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Finance GlossaryIron Condor
Iron Condor
Definition of Iron Condor
The Iron Condor is an options trading strategy wherein the trader will buy two calls and two puts each with different strike prices but the same expiration date. It is a version of the Butterfly Option Strategy. If the underlying asset averages out or in other words, closes between the middle strike prices, then the Iron Condor generates the maximum profit.
Related Terms
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.
That’s why circuit breakers are also known as trading curbs and are put in place when an index or market reaches a specific level. These are the current circuit breaker limits on NSE:
That’s why circuit breakers are also known as trading curbs and are put in place when an index or market reaches a specific level. These are the current circuit breaker limits on NSE:
| Circuit Breaker Trigger | Trading Halt Duration |
|---|---|
| 10% | 0-45 minutes |
| 15% | 45 minutes; 1 hour 45 minutes; rest of the day |
| 20% | Rest of the day |
Annual Net Profit Margin
A Net Profit Margin is the ratio of a company’s net profits to revenues. The formula to calculate Net Profit Margin is:
Net Profit Margin = Net Profit* / Revenue * 100
*Net profit = Revenue - Cost of goods - Operating Cost - Other Expenses - Interest - Taxes
Net Profit Margin is expressed as a percentage, which means that you can compare the financial health of multiple companies.
A company can use its Net Profit Margin to understand whether its strategies and business models are effective.
Net Profit Margin = Net Profit* / Revenue * 100
*Net profit = Revenue - Cost of goods - Operating Cost - Other Expenses - Interest - Taxes
Net Profit Margin is expressed as a percentage, which means that you can compare the financial health of multiple companies.
A company can use its Net Profit Margin to understand whether its strategies and business models are effective.
Reverse Stock Split
A reverse stock split is a corporate action that involves a company reducing the number of outstanding shares it has, while the stock price increases proportionately. For instance, if there is a 1:5 reverse split, five shares are combined into one. A reverse stock split does not change the value of a company. However, it is often used to meet the requirements of listing on an exchange or improve the perception in the market.
MACD
MACD (Moving Average Convergence Divergence) is a technical indicator used to identify entry or exit signals when trading stocks, futures, options, and others. MACD consists of two lines as follows: MACD line Signal line The MACD line represents the difference between two exponential moving averages, while the signal line is a moving average of the MACD line.
Benchmark
A benchmark is a standard used by investors to compare the performance of a stock, commodity, or other securities.
Stock indices like Nifty 50, Sensex, Nifty Bank, and others are often used as benchmarks to evaluate the performance of one or more stocks.
The onset of a bear market is generally in tandem with poor economic conditions.
Benchmarks are not just used for evaluating markets or securities, they can also be used to assess the performance of an investor or wealth manager. Here are some outcomes if the returns are:
Stock indices like Nifty 50, Sensex, Nifty Bank, and others are often used as benchmarks to evaluate the performance of one or more stocks.
The onset of a bear market is generally in tandem with poor economic conditions.
Benchmarks are not just used for evaluating markets or securities, they can also be used to assess the performance of an investor or wealth manager. Here are some outcomes if the returns are:
- Greater than benchmark: the asset is doing considerably well (great)
- Same as benchmark: the asset is moving with the market (okay)
- Less than benchmark: the asset is performing poorly (bad)
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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