers its shares to the public on a stock exchange, transitioning from private to public ownership. 

Intraday – Refers to the trading activity that occurs within a single trading day. Day traders make use of intraday price action. 

Insider Trading – The buying or selling of a stock by someone who has access to non-public, material information about the company. Illegal if done unethically. 

Interest Rate – The cost of borrowing money, typically set by a central bank (like the Fed). Changes in interest rates affect stock and bond prices. 

Index Fund – A mutual fund or ETF designed to track the performance of a specific index, such as the S&P 500 or Nasdaq. 

Inflation – The rate at which the general level of prices for goods and services rises, eroding purchasing power over time.

Investment Grade – A rating that signifies a bond has a relatively low risk of default. Typically rated “BBB” or higher by credit agencies. 

Institutional Investor – A large entity, like a pension fund, hedge fund, or mutual fund, that invests substantial sums in the market. 

Inverted Yield Curve – Occurs when short-term interest rates are higher than long-term rates—often considered a warning sign of a recession. 

Illiquid – Describes a security or asset that cannot be easily bought or sold without affecting its price significantly due to low trading volume.

J-Curve – A chart pattern that shows an initial decline in value followed by a sharp increase, typically used to describe recovery trends in investments.

January Effect – A market anomaly where stock prices — particularly small caps — tend to rise in January more than in other months, often due to year-end tax selling in December. 

Jobless Claims – A weekly economic indicator measuring the number of individuals filing for unemployment benefits. Often watched for signs of economic health or distress. 

Joint Account – An investment or brokerage account shared by two or more individuals, typically with rights of survivorship or equal access. 

Junk Bond – A bond with a credit rating below investment grade, indicating higher risk of default but offering higher potential yields. 

Jump Risk – The risk that a stock or option may suddenly “jump” in price due to unexpected news or events, creating large gaps on a chart.

Junior Stock – Stock issued by companies that are smaller, newer, or higher risk — typically not as financially stable as blue-chip stocks. 

Judgmental Forecasting – A method of predicting market trends based on subjective analysis, intuition, or experience, rather than strict data or models. 

J-Curve Effect – In economics and investing, refers to the trend where a new investment or policy may initially lead to losses before producing positive returns. 

Japanese Candlesticks – A popular charting method that visualizes price movement using candlesticks, each representing open, high, low, and close over a period of time.

Keltner Channel – A volatility-based indicator used in technical analysis to identify overbought and oversold conditions.

Kicker Pattern – A technical chart pattern that indicates a strong reversal in price direction due to unexpected news or earnings reports.

Knock-In Option – A type of barrier option that only becomes active (or “knocks in”) if the underlying asset hits a certain price level. Until this level is reached, the option has no value. 

Knock-Out Option – A type of barrier option that expires worthless if the underlying asset reaches a certain price level. If the asset does not hit that level, the option remains active. 

Keynesian Economics – An economic theory advocating for active government intervention in the marketplace to manage economic cycles, influencing monetary and fiscal policies that impact stock markets. 

Key Support/Resistance Levels – Critical price levels where a stock has historically struggled to move above (resistance) or below (support), providing traders with key entry or exit points. 

Knowledge-Based Economy – An economy that relies more on intellectual capabilities than physical inputs or natural resources, influencing market sectors like tech, research, and development.

KGI (Key Growth Indicator) – Metrics or data points that help identify the growth potential of a company or industry. These can include earnings growth, market share, or R&D spending. 

Kickback – Illegal or unethical payments made by a party to influence a decision or facilitate a transaction, typically in the context of insider trading or fraudulent practices. 

Kicker Clause – A provision in a convertible bond or other securities that offers additional benefits to investors if certain conditions are met, such as a higher interest rate or more favorable conversion terms.

LEAPS (Long-Term Equity Anticipation Securities) – Long-term options contracts with expiration dates up to three years in the future.

Legging Into a Spread – A strategy where a trader enters a multi-leg option position one leg at a time rather than simultaneously.

Limit Order – A trade order placed to buy or sell a security at a specified price or better.

Liquidity – The ease with which an asset can be bought or sold without significantly affecting its price.

Last Trading Day – The third Friday of the expiration month. Options cease trading at 3:00 PM Eastern Time on the last trading day.

Leg – (Verb) A risk oriented method of establishing a two-sided position. Rather than entering into a simultaneous transaction to establish the position (a spread, for example), the trader first executes one side of the position, hoping to execute the other side at a later time and a better price. The risk materializes from the fact that a better price may never be available, and a worse price must eventually be accepted. ?(Noun) In an option strategy involving many kinds of options, each option type is known as a leg.

Legging – Entering each leg of a complex options trading position separately and individually.

LEAPS – Long-Term Equity Anticipation Securities. Simply said, it is option contracts that expires 1 year or more in the future. Sometimes option contracts that expires 6 months to a year later are also known as a LEAPS.

Level II Quotes – Real time quotes provided by NASDAQ outlining the specific bid ask spread provided by each market maker.

