A-Z of trading slang expressions and investment terms

15:14, 2 February 2018

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trading slang

Trading slang glossary:

A

ADR

American depository receipts. Certificates issued by a bank saying that a specific amount of a company’s shares have been deposited with them. Traded on US exchanges as if they were US securities.

AER

Annual equivalent rate. The equivalent rate if interest were added to an investment yearly.

AGM

Annual general meeting. When company directors present the annual report to shareholders. Listed companies must hold this meeting once a year.

AIM

Alternative Investment Market. The London Stock Exchange’s market for smaller, newer companies.

APR

Annual percentage rate. The rate of interest you pay on money you borrow.

Absolute return

The gain or loss on an investment expressed as a percentage of invested capital. Focus on the return that an investment fund achieves over a period of time not in comparison to rivals or peers. Often employing diverse investment techniques including short selling, futures, options, derivatives, arbitrage, leverage and unconventional assets.

Accrue

To build up.

Accrued interest

Interest earned either since the start of the investment or since the last interest payment date.

Alpha

The performance of an investment compared with a suitable market index.

Altcoin

Any cryptocurrency that isn’t Bitcoin.

Alternative investments

Investments other than shares, bonds or cash.

Amortisation

Decrease in an asset’s value over time.

Annual report

Distributed yearly to a company’s shareholders. Contains the company’s accounts and runs through the past business year.

Annuity

The purchaser of an annuity enters a contract with an insurer whereby an upfront lump sum payment is exchanged for a guaranteed income stream. Annuities are popular in retirement planning as they can allow retirees to lock in a given level of income for the remainder of their lives.

Appreciation

The rise in the value of an asset.

Arbitrage

Taking advantage of price differences of the same item in different markets.

Ask price

Price to buy, such as a CFD or a forex base currency.

Asset

Something that has a value to its owner. Often used to refer to a specific tradable item, such as an individual stock, commodity or currency pair.

Asset-backed securities

Securities where the income comes from a pool of underlying assets.

Asset class

Investments of a similar type, such as equities.

Asset stripping

Selling off a company’s assets rather than developing the business.

ATH

All-time-high – the highest price an assets or index has ever reached.

At the money

When an option’s strike price is the same as the current price.

Authorised share capital

The amount of share capital that a company is allowed to allocate to shareholders.

Average earnings growth

An indicator of future inflation rates.

Averaging down

A trading technique in which you buy a falling stock with sound fundamentals and keep buying as if falls further. It works on the basis that the more you buy at a cheaper price, the lower the average price of your stock and the more you will make, or the earlier you can sell at a profit, when the price rebounds.

B

BIS

Bank for International Settlements. Based in Switzerland.

Backwardation

Backwardation refers to the situation in which the spot or cash price of a commodity is higher than the forward price. It is the reverse of contango.

Balance of payments

Money going into a country minus money going out during a particular period.

Balance sheet

A summary of a company’s assets and liabilities taken at a particular point.

Ballot

A way of allocating shares when issues are oversubscribed.

Bagholder

Person left holding an asset that has become worthless.

Bank of England

The UK’s central bank. Founded in 1694. Based on Threadneedle Street, London.

Base currency

The first currency in a currency pair.

Base rate

The minimum interest rate at which banks will lend to customers. Decided in the UK by the Bank of England’s monetary policy committee (MPC), and in the euro zone by the European Central Bank (ECB).

Basis point

One hundredth of 1%.

Bear

An investor who looks to profit from a downturn in the market or the price of a particular share.

Bearish

Pessimistic that the market will fall.

Bear market

A general decline in stock market prices over time. Usually accompanied by widespread pessimism.

Bear raid

A concerted attempt to force down the price of a stock to cover a short position.

Benchmark

Something that the performance of an investment can be compared against, such as an index.

Beta

A measure of the volatility of an investment relative to the market as a whole.

