Finance Glossary

52 Week Low

A 52 week low is the lowest closing price of a stock or ETF in the last 365 days. Let’s say you check a stock’s history on 01-01-2022. Then the 52 week low will be the stock’s lowest closing price between 01-01-2021 and 01-01-2022. 52 week lows are used as technical indicators by traders.

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Abandoned Baby Pattern

An Abandoned Baby Pattern is a type of candlestick pattern that signals the reversal of a bullish or bearish trend. It is made up of three candles, each of which varies based on the trend.

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Abc Wave Theory

Abc Wave Theory or Elliot Wave Theory is used to determine the direction of the stock market by identifying recurring waves or patterns over the long term. The theory is named after Ralph Nelson Elliott.

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Abridged Prospectus

An abridged prospectus is a short version of a company prospectus. As per SEBI norms, a company looking to offer equity or debt to investors must file a prospectus.

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Acceptance Credit

Acceptance Credit is a way for buyers to authorize fund transfers to sellers at a specific date when various terms & conditions are met.

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Accrued Expenses

An accrued expense is the cost that is incurred in the current accounting period but is due to be paid in the future.

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Accrued Interest

An accrued interest is the interest incurred in the current accounting period but the actual interest is due to be paid or received in the next accounting period.

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Accumulation/Distribution Indicator

An Accumulation/Distribution Indicator is used to figure out the trend of a stock based on the relationship between the price and volume.

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Acid Test Ratio

An Acid Test Ratio shows whether a company has enough liquid short-term assets to deal with current liabilities.

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Adjusted Closing Price

The adjusted closing price of stock accounts for any changes that happen due to corporate actions like dividends, stock splits, and others after trading hours.

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Adjusted Futures Price

An adjusted futures price shows the cost of purchasing, financing, and delivering the underlying assets of a futures contract.

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Advance/Decline Line

An Advance/Decline Line can help you plot the daily difference between the number of advancing and declining stocks.

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Advance Payment Guarantee/Bond

An Advance Payment Guarantee or Advance Payment Guarantee Bond is a contract issued by a third party willing to take responsibility for fulling the terms of an agreement or payments owed by one party to another.

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After Hours Trading

After hours trading means buying and selling securities after the end of regular market hours. In India, the stock market is open for regular trade from 9.15 AM to 3.30 PM.

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Algorithmic Trading

Algorithmic trading or algo trading means buying and selling securities using computer algorithms that follow a set of predefined rules to execute trades.

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All Or None Order

An all or none order is an instruction to execute the entire order or none of it. For example, you place an order for 1000 shares with a contingency that it should be an all or none order.

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Alpha

An Alpha indicates the measure by which a stock or portfolio has managed to outperform a benchmark like an index of shares.

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American Option

An American Option allows the contract holder to exercise the right any time before or on the expiry date. American style options contracts are not available in India.

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Anaume Pattern

An Anaume Pattern can be seen when a gap is filled after a change in the direction of a security or market’s price.

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Anchoring and Adjustment

Anchoring is a bias that drives people to make decisions that are based on (anchored to) pre-existing notions, ideas, and suggestions that may or may not be true.

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Annual Earnings Change

An Annual Earnings Change is the difference between a company's earnings from the present and previous fiscal year.

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Annual General Meeting

An Annual General Meeting is the difference between a company’s earnings from the present and previous fiscal year.

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Annual Net Profit Margin

A Net Profit Margin is the ratio of a company’s net profits to revenues.

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Annual Report

An annual report is an exhaustive written account of a company’s finances, activities, and other relevant information for the fiscal year.

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Arbitrage

Arbitrage is a strategy where a security is bought in one market and sold in another market to generate profits due to the difference in price. This difference is known to be minor.

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Ask Or Offer Price

The ask or offer price is the price at which an investor is willing to sell a security like stocks, bonds, currencies, ETFs, and others.

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Ask Size

The ask size is the number of units of a security that an investor is willing to sell at the ask or offer price.

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Asset Allocation

Asset allocation is a strategy or method in which an investor decides how much money they should allocate to an investment based on their risk profile, financial goals, and other factors to maximize returns and minimize risk.

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Assets

An asset is anything that has economic value and is owned by an individual, company, or group. Assets are bought to generate returns in the future.

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Assets And Liabilities

An asset is something that has monetary value and can generate profits in the future while a liability is a debt that’s repayable immediately or in the future. Assets are owned whereas liabilities as owed.

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At The Close Or Closing Price

At the close or closing price is the last traded price of securities like stocks, ETFs, and others at the end of regular market hours.