Leverage – In investments, the attainment of greater percentage profit and risk potential. A call holder has leverage with respect to a stock holder-the former will have greater percentage profits and losses than the latter, for the same movement in the underlying stock.

Limit – See Trading Limit.

Limit Order – An order to buy or sell securities at a specified price (the limit).

Liquid / Liquidity – The ease at which a purchase or sale can be made without disrupting existing market prices.

Listed Option – A put or call option that is traded on a national option exchange. Listed options have fixed striking prices and expiration dates.

Long – To be long is to own something.

Look Back Options – Exotic options which allows the holder to “Look Back” at the price action of the underlying asset during expiration to decide the optimal price at which to exercise the options.

LBO (Leveraged Buyout) – A type of acquisition where a company is purchased using a significant amount of borrowed money, with the assets of the acquired company often used as collateral for the loan. 

Lock-Up Period – A period following an IPO during which insiders, such as executives and employees, are prohibited from selling their shares in the company. 

Laddering – A strategy in which an investor buys bonds or other securities with different maturities to manage interest rate risks or provide a steady stream of income. 

Loss Aversion – A psychological principle stating that investors tend to prefer avoiding losses rather than acquiring equivalent gains. Loss aversion can lead to irrational decision-making, such as holding on to losing positions for too long. 

Long-Term Capital Gains – Profits from the sale of assets held for longer than one year. Long-term capital gains are typically taxed at a lower rate than short-term capital gains.

Lagging Indicator – An economic indicator that follows trends in the market or economy, such as unemployment rates or corporate profits. These indicators reflect past activity and are often used to confirm trends. 

Limit Down – A situation where the price of a stock or futures contract hits the maximum allowed limit for a decline in a single trading session. This limit is set to prevent panic selling. 

Limit Up – A scenario where the price of a stock or futures contract reaches the maximum allowed price increase for the day. It helps prevent excessive speculation or volatility. 

Lock-Box Structure – A legal structure used by certain types of investment funds where investors agree to keep their capital locked in for a specified time period. 

Lead-Lag Relationship – A relationship between two economic indicators where one indicator (the leading indicator) moves before the overall market trend, and the other (lagging indicator) follows it.

Margin Requirement – The amount of capital a trader must have in their account to trade on margin.

Market Maker – A firm or individual who provides liquidity to the market by continuously buying and selling securities.

Market Order – A trade order executed immediately at the best available price.

Max Pain Theory – The theory that a stock’s price will gravitate toward the price at which the largest number of options contracts expire worthless.

Margin (stocks) – To buy a security by borrowing funds from a brokerage house. The margin requirement-the maximum percentage of the investment that can be loaned by the brokerage firm is set by the Federal Reserve.

Margin (options) – Cash deposit needed to be held in account when writing options.

Marked-To-Model – A valuation method using financial models for level 2 assets, which are less liquid assets that are hard to value due to an absence of a readily available market.

Market Maker – An exchange member whose function is to aid in the making of a market, by making bids and offers for his account in the absence of public buy or sell orders. Several market-makers are normally assigned to a particular security. The market-maker system encompasses the market-makers and the board brokers.

Market Order – An order to buy or sell securities at the current market. The order will be filled as long as there is a market for the security.

Market On Close (MOC) – An option trading order that fills a position at or near market close.

Married Put and Stock – a put and stock are considered to be married if they are bought on the same day, and the position is designated at that time as a hedge

Model – A mathematical formula designed to price an option as a function of certain variables-generally stock price, striking price, volatility, time to expiration, dividends to be paid, and the current risk-free interest rate. The Black Scholes model is one of the most commonly used models.

Moneyness – The strike price of an option in relation to the prevailing price of the underlying asset.

Multiple Compression – Where the overall market sell off over a period of time in order to generally reduce PE ratios across the board due to pessimism about the macro economy.

Multiple Expansion – Where the overall market rallies over a period of time in order to generally increase PE ratios across the board due to optimism about the macro economy.

Market Capitalization (Market Cap) – The total value of a company’s outstanding shares of stock, calculated by multiplying the current stock price by the number of shares. It’s often used to classify companies (e.g., large-cap, mid-cap, small-cap). 

Moving Average (MA) – A technical analysis tool that smooths out price data by calculating the average price over a specific time period, such as the 50-day or 200-day moving average. It’s used to identify trends. 

Moving Average Convergence Divergence (MACD) – A technical analysis indicator that shows the relationship between two moving averages of a stock’s price. It is used to identify potential buy and sell signals. 

Mini Futures Contract – A futures contract with a smaller contract size, often used by individual investors to gain exposure to a futures market without taking on the full contract size.

Mean Reversion – A theory that suggests that asset prices and historical returns eventually return to the mean or average level of the entire dataset over time. It’s used in trading to predict price movements. 

Monetary Policy – The process by which a country’s central bank controls the money supply, interest rates, and inflation to stabilize the economy and support growth. 

Maturity Date – The date on which a bond or other debt instrument becomes due for repayment. The principal amount of the debt is paid back to the bondholder on this date. 

Mutual Fund – A pooled investment vehicle that collects funds from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. 

