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Finance GlossaryProgram Trading
Program Trading
Definition of Program Trading
Program trading, which is frequently linked with algorithmic trading, is the use of computer algorithms for automatically generating and executing orders in large volumes based on predetermined sets of rules, such as price or timing conditions. It is the buying or selling of a basket of stocks at the same time. Program trading has significantly increased the speed and volume of market transactions and is commonly employed in arbitrage, index arbitrage, and portfolio insurance strategies.
Related Terms
Short Squeeze
A short squeeze takes place when the price of a stock rises sharply, which forces short sellers to buy the shares to keep losses low. This sudden buying results in more upward pressure. This pushes the prices even higher. Often, short squeezes occur in stocks that are heavily shorted, and can lead to volatile price movements.
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.
The formula for ATR is:
ATR = Previous ATR (n - 1) + True Rangen / n
n= number of periods
True Range = The greater/highest of these:
The formula for ATR is:
ATR = Previous ATR (n - 1) + True Rangen / n
n= number of periods
True Range = The greater/highest of these:
- High - low (Day 1)
- Absolute value of (Day 1’s high - Day 0’s close)
- Absolute value of (Day 1’s low - Day 0’s close)
Issue Price
The issue price is the price at which a company sells its newly issued shares during an IPO. The company that is set to go public will conduct thorough market analysis before deciding the issue price.
Plowback Ratio
The Plowback Ratio (or Retention Ratio) is the ratio of the net income of a company that is retained by the company to be reinvested in the company's business operations and growth (rather than paid out as dividends). The formula is: Plowback Ratio = (Net Income - Dividends Paid) / Net Income. High-growth companies in the IT or manufacturing sector often have a high plowback ratio as they see higher benefit in re-investing their profits to fuel expansion. A low plowback ratio indicates that a company is mature and returns a larger portion of its earnings to its shareholders.
Annual General Meeting
An Annual General Meeting or AGM is an event where a company’s board of directors presents the annual report, future outlook, and strategy to shareholders. AGMs serve as one of the few occasions when shareholders get to interact with a company’s board of directors.
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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