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At The Money

At The Money is a scenario in which the strike price of an options contract is the same as the market price of its underlying security.

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At The Opening

At the opening is an instruction to execute an order at the open price, which is the price of a security at the start of regular stock market hours.

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Authorized Capital

Authorized capital or authorized share capital is the maximum amount of capital for which shares can be issued by a company to its shareholders.

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Average Daily Trading Volume

The Average Daily Trading Volume (ADTV) is a technical indicator that indicates the number of shares that were bought and sold on average across one or more trading days.

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Average True Range Atr

The Average True Range (ATR) is a technical indicator used to measure market volatility, typically using the average of true ranges from 14 periods that can be daily, weekly, monthly, or even intraday values.

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Back Months

“Back months” is used to refer to futures contracts that have a delivery date that’s due far into the future. Back months is generally known to be a popular term in commodity trading.

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Backtesting

Backtesting means simulating trading strategies and models using historical data to understand whether they are effective.

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Basing

Basing happens when a security trades sideways after prolonged periods of falling prices.

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Basis Trading

Basis trading means futures trading strategies that use the difference between the spot price and the futures contract price of a stock or commodity.

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Bear Market

A bear market is a period of continuous decline in the stock or commodity market.

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Benchmark

A benchmark is a standard used by investors to compare the performance of a stock, commodity

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Beta Coefficient

Beta coefficient is used to measure the volatility of stocks in relation to changes in the market. Basically, Beta helps investors understand the risks associated with a stock compared to the market.

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Beta Stocks

Beta of stocks measures the risk that the shares carry compared to the broader market. Theoretically, the market is said to have a default Beta of 1. As a result, Beta stocks can be of four types.

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Blue Chip Stocks

Blue chip stocks are shares of iconic companies in India that have been leaders of their respective industries for years, if not decades, and have a stellar yet consistent business track record.

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Bombay Stock Exchange

Established in 1875, Bombay Stock Exchange or simply BSE is a place where stockbrokers and traders can buy and sell securities like stocks, bonds, ETFs, and more. 5000+ securities are listed on BSE, which is the oldest stock exchange in India and Asia.

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Bonds

Bonds are fixed income securities issued in exchange for a loan, generally by governments and corporations. A bond will generate a fixed interest rate on top of the principal across a fixed time period. A bond market is a place where bonds are issued, bought, and sold. Bonds are issued in exchange for a loan generally by governments and corporations.

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Book Building

Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.

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Book Running Lead Manager

A book running lead manager is the head or lead of the underwriting process when new shares or securities are issued for their client, most commonly during an IPO.

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Book To Bill Ratio

Book to Bill ratio is the value you get by dividing the total worth of new orders received by the total worth of orders sold. The formula to calculate Book to Bill ratio is:

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Bottom Line in Finance

Bottom line in finance is used to refer to a company’s crucial metrics like earnings, profits, net profits, earnings per share (EPS), and others.

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Bottom Up Investing

Bottom-up investing is a stock picking strategy that uses analysis of individual companies and shares for decision-making instead of focusing on the broader economy, market, or industry.

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Bounce Trading

Bounce trading refers to buying a position in security when its price falls to a particular support level with the anticipation that it will “bounce” back to a certain price level. Technical analysis is the bedrock of bounce trading but various patterns and strategies can be used to achieve the desired goal.

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Box Spread

A box spread is a trading strategy that involves buying a bull call spread and a matching bear put spread.The goal of a box spread is to create an arbitrage strategy that can generate profits due to the price differential between the two spreads.

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Broker

A broker is an intermediary between a securities exchange and investors. Only registered entities can place trades on a securities exchange. These members can be individuals or firms known as stockbrokers.

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Brokerage

Brokerage is the fee that an investor or trader must pay to a brokerage in exchange for its services. Brokerage varies from platform to platform. But, broadly speaking, brokerage on intraday, futures, and options trading is known to be higher than equity delivery (investing).

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Bull Market

Bull market is a positive trend in the stock market where price of shares increase by 20% or more after falling by 20%. Investors may say they're bullish or expect a bull market to arrive when they believe that there will be prolonged periods of increase in the stock market.

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Bullion

Bullion is used to refer to gold, silver, and other non-ferrous metals that have been designed to have high purity. These metals are generally molded into bars, coins, and other valuable items.

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Butterfly Spread

A butterfly spread is an options strategy that combines bull and bear spreads to generate a small chunk of profit. To achieve this, a butterfly strategy consists of four positions in four options contracts that have the same expiration but different strike prices.