Market Depth – The number of buy and sell orders at various price levels for a particular security. Market depth is used to gauge the liquidity and potential price volatility of the security. 

Momentum – In technical analysis, momentum refers to the strength of a price trend. Traders use momentum indicators to determine whether a trend is likely to continue or reverse.

Naked Options – An options position where the seller does not own the underlying asset or a corresponding hedge.

Net Debit – The cost of entering an options position, calculated by subtracting premiums received from premiums paid.

Net Credit – The income generated when entering an options position, calculated by subtracting premiums paid from premiums received.

NASDAQ – National Association of Securities Dealers Automatic Quotation System. It is an electronic market place in USA where securities are listed and traded electronically.

Naked Option – An uncovered option risk that carries unlimited risk.

Narrow Based – Generally referring to an index, it indicates that the index is composed of only a few stocks, generally in a specific industry group. Narrow-based indices are NOT subject to favorable treatment for naked option writers.

Neutral – Describing an opinion that is neither bearish or bullish. Neutral option strategies are generally designed to perform best if there is little or no net change in the price of the underlying stock.

Neutral Options Strategies – Different ways to use options in order profit a stock remains stagnant or within a tight trading range

Non-Equity Option – An option whose underlying entity is not common stock; typically refers to options on physical commodities, but may also be extended to include index options.

Net Asset Value (NAV) – The total value of an investment fund’s assets minus its liabilities, typically used to determine the value of mutual funds or ETFs. NAV is calculated at the end of each trading day. 

Nominal Price – The price of an asset as it is listed or quoted, without adjusting for factors like inflation, interest, or other financial conditions. 

Nifty 50 – A stock index representing the 50 largest and most traded companies on the National Stock Exchange of India (NSE). It’s widely used to measure the performance of India’s equity market.

Net Worth – The total value of an individual’s or company’s assets minus their liabilities. For investors, this is an important indicator of financial health. 

Non-Performing Asset (NPA) – An asset (usually a loan or credit) that is no longer generating income or is unlikely to generate a return, often due to a default by the borrower. 

Naked Put – A type of options strategy where the seller writes a put option without having the underlying asset to deliver if the option is exercised. This strategy can be highly risky if the stock falls significantly. 

Nominal Yield – The annual interest rate paid by a bond or other fixed-income security, expressed as a percentage of its face value. 

New Issue – Refers to newly issued stocks, bonds, or other securities. A “new issue” is often part of an Initial Public Offering (IPO) or other offerings to raise capital. 

Non-Correlation – The lack of a statistical relationship between two assets. Non-correlated assets move independently of each other, meaning the price movement of one asset doesn’t impact the price movement of the other. 

News Impact Trading – A trading strategy that aims to profit from short-term volatility caused by news events, earnings reports, or other significant market-moving events. 

Negative Beta – An asset or security that moves in the opposite direction to the overall market. A negative beta means the asset tends to rise when the market falls and vice versa.

Open Interest – The total number of outstanding options contracts that have not been closed, exercised, or expired.

Option Chain – A listing of all available options contracts for a given security, including their strike prices and expiration dates.

Out of the Money (OTM) – A term describing an option that has no intrinsic value, meaning a call option’s strike price is above the stock price or a put option’s strike price is below the stock price.

One Sided Market – A market condition where there are significantly more sellers than buyers or more buyers than sellers. In this case, there are not enough buyers putting up offers to buy from sellers or that there are not enough sellers putting up offers to sell to buyers.

Open Interest – The net total of outstanding open contracts in a particular option series. An opening transaction increases the open interest, while any closing transaction reduces the open interest.

Option – The right to buy or sell specific securities at a specified price within a specified time. A put gives the holder the right to sell the stock, a call the right to buy the stock.

Options Chains – Tables showcasing the options that a stock offers over various strike price and expirations.

Options Contracts – Contingent contracts that allows its holder to buy or sell a specific asset when exercised.

Optionable Stocks – Stocks with tradable options.

Option Pain – Also known as Max Pain or Max Option Pain. It is the stock price which will result in the most number of options contracts expiring out of the money.

Option Pricing Curve – A graphical representation of the projected price of an option at a fixed point in time. It reflects the amount of time value premium in the option for various stock prices, as well. The curve is generated by using a mathematical model. The delta (or hedge ratio) is the slope of a tangent line to the curve at a fixed stock price.

Option Trader – Also known as Options Trader. It is anyone who buys and sells options in the capital markets.

Option Trading – Also known as Options Trading. It is the buying and selling of stock and index options in the capital market so as to speculate for leveraged profits in every market condition or perform hedging to reduce portfolio risk.

Options Clearing Corporation (OCC) – The issuer of all listed option contracts that are trading on the national option exchanges.

Options Margin – See “Margin (Options)”.

Options Trading – The buying and selling of stock and index options in the capital market so as to speculate for leveraged profits in every market condition or perform hedging to reduce portfolio risk.

Options Trader – Anyone who buys and sells options in the capital market.

Options Strategist – An investment professional who specializes in research, analysis and execution of options strategies.