Biases

Specific sub-conscious behaviours (called representativeness heuristics) in trading psychology that affect individual trader’s actions. Common ones include overconfidence loss aversion, herding, confirmation, anchor bias, the disposition effect and the hot hand fallacy. Here is a list of 50 biases.

Bid-offer spread

The difference between the buying price (offer) and the selling price (bid) of shares, currency etc.

Bid Price

The price at which the market will buy the product.

Big Mac index

Uses the cost of a Big Mac in different countries to compare purchasing power.

Bitcoin

The original cryptocurrency.

The original cryptocurrency.

Black swan

An event that is extremely hard to predict. Derives from Nassim Nicholas Taleb's book of the same name.

Black-Scholes model

A way of pricing options.

Blockchain

The digital ledger that records all cryptocurrency transactions.

Blue chip

A high-quality company. Derived from blue being the highest value poker chip.

Bond

A fixed-term loan to a company or institution.

Bonus issue

Extra shares issued free to existing shareholders. Also known as a scrip issue.

Book cost

The purchase cost of assets.

Bottom fishing

Buying shares when the price is thought to have bottomed out after falling sharply.

Bottom-up

An investment approach based on picking individual stocks.

Bourse

Another name for a stock exchange.

Brent crude

A benchmark oil.

Broker

Buys and sells investments for clients.

Bubble

When the price of an asset rises far higher than can be justified by fundamentals. Likely to be followed by a collapse in price.

Buck

US Dollar

Budget

Public spending and how it will be paid for.

Bull

An investor who looks to profit from an upturn in the market or the price of a particular share.

Bullish

Confident the market will rise.

Bull market

A market with a general upward trend over time. Usually accompanied by widespread optimism.

Bundesbank

Germany’s central bank

Business cycle

The move between boom and bust.

Buyer’s market

Low prices and plentiful supply.

Buy-out

When a controlling stake in a company is bought by a single party.

C

CAC 40

France’s version of the FTSE 100 but with 40 companies in the index.

CDO

Collateralised Debt Obligation. An asset-backed security where the underlying assets are various debt obligations. Doesn’t have a good reputation.

CFD

Contract for difference. A derivative where the parties agree to settle the difference in opening and closing prices. Uses leverage.

CPI

Consumer Price Index. A measure of consumer price inflation based on the cost of a basket of common household goods. The main measure of inflation in the UK.

Cable

The US dollar/GB pound pair, represented as USD/GBP.

Call

A further payment for partly-paid shares.

Callable bond

A bond where the issuer has the option to redeem it early.

Call money

Short-term finance repayable on demand.

Call option

The right to buy an agreed amount of a commodity or security for an agreed price by an agreed date.

Candlestick chart

Shows trading range and opening and closing prices for a day.

Capital

Money or assets put to economic use.

Capital expenditure

Money spent on fixed assets.

Capital gains tax

Tax charged on certain investment gains above an annual limit.

Capital markets

Markets where money is raised and securities traded.

Capital receipt

Money received from selling fixed assets.

Carry trade

When a currency that has a low interest rate is borrowed to purchase another currency with a higher interest rate.

CCJ

A county court judgment. When the court issues an order that you must pay a specific debt. Will worsen your credit rating and may impede your ability to borrow, or raise the price at which you can borrow.

Central bank

The banker to the government and other banks in a country, such as the Bank of England.

Certificate of deposit

A fixed-term, fixed-interest deposit with a bank or building society. Also known as a CD.

Chargeable asset

One that may incur capital gains tax.

Chartism

The study of historical market data to try and predict future movements.

Chattels

Collectibles that can be bought and sold as investments, such as antique furniture, stamps, artwork, jewellery.

Chinese walls

Controls to stop conflicts of interest in financial institutions that offer a range of services.

Churning

Excessive dealing in securities.

Class action

A legal action by a group of investors against a company or its directors to gain compensation for alleged negligence or illegal behaviour.

Clean price

The price of a bond excluding any accrued interest.

Close a position

Sell an asset you are holding or buy a asset you have sold short.