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Buy and Hold

Buy and hold is a long term investment strategy that is designed to help investors ride out market volatility by buying and holding fundamentally solid businesses that have the potential to grow over decades.

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Call Option

A call option is a type of derivative contract that gives the right but not the obligation to buy an underlying asset like shares, commodities, currencies, and others at a pre-agreed price and date.

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Candlesticks

Candlesticks are technical charts used in trading to understand price movements.

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CANSLIM

CANSLIM is an acronym for a seven-step strategy to pick growth stocks by combining fundamental and technical analysis.

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Capital Asset Pricing Model

Capital Asset Pricing Model or CAPM is used to determine the expected return one can earn on an asset by evaluating the associated risks and how markets price the asset.

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Capital Expenditure

Capital expenditure or CapEx is the amount of money a company spends on maintaining, upgrading, or buying new assets like machinery, equipment, property, and others.

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Capital Gain Or Loss

A capital gain is a profit that an investor or trader earns by selling an asset while a capital loss is the money a trader or investor loses after selling an asset. Capital gains are taxed while capital losses can be used to offset gains.

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Capital Gains

A capital gain is a profit an investor or trader earns by selling shares, commodities, futures, options, currencies, and other assets. More literally, a profit is a gain on the capital that’s invested - hence the term capital gains.

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Capital Gains Exemption

Capital gains exemption is the tax break that a government offers on profits earned by selling assets. Generally, an investor must pay a tax on the short-term capital gains or long-term capital gains earned.

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Capital Gains Tax

Capital gains are profits, which means they can be taxed. The rate of taxation is based on the type of asset (debt/equity) and holding period. Here is the list of ways capital gains are taxed in India

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Capital Growth

Capital growth is the profits an investment generates on the principal amount. Since the capital grows on earning profits, the term capital growth is also used to describe the overall corpus of an individual (principal + profits).

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Capital in Trading

Capital is the total amount of money that a trader can use to buy and sell securities. There are variations of the term, the most common one is “starting capital”. This is the amount of money a trader starts their journey with.

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Capped Style Option

A capped style option is designed to limit the amount of profit that an options trader can earn. Since this style of option limits or puts a cap on the profit, it is known as a capped style option.

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Capture Ratio

The capture ratio is used to measure the performance of an asset during market highs and lows by comparing it to a benchmark.

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Carrying Charge

Carrying charge or cost of carry is the money involved in the upkeep or general holding of an asset or financial instrument. Examples of carrying charges include maintenance costs, insurance, and others.

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Cash and Cash Equivalents

Cash and cash equivalents are short-term assets or holdings which fall under the current assets of a business. Cash and cash equivalents have very high liquidity.

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Cash Commodity

A cash commodity refers to physical goods like aluminium, cotton, gold, silver, zinc, and other tangible goods which are delivered to a trader or company most commonly after exercising derivatives like options and futures contracts.

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Cash Contract

A cash contract is an agreement between two parties in which the delivery of goods is involved at a predetermined price and date. Typically, bulk buyers like big companies enter into cash contracts on the spot price of a commodity.

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Cash Conversion Cycle

A Cash Conversion Cycle (CCC) tells you how many days it will take to convert a company’s inventory or resources into cash. The formula for Cash Conversion Cycle is:

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Cash Flow

The cash flow describes the amount of money that moves in or out of a company or an individual’s pocket. Cash flow can be of two types:

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Cash Flow Statement

A cash flow statement is used to present the amount of money that has been earned and spent by a business over a specific period of time. There are three sections or parts to a cash flow statement:

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Cash Market

A cash market is a place where assets, goods, and services are bought and sold on the spot. That’s why it is also known as the “spot market”.

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Cash Ratio

A cash ratio measures a company’s ability to fulfill short-term debt obligations using only its cash and cash equivalents, which are known to have high liquidity. The formula for calculating cash ratio is:

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Cash Reserve Ratio

Cash Reserve Ratio (CRR) is the amount of liquid cash a bank has to deposit with the Reserve Bank of India (RBI), calculated as a percentage of the total deposit of the bank. The latest Cash Reserve Ratio in India is 4.5%.

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Cheapest To Deliver

Cheapest to deliver (CTD) refers to the cheapest or lowest priced security in a futures contract that a seller can deliver to a buyer who holds a long position. Here’s the formula to calculate the cheapest security that can be delivered:

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Circuit Breaker

A circuit breaker or market curb is a measure that exchanges use to put a stop to all trading activities across an index or entire market. This regulatory measure is put in place to curb panic selling, especially when markets are in free fall.