Options Symbol – A string of alphabets that define specific options contracts. Can be referred to as the name of an options contract.

Out of the Money – Describing an option that has no intrinsic value. A call option is out-of-the-money if the stock is below the strike price of the call, while a put option is out-of-the-money if the stock is higher than the strike price of the put.

Over-the-Counter Option (OTC) – An option traded over-the-counter, as opposed to a listed stock option. The OTC option has a direct link between buyer and seller, has no secondary market, and has no standardization of striking prices and expiration dates.

Overvalued – Describing a security trading at a higher price than it logically should. Normally associated with the results of option price predictions by mathematical models. If an option is trading in the market for a higher price than the model indicates, the option is said to be overvalued.

Order Book – A record of buy and sell orders for a particular security, organized by price level. It shows the current supply and demand in the market for a specific asset.

Open Order – An order to buy or sell a stock or other security that has not yet been executed or filled. It remains in place until it is either filled or canceled. 

Overbought – A condition in which the price of an asset or security has risen too quickly and may be due for a correction. Technical indicators, such as the RSI, are often used to determine if a stock is overbought. 

Oversold – The opposite of overbought, where a stock or asset has fallen too far and may be due for a bounce or reversal. Traders often use technical indicators to identify oversold conditions. 

On-Balance Volume (OBV) – A technical indicator that uses volume flow to predict changes in stock price. It is calculated by adding volume on up days and subtracting volume on down days. 

Option Premium – The price paid for an option contract. It consists of intrinsic value and time value. The premium is what the buyer of the option pays to the seller. 

Oscillator – A type of technical indicator that moves within a defined range and is used to identify trends, overbought or oversold conditions, and potential reversals in the market. 

Option Assignment – Occurs when the writer of an options contract is required to fulfill the terms of the contract. For a call option, this means delivering the underlying asset, and for a put option, it means buying the asset at the strike price. 

Order Flow – The buying and selling orders that are transmitted to the market. Analyzing order flow helps traders predict potential price movements based on where large trades or significant orders are placed. 

Opening Range – The range between the high and low prices during the first few minutes of trading, often used as an indicator of market sentiment and potential price direction for the rest of the day.

Protective Put – A risk-management strategy involving the purchase of a put option to protect against downside risk in a stock position.

Put-Call Ratio – A metric that compares the trading volume of put options to call options, often used to gauge market sentiment.

Pin Risk – The risk faced by an option seller when the stock price is very close to the option’s strike price at expiration, making it uncertain whether the option will be exercised.

Parity – Describing an in-the-money option trading for its intrinsic value: that is, an option trading at parity with the underlying stock. An option trading under parity is a discount option.

Physical Option – An option whose underlying security is a physical commodity that is not stock or futures.

Physically Settled Option – An option which the actual underlying asset exchange hands when exercised.

Portfolio – Holdings of securities by an individual or institution. A portfolio may contain options of different stocks or a combination of shares, options and other financial instruments.

Position – Specific securities in an account or strategy. A covered call writing position might be long 1,000 ABC and short 10 ABC January 50 calls. It also refers to facilitate; buy or sell a block of securities, thereby establishing a position.

Position Trading – The use of options trading strategies in order to profit from the unique opportunities presented by stock options, such as time decay, volatility and even arbitrage to make safe, fixed, albeit lower profit.

Premium – The total price of an option contract is made up of the sum of the intrinsic value and the time value premium. Even though most people refer to the price of an option contract as the “Premium”, it is actually an inaccurate expression. The Premium of an option contract is the part of the price that is not intrinsic.

Premium Over Parity – This is the time value in an option.

Profit Range – The range within which a particular position makes a profit. Generally used in reference to strategies that have two break-even points-an upside break-even and a downside break-even. The price range between the two break-even points would be the profit range.

Profit Table – A table of results of a particular strategy at some point in time. This is usually a tabular compilation of the data drawn on a profit graph.

Protected Strategy – A position that has limited risk. A protected short sale (short stock, long call) has limited risk, as does a protected straddle write (short straddle, long out-of-the-money combination).

Protective Call – An option trading hedging strategy that protects profits made in a short stock position using call options.

Protective Put – An option trading hedging strategy that hedges against a drop in stock price using put options.

Public Book (of orders) – The orders to buy or sell, entered by the public, that are away from the current market. The board broker or specialist keeps the public book. Market-makers on the CBOE can see the highest bid and lowest offer at any time. The specialist’s book is closed (only he knows at what price and in what quantity the nearest public orders are).

Pull back – A temporary fall in price after a rally. The rally usually continues after a Pull Back. This is also known as a “Correction” in prices.

Put – An option granting the holder the right to sell the underlying security at a certain price for a specified period of time.

Put Broken Wing Butterfly Spread – A Butterfly Spread with a skewed risk/reward profile which makes no losses or even a slight credit when the underlying stock breaks to upside. This is achieved by buying further strike out of the money put options than a regular butterfly spread.

