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Finance GlossaryNarrow Market
Narrow Market
Definition of Narrow Market
A narrow market describes a situation where only a few stocks or sectors influence market movement, while the majority of stocks have low trading volume. It has few active participants on either the buy or sell side of the market. This limited participation suggests that the market trend is not broadly supported across the entire market.
Related Terms
Pre-IPO
Pre-IPO (or Pre-Initial Public Offering) refers to the phase of a company where it raises capital by selling its shares to private investors (such as venture capitalists, private equity firms, or institutional investors) before officially going public with an IPO. These shares are bought at a discount to the expected IPO price. Investing in pre-IPO shares is for experienced investors because the shares are illiquid and have a high risk, but have the potential for high returns if the company performs well after listing.
Market Out Clause
Market Out Clause is a provision in a contract that allows a party, usually an underwriter or buyer, to withdraw from or renegotiate a deal if major market conditions change suddenly. It protects parties from unexpected events like market crashes, extreme volatility, or economic shocks that could significantly affect the value or feasibility of the transaction.
Equity Options
An equity option gives the holder the right but not the obligation to buy or sell the underyling shares at a pre-agreed price and date. Equity options are derivative contracts that derive value from underlying shares.
Every equity option comes with a lot size that specifies the total number of underlying shares the contract contains. A trade who wants to start options trading can procure the derivative contract by paying a premium.
Every equity option comes with a lot size that specifies the total number of underlying shares the contract contains. A trade who wants to start options trading can procure the derivative contract by paying a premium.
Put Option
A put option is a contract that gives the buyer the right, but not the obligation, to sell a specified amount of an underlying security (like a stock) at a predetermined price (the strike price) on or before a specified date (the expiration date). Buyers of put options typically expect the price of the underlying asset to decline. Put options are used for speculation or for hedging a long position in the underlying asset.
Yield to Maturity (YTM)
Yield to Maturity is the total return an investor can expect if a bond is held until maturity, accounting for interest payments and any gain or loss if purchased at a discount or premium. For example, buying a bond below face value increases its YTM beyond the coupon rate.
Market Lot
Market Lot is the minimum number of shares or contracts that must be bought or sold in a single trade. It is set by the exchange to standardize trading. For example, if the market lot for a stock is 100 shares, trades must be placed in multiples of 100.
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