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Finance GlossaryOpen Interest
Open Interest
Definition of Open Interest
Open Interest is created when a new seller and a new buyer enter into a fresh contract. It represents the total number of active futures or options contracts that are still open and not squared off on an exchange like the NSE. Open Interest helps traders understand market participation, liquidity, and sentiment in stocks or indices such as the Nifty. Rising Open Interest with rising prices indicates bullish strength, while rising Open Interest with falling prices signals bearish sentiment.
Related Terms
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:
| Asset Type | Gains Type | Holding Period | Tax Rate |
|---|---|---|---|
| Equity | Short Term Capital Gains | < 1 year | 15% |
| Long Term Capital Gains | > 1 year | 10% | |
| Debt | Short Term Capital Gains | < 3 years | As per I-T slab |
| Long Term Capital Gains | > 3 years | 20% |
Market Order
A market order is an order placed to execute a buy or sell transaction instantly using the prevailing market prices. It prioritizes speed over price certainty, meaning the trade is executed quickly, but the final price may differ slightly from the last traded price.
Operating Cash Flow (OCF)
Operating Cash Flow (OCF) measures the amount of cash generated by a company from its normal, day-to-day business activities. It is a key element in a company's cash flow statement. OCF indicates the company's ability to generate enough cash internally to sustain and expand its operations without access to external financing. A consistently positive and growing OCF is a sign of strong financial health and operational efficiency.
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.
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. In fact, the implied volatility rises when the options premium rises.
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.
The formula to calculate EBITDA margin is: EBITDA Margin = (EBITDA/Revenue)*100
Just like EBITDA, the EBITDA margin also excludes non-cash expenses. That’s why a positive EBITDA margin doesn’t necessarily mean that a company is profitable.
The formula to calculate EBITDA margin is: EBITDA Margin = (EBITDA/Revenue)*100
Just like EBITDA, the EBITDA margin also excludes non-cash expenses. That’s why a positive EBITDA margin doesn’t necessarily mean that a company is profitable.
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