Put Broken Wing Condor Spread – A Put Condor Spread with a skewed risk/reward profile which makes no losses or even a slight credit when the underlying stock breaks to upside. This is achieved by buying further strike out of the money put options than a regular put condor spread.

Put Call Parity – Put Call Parity is an option pricing concept that requires the extrinsic values of call and put options to be in equilibrium so as to prevent arbitrage. Put Call Parity is also known as the Law of One Price.

Put Call Ratio – The ratio of the number of open put options against the number of open call options. The higher the resulting number, the more put options are bought or shorted on the underlying asset.

Put Ratio Backspread – A credit options trading strategy with unlimited profit to downside and limited profit to upside through buying more out of the money puts than in the money puts are shorted.

Put Ratio Spread – A credit options trading strategy with the ability to profit when a stock goes up, down or sideways through shorting more out of the money puts than in the money puts are bought.

Price-to-Earnings Ratio (P/E Ratio) – A valuation ratio calculated by dividing the current price of a stock by its earnings per share (EPS). It’s commonly used to assess if a stock is overvalued or undervalued compared to its earnings. 

Pairs Trading – A market-neutral trading strategy that involves buying and selling two correlated assets simultaneously, aiming to profit from the relative price movements between the two. 

Passive Investment – A long-term investment strategy that aims to replicate the performance of a market index, rather than attempting to outperform it. This strategy typically involves buying index funds or exchange-traded funds (ETFs). 

Price Action – The movement of a security’s price over time, which is often analyzed without the use of technical indicators. Traders use price action to make decisions based on historical price movements. 

Portfolio Diversification – A risk management strategy that involves spreading investments across various assets to reduce exposure to any single risk. The goal is to reduce the overall risk of the portfolio by holding different types of securities. 

Point – A unit of measurement for price movement. In stock markets, a “point” represents a one-unit change in the price of a stock or index. For example, if a stock moves from $100 to $101, it has moved 1 point. 

Public Offering – A process through which a company offers its shares to the public for the first time, usually through an Initial Public Offering (IPO), or a secondary offering if shares are already publicly traded. 

Pre-Market Trading – Trading that occurs before the official market opening hours, usually between 4:00 AM and 9:30 AM EST in the U.S. Pre-market trading allows traders to react to news events before the regular session begins.

Price-to-Book Ratio (P/B Ratio) – A valuation ratio used to compare a company’s market value (stock price) to its book value (net assets). It is calculated by dividing the stock price by the book value per share. 

Pivot Point – A technical analysis indicator that helps traders identify potential support and resistance levels based on the previous day’s price action. Pivot points are commonly used to predict market trends. 

Penetration – The act of a stock price breaking through a support or resistance level. Penetration is often viewed as a sign of potential trend reversal or acceleration.

Quantitative Analysis – A method of evaluating securities using mathematical and statistical models.

Quadruple Witching – The third Friday of March, June, September and December when Index Futures, Index Options, Stock Futures and Stock Options expire. This is one of the most volatile trading days of the year, with exceptionally high trading volume.

Quarterlies / Quarterly Options – Options with quarterly expiration cycle.

Quotation – The price at which an asset or security is being bought or sold at a given time. A quotation can also refer to the bid and ask prices for an asset. 

Quarterly Earnings Report – A financial report published by a company every quarter, outlining its performance, revenue, profits, and expenses. Investors use these reports to assess a company’s financial health and profitability. 

Quality Stock – A stock that is considered to be of high quality, typically characterized by consistent earnings, a strong balance sheet, and solid fundamentals. These stocks tend to be more stable and less volatile. 

Quotation System – A computerized system used by exchanges or brokerages to provide real-time quotes on the prices of various securities. It typically includes bid, ask, and last trade prices. 

Quick Ratio (Acid-Test Ratio) – A financial metric that measures a company’s ability to pay off its current liabilities without selling inventory. It’s a more conservative measure of liquidity than the current ratio.

Quota – A limited share or portion of something, such as a set amount of stocks or bonds allocated for purchase. A quota can be applied in various contexts, such as limited share offerings in IPOs. 

Quoted Price – The price of a security as quoted by a broker or exchange at a specific time. It is typically the price at which a security can be bought or sold. 

Quotation Board – A display board or digital platform showing the latest quotes for various securities, including bid prices, ask prices, and trade sizes. It is a tool commonly used in trading floors or online platforms.

Resistance Level – A price level where selling pressure tends to prevent further price increases.

Ratio Backspread – Credit volatile options trading strategy that opens up one leg for unlimited profit through selling a smaller amount of in the money options against the purchase of at the money or out of the money options of the same type.

Ratio Calendar Combination – A strategy consisting of a simultaneous position of a ratio calendar spread using calls and a similar position using puts, where the striking price of the calls is greater than the striking price of the puts.

Ratio Spread – Constructed with either puts or calls, the strategy consists of buying a certain amount of options and then selling a larger quantity of out-of-the-money options.

Ratio Strategy – A strategy in which one has an unequal number of long securities and short securities. Normally, it implies a preponderance of short options over either long options or long stock.