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Commodity

A commodity refers to physical goods and raw materials like aluminium, cotton, copper, sugar, steel, zinc, and others. Commodities are an essential part of the day-to-day life of individuals, companies, and industries.

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Commodity Exchange

A commodity exchange is a marketplace where commodities and related

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Commodity Futures

A commodity futures is a contract between two parties to buy or sell an underlying commodity like gold, silver, corn, and others are a pre-determined price and date.

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Commodity Options

A commodity option is a contract that gives the buyer or seller the right but not the obligation to execute a trade for a commodity like copper, cotton, zinc, and others at a pre-agreed price and date. Commodity options are derivative contracts that require a trader to pay a premium in order to secure the “option”.

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Commodity Spread Straddle

A commodity spread straddle or simply a commodity straddle is an options trading strategy where a trader will buy call and put options with the same strike price and expiration date.

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Common Stocks

A common stock is a type of share that gives the holder the right to a part of a company’s profits, voting on key policies and decisions. Common stockholders have an advantage over preferred stockholders because they can:

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Company Debentures

A debenture is a debt instrument that a company uses to take out a loan in exchange for a fixed interest rate. Debentures can either be used to refer to bonds or documents created in exchange for a medium to long-term loan.

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Comparable Company Analysis

Comparable Company Analysis (CCA) is a method used to evaluate a company’s value by comparing its essential metrics like EBIT, EBITA, and more with other companies.

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Compounded Annual Growth Rate

Compounded Annual Growth Rate shows how much returns on average an investment can

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Consolidated Financial Statements

A consolidated financial statement is a record of all the assets, liabilities, income, expenses, and other financial data of a company and its subsidiaries.

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Consumer Price Index

The Consumer Price Index (CPI) measures how costly goods and services have become over time. It is calculated by measuring the weighted average of the percentage change in the price of a basket of goods and services.

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Contingent Liabilities

A contingent liability is shown on a balance sheet for an event that may or may not happen in the future. The potential liability arising out of such an uncertain event is recorded as a contingency in both GAAP and IFRS accounting standards.

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Contract Note

A contract note is a compilation of all the trades and transactions made through a stockbroker on a stock exchange. It is a legal record that all recognized stockbrokers must send to traders and investors at the end of each trading day.

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Convertible Arbitrage

A convertible arbitrage is a trading strategy that involves buying convertible securities - most commonly bonds and preferred stock - and a short option on the common stock of the same company.

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Convertible Bonds

A convertible bond is a hybrid security that’s initially designed to be a debt instrument that pays a fixed interest rate in exchange for a loan. Once the loan’s tenure ends, the holder can decide to take one of either action:

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Convertible Debentures

A convertible debenture is a long term debt instrument that can be converted into equity on maturity. Convertible debentures are generally unsecured loans that small to mid-size companies take on in exchange for an interest rate.

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Cost Inflation Index

A Cost Inflation Index or CII is used to calculate a financial security’s price after adjusting for inflation.

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Debentures

A debenture is a legal certificate that a company issues in exchange for a long-term unsecured loan. A debt instrument like a debenture is issued by companies who want to fund their business without diluting existing shares.

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Debt To Equity Ratio

The debt to equity ratio is a measure of a company’s financial health that’s calculated by dividing liabilities from shareholder equity.

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Defensive Stock

A defensive stock refers to the shares of iconic companies that generate stable and consistent returns and dividends, regardless of the market conditions.

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Deferred Tax

The term deferred tax in a financial statement is used to refer to future tax payments in the case of temporary differences, a situation where an asset or liability on the balance sheet is realised but is taxable in the future.

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Deferred Tax Asset

A deferred tax asset is an item on a company’s financial statement that can be used to get tax relief, generally in the event of overpaying taxes or net losses that are carried forward.

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Deferred Tax Liability

A deferred tax liability is line item on a company’s balance sheet that refers to taxes that owed but due in the future. Common examples of deferred tax liabilities include:

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Delivery Date

The delivery date of a cash or derivative contract refers to the final day and time on which the underlying asset should be delivered to the contract holder to fulfil the terms and obligations of the contract.

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Delivery Notice

A delivery notice is produced by the seller of a commodity futures contract. It is proof of confirmation of the sellers intention to physically deliver the underlying commodity to the buyer at the pre-agreed date.

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Delivery Trading

Delivery trading refers to buying a stock or ETF and holding it for more than one day. In such a scenario, the buyer take delivery of the asset instead of squaring off their position in the same trading session. Delivery trading is applicable for short term and long term trades and can last overnight to a decade or more.