Closing bell

The end of the trading day on the New York Stock Exchange and NASDAQ.

Collective investment scheme

A fund in which individual investors hold units of a pool of assets, such as a unit trust.

Commission

The amount paid to brokers for their services.

Commodity

A physical item that can be processed and sold on, such as metals and oil.

Common investment fund

Where two or more entities pool assets together for investment.

Concentrated portfolio

One with fewer stocks than usual.

Consolidation

Increasing the nominal value of shares and decreasing the number in issue.

Contagion

Financial stress in one area spreading to another indirectly related area.

Contango

Contango describes the typical situation where the futures price of a commodity is higher than the expected spot price at maturity of the futures contract. Contango is normal for a non-perishable commodity as storage fees and the time value of money translates into a cost of carry.

Contract

The standard unit of forex trading.

Contract note

Written confirmation of the purchase or sale of an investment.

Conventional bond

One with the coupon and principal payments fixed at the time of issue.

Convertible bond

One that can be exchanged for stock in the same company.

Corporate governance

The way in which a company is directed and managed.

Corporate raiders

Specialise on hostile takeovers of companies with undervalued assets.

Corporation tax

Paid by UK companies on their profits. Currently 19%.

Counter currency

The second currency in a currency pair.

Counterparty

A party in a financial transaction.

Coupon

The regular interest payment due on a bond.

Credit default swap

A type of derivative that offers a guarantee against the non-payment of a debt. Also known as a CDS.

Credit rating

An assessment of how likely a bond issuer is to meet their obligations.

CREST

A UK system for holding and transferring securities electronically.

Cross

A pair of currencies that does not include the US dollar.

Cryptocurrency

An encrypted digital currency. Bitcoin is the most famous example.

Currency

The system of money in general use in a country. Currencies have names, symbols and internationally recognised three-letter abbreviations. The dollar, $, USD. In the UK the short forms of ‘pound’ and ‘sterling’ are also used. Great British pound sterling, £, GBP.

Currency pair

Two currencies that make up a foreign exchange rate.

Cyclical stock

One that fares better in good times, such as a company selling discretionary items.

D

DAX

Deutsche Aktienindex. An index of 30 blue chip German companies listed on the Frankfurt Stock Exchange.

DTCC

Depository Trust and Clearing Corporation. Provides clearing and settlement services to the US financial markets.

DVP

Delivery versus payment. The simultaneous transfer of securities and cash between parties.

Dark pool

Secretive way of trading large volumes of shares.

Dawn raid

When an investor buys a substantial number of shares in a company as soon as the market opens. Often a prelude to a takeover bid.

Day trading

Buying and selling stocks during a trading day leaving no open positions at the close of the session.

Dead cat bounce

A brief resurgence during a concerted fall in price. Derived from the idea that even a dead cat will bounce if it falls from a great height.

Defensive stock

One that is generally immune to changes in the general economic climate, such as a utility stock.

Defined Benefit

A defined benefit pension scheme is much coveted as it will pay out a secure income for life on retirement that will typically increase each year in line with inflation. Such plans have become increasingly rare as they can be relatively expensive for employers to service over time.

Defined Contribution

Defined contribution schemes are occupational pension plans where the value of the ultimate benefits payable from depend on factors such as the amount of contributions paid, the investment return achieved on the funds invested. Contributions come from both the employer and employee.

Deflation

A general decrease in the price of goods and services.

Depreciation

Fall in the value of an asset due to wear and tear, age and obsolescence.

Derivative

A contract that derives its value from the performance of its underlying asset.

Discounted cashflow

A mathematical technique for expressing future cashflow at a current value.

Distribution

A company giving cash or other assets to its shareholders.

Diversification

Spreading investment funds among different kinds of assets to lower risk.

Dividend

After-tax profit distributed to shareholders.

Dividend investing

Focus not just on rising share price but on the amount returned to shareholders in dividend payments, usually reinvesting the dividends in more stock. Sometimes called a DRIP - dividend reinvestment plan.