Ratio Write – Buying stock and selling a preponderance of calls against the stock that is owned.

Realize (a profit or loss) – The act of closing a position, incurring a profit or a loss. As long as a position is not closed, the profit or loss remains unrealized.

Resistance – A term in technical analysis indicating a price area higher than the current stock price where an abundance of supply exists for the stock, and therefore the stock may have trouble rising through the price.

Reverse Hedge – A strategy in which one sells the underlying stock short and buys calls on more shares than he has sold short. This is also called a synthetic straddle and is an outmoded strategy for stocks that have listed puts trading.

Reverse Strategy – A general name that is given to strategies which are the opposite of better known strategies. For example, a ratio spread consists of buying calls at a lower strike and selling more calls at a higher strike. A reverse ratio spread also known as a backspread consists of selling the calls at the lower strike and buying more calls at the higher strike. The results are obviously directly opposite to each other.

Risk Graph – A graphical representation of the risk/reward profile of an option position.

Risk Free Return – Profit on a risk free investment instrument such as the Treasury bills. It is a common standard of measuring the opportunity cost of having your money in anything other than Treasury bills.

Roll Down – Close out options at one strike and simultaneously open other options at a lower strike.

Roll Forward – Close out options at a near-term expiration date and open options at a longer-term expiration date.

Rolling – A follow up action in which the strategist closes options currently in the position and opens other options with different terms, on the same underlying stock.

Rally – A period of sustained increase in the price of a security or market index. A rally often indicates investor optimism and can occur over a short or long time frame. 

Risk Management – The process of identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. In trading, it involves strategies like stop-loss orders, portfolio diversification, and position sizing. 

Return on Investment (ROI) – A performance measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit by the initial investment cost. It’s often expressed as a percentage. 

Reversal – A change in the direction of a security’s price trend. A reversal may occur after a trend has been in place for a while and signals a potential shift in momentum.

Risk/Reward Ratio – A measure used to compare the potential return of an investment relative to its risk. Traders use this ratio to assess whether the potential reward justifies the level of risk they are willing to take on a trade. 

Rate of Change (ROC) – A technical indicator that measures the percentage change in price over a specific period of time. It’s often used to gauge the momentum of an asset and help identify potential trends or reversals. 

Round Lot – A standard trading unit of stocks, usually 100 shares. Round lots are typically easier to trade compared to odd lots, which involve a number of shares that is not a multiple of 100. 

Risk Tolerance – The degree of variability in investment returns that an individual is willing to withstand in their investment portfolio. Higher risk tolerance typically allows for more aggressive investment strategies. 

Reverse Split – A corporate action where a company consolidates its shares, typically to increase the stock price. For example, in a 1-for-10 reverse stock split, shareholders receive one share for every 10 shares they hold, but the price per share increases proportionally. 

Retracement – A temporary reversal in the price direction within a larger trend. It typically occurs when prices temporarily move against the overall trend before resuming the previous direction. It’s a common concept in technical analysis. 

Relative Strength Index (RSI) – A momentum oscillator that measures the speed and change of price movements. The RSI ranges from 0 to 100 and is used to identify overbought or oversold conditions in a market. 

Risk Adjusted Return – A measure that evaluates the return of an investment relative to its risk. It helps investors compare potential returns with the amount of risk taken on, with metrics like the Sharpe ratio often used to measure this.

Retained Earnings – The portion of a company’s profits that are kept or retained and not paid out as dividends. Retained earnings are reinvested in the company or used to pay down debt.

Stop-Loss Order – An order placed with a broker to sell a security when it reaches a specific price, designed to limit losses.

Stock – A type of security that represents ownership in a corporation. It entitles the holder to a proportion of the company’s profits and assets. 

Support – A price level at which a stock or market tends to find buying interest as it declines. Support acts as a “floor” that prices typically have difficulty falling below. 

Strike Price – The fixed price at which the holder of an options contract can buy (call) or sell (put) the underlying asset. It’s a key component in options trading. 

Short Selling (Shorting) – A strategy where a trader borrows shares and sells them with the intention of buying them back later at a lower price to profit from a price drop. 

Scalping – A short-term trading strategy focused on making multiple small profits throughout the day by buying and selling securities quickly. 

Swing Trading – A trading style that aims to capture short- to medium-term gains in a stock or other financial instrument over a few days to weeks. 

Spread – The difference between two prices, rates, or yields. In options, it often refers to the difference between two strike prices or premiums. In stocks, it can also mean the bid-ask spread. 

Sector – A group of stocks within the same industry or market segment, such as technology, healthcare, or finance. Investors often analyze sectors for diversification and trend spotting.

S&P 500 (Standard & Poor’s 500) – A market-capitalization-weighted index of 500 of the largest publicly traded companies in the U.S. It’s a key benchmark for overall market performance. 

Securities – Tradable financial instruments such as stocks, bonds, options, and mutual funds that represent ownership or a debt agreement. 

Shareholder – An individual or institution that owns shares in a company. Shareholders are partial owners of the company and may receive dividends and voting rights. 