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Demat Account

A Dematerialized or Demat account is used to store shares and ETFs in the electronic format. It is linked to a bank account and is necessary for trading or investing that involves delivery, that is, where the asset is held overnight.

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Depository Participant

A depository participant is a financial institution that acts as a bridge between a depositories like NSDL/CDSL and investors. Moreover, a depository participant is responsible for holding shares in the Dematerialized format in a Demat account.

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Derivative

A derivative is a financial contract that is designed to derive its value from a single or group of underlying assets, generally between two parties or more. It contains a pre-agreed date of delivery and price.

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Derivatives Market

The derivatives market is a place where financial contracts like futures, options, forwards, and swaps are traded. It is a complex market that is a subset of the stock market, commodity market, currency market, and others depending on the underlying asset that’s a part of the derivative contract.

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Derivatives Trading

Derivatives trading means buying and selling derivatives contracts like futures, options, swaps, and forwards either on an exchange or over the counter.

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Differential Pricing

Differential pricing is a strategy that involves setting different prices for the same product or service based on the type of customer or tming.

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Differential Voting Rights

Differential Voting Rights or DVRs are special types of shares that carry more or less voting rights, depending on the issuing company. For example, a DVR share that carries less than usual voting rights may generate relatively high dividends.

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Direct Public Offerings

A Direct Public Offering or DPO allows a company to issue shares directly to the public without an intermediary like investment banks. In the process, the company becomes publicly traded.

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Discount Brokers

Discount brokers are platforms that offer essential stock trading and investment services rather than a full stack of services that may or may not be useful for everyone.

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Discounted Cash Flow

Discounted cash flow is a method of valuing a company in the present based on future cash flows. An investment may be profitable in the present if the discounted cash flow is above the current cost of investing.

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Diversification

Diversification is the act of investing in more than one asset class, sector, industry, or country to mitigate risk. It is an investment strategy designed to reduce risk by pairing a volatile asset class like equities with a fixed income asset class like fixed deposits. Or, by investing in equities in one country and complementing it by investing a portfolio in stocks from another country.

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Dividend Payout Ratio

The Dividend Payout Ratio refers to dividends paid to shareholders as a percentage of the net income or Earnings Per Share (EPS) of a company. The formula to calculate dividend payout ratio is:

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Dividend Per Share

Dividend per share indicates the amount of dividends paid as a ratio of the number of shares outstanding. Or, dividend per share could also refer to the product of earnings per share and dividend payout ratio.

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Dividend Reinvestment Plan

A Dividend Reinvestment Plan is a feature where an investor can reinvest the dividends they earn to buy additional shares or units of a mutual fund, either fractional or whole.

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Dividend Stocks

Dividend stocks are shares of companies that redistribute their profits to shareholders in the form of dividends. Such companies are typically industry or sector leaders with stellar reputations and track records.

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Dividend Stripping

Dividend stripping is a strategy of buying a company’s stock days before it announces a dividend and then selling the same stock at a lower price once the current holder is entitled to get the dividend previously announced.

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Dividend Yield

A dividend yield is a ratio of dividends paid per share by the latest share price, expressed as a percentage. It is used to understand how much dividends a company pays per share outstanding. The formula to calculate dividend yields is:

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Doji Pattern

A Doji is a candlestick pattern that is formed when the open and close price of a share or market is identical. The word Doji means indecision in Japanese, which is fitting because the Doji pattern is an indicator of indecisiveness. In terms of appearance, a Doji looks like a cross or like the letter T.

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Donchian Channels

A Donchian Channel is the area between upper (highest price) and lower (lowest price) bands formed around the median as a result of calculating the moving average of a security’s price over a period of time. Visually, the Donchian Channel will have three lines.

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Draft Offer Document

A draft offer document is the preliminary version of the IPO document that a company must file with SEBI 21 days before submitting the actual IPO document. The draft offer document is open to the public for comments during the 21 -day period. SEBI may suggest changes to the draft offer document in this period.

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Earnings Per Share

Earnings Per Share or EPS refers to the amount of profit that a company generates per outstanding share it has in the stock market. It is calculated by dividing the net income of a company by its shares outstanding.

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EBITDA

EBITDA is short for Earnings Before Interest, Taxes, Depreciation, and Amortization. EBITDA allows investors to understand cash flow from all operations while excluding certain non-cash expenses related to interest, depreciation, amortization, and taxes.

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EBITDA MARGIN

EBITDA margin is the ratio of Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) by revenue, represented as a percentage. It is used to understand whether a company is profitable and as a valuation technique.