Sentiment (Market Sentiment) – The overall attitude of investors toward a particular security or financial market. Sentiment can be bullish (positive) or bearish (negative). 

Settlement Date – The date by which a trade must be finalized. This typically means the buyer must pay for the securities, and the seller must deliver them—usually T+2 (two business days after the trade). 

Short Interest – The total number of shares of a security that have been sold short and not yet covered or closed out. High short interest can indicate bearish sentiment—or a potential short squeeze. 

Sharpe Ratio – A measure of risk-adjusted return. It’s calculated by dividing the investment’s excess return by its standard deviation. A higher Sharpe Ratio suggests better risk-adjusted performance. 

Secondary Offering – A sale of new or existing shares by a company after its initial public offering (IPO). It can dilute existing shares but also raise capital. 

Synthetic Position – An options strategy that mimics the payoff of another position using a combination of options. For example, a synthetic long stock position can be created with a long call and a short put.

Technical Analysis – The study of past market data—primarily price and volume—to forecast future price movements. It involves charts, indicators, and patterns to identify trading opportunities. 

Ticker Symbol – A unique series of letters assigned to a security for trading purposes. For example, AAPL represents Apple Inc. 

Time Decay (Theta) – A measure of how the value of an options contract decreases as it approaches its expiration date. Time decay accelerates the closer an option gets to expiry. 

Trading Volume – The number of shares or contracts traded in a given period. High volume can indicate strong investor interest or signal key market movements. 

Trend – The general direction in which the market or a security’s price is moving—upward (bullish), downward (bearish), or sideways (neutral). 

Take Profit Order (T/P) – An order to sell a security when it reaches a certain profit level. It locks in gains automatically when a target price is hit. 

Trailing Stop Order – A type of stop-loss order that moves with the market price, maintaining a fixed percentage or dollar amount below (or above) the current price. It allows profits to run while managing downside risk. 

Treasury Bonds (T-Bonds) – Long-term government securities with a maturity of more than 10 years. They pay interest semi-annually and are considered low-risk investments. 

Tick – The smallest possible price movement in a trading instrument. For example, if a stock moves from $100.00 to $100.01, it has moved one tick. 

Total Return – The overall return on an investment, including both capital gains and dividends or interest over a specified period.

Trading Plan – A written strategy that defines entry and exit rules, risk management, position sizing, and performance tracking. A key tool for discipline and consistency. 

Tax-Loss Harvesting – A strategy where losing investments are sold to offset capital gains taxes. Often used at the end of the year to reduce tax liability. 

Trade Execution – The completion of a buy or sell order in the market. Good execution ensures the order is filled efficiently and at the best possible price. 

Turnover Rate – The percentage of a portfolio or fund’s holdings that are replaced over a period, usually one year. High turnover can mean more active trading and possibly higher transaction costs. 

Time in Force (TIF) – Instructions that specify how long an order will remain active before being executed or canceled. Common TIFs include GTC (Good Till Canceled) and DAY (expires at the end of the trading day).

Underlying Asset – The financial asset (like a stock, index, or commodity) upon which a derivative’s price is based—such as options or futures contracts. 

Uptrend – A market condition where the price of a security consistently moves higher over time, marked by higher highs and higher lows. Traders often look for uptrends as a signal to go long. 

Uncovered Option (Naked Option) – An options position that is not backed by the equivalent position in the underlying asset. For example, selling a call option without owning the stock. It carries high risk due to unlimited loss potential.

Unit Investment Trust (UIT) – A type of investment company offering a fixed portfolio of stocks and/or bonds as redeemable units to investors for a set period. Unlike mutual funds, UITs are not actively managed. 

Unrealized Gain/Loss – A profit or loss that exists on paper but has not yet been locked in by selling the asset. Also known as a “paper” gain or loss. 

Unusual Options Activity (UOA) – A higher-than-average volume of trading in a specific options contract. This can indicate insider knowledge or large institutional moves and is often monitored for trading signals. 

Uptick – A trade executed at a price higher than the previous trade. A series of upticks often signals bullish momentum. 

Underweight – A term used when an investor or analyst recommends holding a smaller portion of a specific asset relative to its weighting in a benchmark index. It often reflects a bearish or cautious outlook. 

Underwriter – An institution (usually an investment bank) that administers the public issuance and distribution of securities from a corporation or other issuing body. Underwriters help set the offering price and buy the securities to resell to the public. 

Utilities Sector – One of the 11 stock market sectors, it includes companies that provide essential services like electricity, water, and natural gas. Utilities are considered defensive stocks due to steady demand.

Vega – A Greek letter that measures an option’s sensitivity to changes in implied volatility.

Volatility – A statistical measure of the dispersion of returns for a given security or market index. High volatility means large price swings; low volatility means smaller, steadier movements.

Volume – The total number of shares or contracts traded for a security during a given period. Volume helps gauge liquidity and the strength of price movements. 

VIX (Volatility Index) – Also known as the “fear gauge,” the VIX measures the market’s expectation of volatility based on S&P 500 options. A rising VIX often indicates market fear or uncertainty. 