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Enterprise Value

Enterprive Value is a metric used to determine the total value of a company. It is valuation technique used by companies to understand how much money they need to pay to acquire another company.

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Equilibrium Price

Equilibrium price is achieved when the demand is exactly equal to the supply. It is a state where buyers and sellers have enough goods and services to meet each other’s demands - not more, not less. One could say that equilibrium price is a perfectly balance state in the market.

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Equities

The term equities can be used to describe two different things. First, equities refers to stocks held by shareholders. Equities of this type represent residual ownership or stake in a company.

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Equity

Equity is generally defined as a stake or per share ownership

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Equity Capital Markets

Equity capital markets (ECMs) are a place where companies raise money

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Equity Delivery

In equity delivery, shares are delivered to an investor's Demat account after

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Equity Market

The Equity Market is a place where shares are traded, money is raised

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Equity Options

An equity option gives the holder the right but not the obligation to

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Equity Share Capital

The total amount of money that is raised by a company through the

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Equity Shares

Equity shares is a term used to describe stock of a company that's

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Equity Trading

Equity trading refers to the buying and selling of equity shares on

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European Option

A European Option allows a trader to exercise the contract only

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Ex-Dividend Date

The ex-dividend date is the trading day on and after which a new

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Exit Load

Exit load is a type of premature withdrawal fee that mutual funds

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Expense Ratio

An expense ratio is a management fee that investors must pay

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Exponential Moving Average

Exponential Moving Average (EMA) is a technical indicator used

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Face Value

The term face value refers to the actual price of a stock that's

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Fair Value

The fair value of a stock, product, or service is the price at which the buyer and seller willingly agree on without being on the losing end of the deal. Think of fair value as a win-win situation for both parties, assuming that all conditions are normal.

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Fibonacci Retracement

A Fibonacci Retracement is a predictive technical indicator that is used to determine possible direction or trend reversal of a stock or index’s price with horizontal lines for potential support as well as resistance levels.

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Firm Allotment

Firm Allotment is the process of allocating shares during an IPO to investors who are not considered to be retail public investors. The firm allotment is done as per SEBI guidelines, which dictate that a portion of the IPO can be allocated to the likes of Mutual Funds, regular employees (permanent), and others.

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Fixed Income Securities

Fixed Income Securities are issued in exchange for a loan and offer returns to investors in the form of a fixed interest rate. That’s why they are referred to as “fixed income” securities. The common types of fixed income securities are: Firm Allotment is the process of allocating shares during an IPO to investors who are not considered to be retail public investors. The firm allotment is done as per SEBI guidelines, which dictate that a portion of the IPO can be allocated to the likes of Mutual Funds, regular employees (permanent), and others.

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Flipping

Flipping is the act of buying and selling an asset quickly to make a profit. The term is commonly used in real estate where an investor buys a property and sells it within a short span of time, say days or weeks, to make a quick buck.

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Floating Interest Rate

The rate of interest that changes across the tenure of a loan, generally every quarter, due to the government’s interest rate, market conditions, and other factors is known as a floating interest rate.

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Follow On Public Offer

A Follow On Public Offer or FPO allows a publicly traded company to issue more stock to public investors. FPOs are similar to IPOs because FPOs allow companies to raise additional capital through the public market.

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Foreign Direct Investment

Foreign Direct Investment (FDI) is the act of acquiring a majority stake in a company located in a different country with the intention of assisting, growing, and managing the business.

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Foreign Portfolio Investment

A Foreign Portfolio Investment includes stocks, bonds, ETFs, derivatives, and other financial instruments from another country. Generally, FPIs do not give an investor the right to ownership or a controlling stake in any organization.

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Forex Options

Forex options are exchange-traded derivative contracts that give the right but not the obligation to buy or sell a pair of underlying currencies at a pre-agreed price and date. Forex options are also known as currency options.

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Forex Trading

Forex trading means buying and selling currency pairs through exchange-traded derivatives or on the OTC market. A currency can only be bought and sold in exchange for another currency, which is why forex trading is always done in pairs.

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Forward Market

The forward market is a place where forward contracts are traded. A forward is an over-the-counter derivative that carries a pre-agreed expiration date and price on which the contract must be exercised. It carries a right and an obligation.

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Forward Price

The forward price is the final value at which a forward contract is exercised, that is, delivered to the buyer by the seller.

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Founders Stock

The term founders stock refers to shares issued to the founders of a company. This type of stock is issued at face value and carries a vesting period, which is a lock-in period during which the shares cannot be sold.