Valuation – The process of determining the current worth of an asset or company. Common methods include price-to-earnings (P/E) ratio, discounted cash flow (DCF), and book value. 

Value Investing – An investment strategy where stocks are selected because they trade for less than their intrinsic value. Popularized by Warren Buffett and Benjamin Graham. 

Value Stock – A stock that appears to be trading for less than its intrinsic or book value. These stocks often have low P/E ratios and high dividend yields. 

Vertical Spread – An options trading strategy that involves buying and selling two options of the same type (calls or puts), same expiration, but different strike prices. Examples: vertical call spread, vertical put spread. 

Vesting – The process by which an employee earns the right to keep shares or options granted by their employer over time. Vesting schedules are common in employee stock option plans (ESOPs). 

Volatility Skew – A pattern where implied volatility differs across various strikes and expirations. It reflects supply and demand imbalances or market sentiment.

Wash Sale – A sale of a security at a loss followed by a repurchase of the same or a substantially identical security within 30 days. Under U.S. tax law, the loss cannot be claimed as a tax deduction.

Warrants – Securities that give the holder the right to buy the underlying stock of the issuing company at a fixed price until the expiration date. Similar to options but typically issued by the company itself. 

Watchlist – A list of selected stocks, ETFs, or other securities that a trader monitors for potential trading opportunities based on technical or fundamental criteria. 

Weighted Average Cost of Capital (WACC) – A company’s average cost of capital from all sources (debt, equity, etc.), weighted by their proportion. It’s used in valuation to assess investment efficiency. 

Whipsaw – A condition in which a stock or market moves quickly in one direction and then reverses sharply, often resulting in losses for traders who entered based on the initial move. 

White Knight – A friendly company that acquires a target company facing a hostile takeover. The white knight is preferred by the target company’s management and stakeholders. 

Window Dressing – A strategy used by mutual fund or portfolio managers to improve the appearance of a fund’s performance at the end of a reporting period by buying high-performing assets and selling underperformers. 

Working Capital – The difference between a company’s current assets and current liabilities. It reflects short-term financial health and operational efficiency. 

Write (an Option) – To sell an options contract. The writer of a call option assumes the obligation to sell the underlying asset, while the writer of a put option agrees to buy the asset if exercised. 

Weak Hands – Traders or investors who are easily shaken out of their positions by short-term volatility. Opposite of “strong hands,” who hold positions through market noise.

X-Dividend Date (Ex-Dividend Date) – The date on which a stock begins trading without the value of its next dividend payment. If you buy the stock on or after this date, you will not receive the upcoming dividend. 

XETRA – An electronic trading system based in Frankfurt, Germany, operated by the Deutsche Börse. It facilitates trading of stocks, ETFs, and other securities across Europe. 

XIRR (Extended Internal Rate of Return) – A function used in Excel and financial software to calculate annualized returns for a schedule of cash flows that are not necessarily periodic. Useful for evaluating uneven investment inflows/outflows. 

XS (Cross Listing) – Refers to a company that is listed on more than one exchange. For example, a U.S. company also listing its shares on a European exchange to access a broader investor base.

Yield – The income return on an investment, typically expressed as an annual percentage. For stocks, it’s most often calculated as:
Yield = (Annual Dividend / Stock Price) × 100 

Yield Curve – A graph that plots interest rates of bonds (usually government bonds) with equal credit quality but differing maturity dates. It helps forecast economic changes: 

• Normal curve = economic growth
• Inverted curve = potential recession 
• Flat curve = uncertainty 

Yield to Maturity (YTM) – The total return expected on a bond if held to maturity. YTM considers the bond’s current market price, coupon payments, and time to maturity. 

Year-over-Year (YoY) – A method of comparing a company’s performance during a specific period (like a quarter or year) to the same period from the previous year. Example: YoY revenue growth. 

Yellow Knight – A company that initially attempts a hostile takeover but then changes its approach to negotiate a friendly merger instead. 

YTD (Year-to-Date) – The period beginning from the first day of the current calendar year (or fiscal year) up to the current date. Often used in performance metrics, like YTD return or YTD earnings.

Zero-Cost Collar – An options strategy that protects against downside risk by using a combination of options with little to no cost.

Zero-Coupon Bond – A bond that does not pay periodic interest (coupons). Instead, it’s sold at a deep discount to its face value and pays the full face value at maturity. Investors earn from the difference. 

Zero-Sum Game – A situation in trading where one party’s gain is exactly another party’s loss. Certain derivatives markets (like options and futures) can be viewed as zero-sum, especially in speculative trades. 

Z-Score – A statistical measure that indicates how many standard deviations an element is from the mean. In finance, it’s often used to identify outliers or assess bankruptcy risk (Altman Z-Score).

Zombie Company – A company that generates just enough revenue to continue operating and pay interest on its debt but is unable to invest or grow. Often kept alive by low interest rates or investor hope. 

ZIRP (Zero Interest Rate Policy) – A central bank policy where interest rates are kept near zero to stimulate economic activity, often used during economic downturns or crises.