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Free Cash Flow

In accounting and earnings reports, free cash flow refers to the amount of money a company has after paying its maintenance

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Free Float Market Capitalization

Free float market capitalization is the market cap of a company based on the total freely available publicly traded outstanding shares. The formula to calculate free float market capitalization is:

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Full Market Capitalization

Full market capitalization is the market value of the total shares outstanding issued by a company, including public and private stock. This includes stock that’s locked-in and unexercised. That’s why full market capitalization is also referred to as total market capitalization.

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Futexagri

Futexagri refers to the commodity index of futures on NCDEX that’s equal-weighted, meaning all components have equally proportional weights assigned to them, comprised of the futures contracts of the most recent month.

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Future Trading

Futures trading is the buying and selling of futures contracts on a recognized exchange or over the counter. Futures contracts are derivatives that oblige a trader to buy or sell the underlying security at a predetermined price and date.

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Futures

Futures are derivative contracts that serve as an agreement and obligation between two parties to buy or sell underlying securities at a pre-agreed price and date. Underlying securities in futures can be stocks, bonds, interest rates, currencies, and commodities.

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Futures and Options

Futures and options are derivative contracts that derive their value from one or more underlying financial securities like stocks, bonds, interest rates, currencies, and commodities.

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Futures Contract

A futures contract is a derivative instrument that is legal agreement between two parties for the mandatory purchase or sale of an underlying asset at a pre-agreed price and date.

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Futures Expiry

Futures expiry is the date on which the derivative contract’s terms and conditions must be fulfilled. Alternatively, it’s the day on or before which the trader must square-off their futures contract to avoid delivery. In India, futures expire on the final Thursday of the expiry month.

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Gamma

Gamma is a mathematical formula used to measure the change in the delta of an options contract price.

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Go Public

To “go public” or going public means to get listed on the stock market by launching an Initial Public Offering (IPO). The act of going public involves receiving approval from existing stakeholders to launch an IPO, the price of which is decided by two methods:

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Gold ETF

A gold ETF is an exchange-traded fund that invests in gold bullion. Every unit of a gold ETF is backed by one gram of gold of assured purity that is held in the physical or demat form (digital).

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Gold Futures

Gold futures are commodity derivatives that derive their value from gold bullion. A trader who buys a gold futures contract acquires the right and obligation to buy gold at a later date and price that’s pre-agreed. Gold futures in India are eligible for physical delivery once the terms of the contract are successfully fulfilled.

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Government Bonds

Government bonds are debt instruments that allow the central banks to raise capital to finance operations. The types of government bonds are:

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Gravestone Doji

A Gravestone Doji is a candlestick pattern that signals the reversal of a bullish trend into a bearish one. The key marker of a Gravestone Doji pattern is the open, low, and closing prices being near to one another.

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Grey Market

The grey market is an unofficial yet legal marketplace where unlisted or soon-to-be-listed securities are traded.

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Gross Domestic Product

The Gross Domestic Product is an economic measure of the financial value of all goods and services produced by a country during a specific time period.

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Growth Stocks

Growth stocks are shares of companies that have the potential to outperform the market. These are stocks can grow faster than the market due to strong fundamental characteristics like a strong balance sheet, high Earnings Per Share, solid P/E, and more that can bolster its profits in the medium to long term.

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Hammer Candlestick Pattern

A Hammer Candlestick pattern occurs when a stock, commodity, or currency opens much lower than its previous closing price but moves close to or above the the same price at the close. The pattern looks like a hammer, hence the name “Hammer Candlestick”.

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Hard Underwriting

A hard underwriting occurs when the underwriter agrees to buy their share of stock before the IPO opens. This is known as hard underwriting because in a regular underwriting process, the underwriter is liable to buy all unsold shares after the issue opens.

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Hedging

Hedging is a risk management technique where potential loss is offset by securing a safer, more stable trade. For example, buying stock (risky) and offsetting the risk with commodity (stable) is a common hedging practice in the securities market.

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High Beta Stocks

High Beta stocks are shares that outperform the market in terms of returns but carry high risk. Such shares are called “High Beta” because of their significantly high Beta Coeffient value, which measures the correlation of a stock and the market. A Beta value on the high side typically indicates more volatility and the potential for higher returns.

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High Dividend Yield Stocks

High Dividend Yield Stocks are shares of companies that generate above average dividends on top of regular market-based returns. These shares are known to be valued highly because they generate passive income as well as capital gains.

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High Volatility Stocks

High volatility stocks are shares that fluctuate based on market conditions, typically more than others. The volatility could be a result of inherent fundamentals or other factors like the industry or domain. Identifying high volatility stocks is possible through indicators like Average True Range and Bollinger Bands.

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Holding Company

A holding company is a parent organization that holds a controlling interest in one or more subsidiary companies. The goal of a holding company is not to create products or services but to hold financial securities, typically in the form of equity, in other companies that create products or services. For example, Raise Financial Services is a holding company while Dhan is its subsidiary.

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Holding Period

The holding period of a financial security is the time period between buying and selling the said security. It is the total amount of time for which the security has been held in the portfolio of an investor. At times, there’s a mandatory holding period attached to a security. During this mandatory holding period, the security can not be sold.

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Holdings

Holdings are the financial assets in the portfolio of an investor or company. They can include stocks, bonds, derivatives, commodities, currencies, and more.

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Iceberg Order

An Iceberg Order is used to slice and execute large orders into multiple “legs”. Large orders have the potential to drastically affect stock prices and subsequently investor behaviour.

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Ichimoku Cloud

Ichimoku Cloud is a group of technical indicators that’s used to understand trends, momentum, support, and resistance by calculating averages.

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Ichimoku Kinko Hyo

Ichimoku Kinko Hyo is a combination of 5 lines that’s used to understand trends, momentum, support and resistance. The 5 lines include:

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Identifiable Asset

An identifiable asset is a tangible or intangible asset that be assigned a fair value at any point in time. This concept is important during acquisitions and mergers as not all assets on a company’s balance sheet can easily be valued.

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Illiquid Asset

An illiquid asset is something of value that can not be exchanged for cash easily. Although an illiquid asset may have value, you will not be able to find buyers for it readily. As a result, illiquid assets are typically sold at a significant discount or worse, lose value and expire.

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Implied Volatility In Options

Implied volatility in options is a measure of the expected volatility of the underlying stock over the period of the options tenure. You could say that an option’s premium is related to the implied volatility - the change in the underlying share’s value over time affects the share price.

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Income Statement

An income statement of a company is a document that displays crucial financial information like profit, loss, revenue, expenses, taxes, and more. Income statements are logically divided and published in monthly or quarterly manner for better accounting and financial modelling.

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Income Stocks

Income stocks are shares of companies that help you earn a steady income, typically in the form of dividend payouts. At the same time, income stocks are known to have lower risk compared to others and thus, relatively decent returns over a period of time. But the consistently growing dividend yield makes up for the perceived lack of returns.

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Index Arbitrage

Index arbitrage is the method of generating returns by trading the difference between the same or different indices that have a standard value but has diverged momentarily. The way one does index arbitrage can vary as it is possible to trade indices via ETFs, Options, Futures, and more.

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Index Futures

Index futures are derivative instruments that track an underlying sectoral, thematic, or benchmark index like Nifty Bank, Finnifty, Nifty 50, and others. While trading index futures, a trader avoids individual share risk by trading an entire index.

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India Vix

India VIX is an index that measures volatility and market sentiment. The term VIX stands for Volatility Index and thus, the full form of India VIX is Indian Volatility Index.

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Indices

Indices are a collection of financial instruments that measure the performance of those very instruments.

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Industry Analysis

Industry Analysis is a method of understanding the level of competition, potential profit/loss, supply and demand cycle, & other crucial factors within an industry.

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Inflation

Inflation is defined as the rise in the price of goods and services with a declining purchasing power amongst the general population. The primary cause of inflation is a surge in demand that can not be met with the same level of supply.

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Information Ratio

Information Ratio (IR) compares the returns generated by an asset adjusted for risk compared to a benchmark. IR helps you identify the level of consistency with which a fund or fund manager performs over time. This can help you compare fund managers who follow a similar investment strategy.

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Insider Trading

Information Ratio (IR) compares the returns generated by an asset adjusted for risk compared to a benchmark. IR helps you identify the level of consistency with which a fund or fund manager performs over time. This can help you compare fund managers who follow a similar investment strategy.

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Institutional Investor

An institutional investor can be a company or individual who invests a large pool of money in assets like equity shares, bonds, and more. Unlike a typical retail investor, institutional investors buy and sell significantly large quantities of assets. Mutual funds are one of the best examples of institutional investors.

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Interest Coverage Ratio

Interest Coverage Ratio (ICR) is used to determine the likelihood of a company’s ability to pay interest on existing outstanding debt. A low ICR typically indicates that a company is less likely to pay interest.

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Interest Rate Futures

Interest rate futures are derivative contracts whose underlying instrument is any instrument that bears interest.

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