Dividend yield

Dividend per share divided by price per share. Usually expressed as a percentage.

Dog

A chronically underperforming share.

Dove

Someone whose top monetary policy priority is low unemployment.

Dow Jones Industrial Average

A price-weighted average of 30 blue chip stocks listed on the New York Stock Exchange. One of the oldest and most widely quoted stock market indices. Also known as the Dow.

Downtick

Sale of a stock at one tick down from the previous sale price.

Dubai crude

A benchmark oil.

Duration

Duration is a measure of the sensitivity of the price of a bond to changes in interest rates. In general, in tends to be higher for government bonds with longer periods to go until maturity. Bond prices are inversely related to interest rates.

Duty

A levy on the purchase of a specific product or raw material (or import). It is a kind of consumption tax. Examples include Stamp duty (on property and shares), fuel duty (on petrol and diesel) and alcohol duties.

E

EBIT

Earnings before interest and tax.

EBITDA

Earnings before interest, tax, depreciation and amortisation. Measures a company’s short-term cash flow generation in relation to its market valuation.

ECB

European Central Bank. The central bank for the European Union.

Elliott wave principle

Technical theory of trading based on analysing investor psychology, prices and other factors.

ETC

Exchange-traded commodity. Tracks the price of the underlying commodity. Traded like shares.

ETF

Exchange-traded fund. The underlying assets of the fund are divided into shares, which are then traded. Usually follows an index.

ETP

Exchange-traded products. Examples are ETCs and ETFs.

Earnings per share

Profits after tax divided by the number of shares issued.

Enterprise Value

The enterprise value tends to be thought of as a theoretical takeover price if a company were to be bought. It is calculated as market capitalisation plus debt, minority interest and preferred shares, minus total cash and cash equivalents.

Equity

The capital of a company that is owned by ordinary shareholders.

The value of something less money owing on it.

Exchange

Official market place for trading assets, (stock exchange, commodity exchange, currency exchange).

Execution

The buying and selling of an investment.

Exercise price

The price at which an option holder can exercise their option.

Ex-gratia payment

A payment made by where there is no legal liability to pay.

Expiry date

The last date on which an option can be exercised.

F

FCA

Financial Conduct Authority. Regulates the financial services industry in the UK.

FTSE 100

The most widely used index for tracking the London market. Contains the 100 most capitalised companies on the London Stock Exchange.

FTSE 250

Index of the next 250 largest companies on the London Stock Exchange.

FTSE 350

Index of the FTSE 100 and FTSE 250 combined.

FTSE All-Share

Index of all companies listed on the London Stock Exchange.

FTSE SmallCap

Index of the companies outside the top 350 on the London Stock Exchange.

FTSE TechMARK

All the tech stocks listed on the London Stock Exchange.

FTSE4Good

A series of ethical stock market indexes launched by FTSE.

Fat-finger trade

A keyboard input error in the financial markets such as the stock market or foreign exchange market whereby an order to buy or sell is placed of far greater size than intended, for the wrong stock or contract, at the wrong price, or with any number of other input errors.

Fibonacci retracement

A mathematical theory for stock trading.

Fed

Abbreviation for the Federal Reserve Board.

Federal Reserve Board

Oversees the Federal Reserve Banks and helps establish US monetary policy.

Federal Reserve System

The US’s central bank. Also known as the Fed. There are 12 central reserve districts all with their own Federal Reserve bank.

Fiat money

A currency set as legal tender by a government but that has no intrinsic value – banknotes, rather than gold.

Financial Ombudsman Service (FOS)

An independent service to rule on complaints that remain unsolved through normal company complaints procedures. The decision of the ombudsman is binding, unless the firm appeals to the court. You must give the regulated firm eight weeks to resolve your complaint internally before going to the ombudsman.

Financial year

A company’s financial year can start when it likes. The most popular year-ends are 31 March and 31 December.

Fiscal

(UK) Relating to government revenue, especially taxes. (US) Relating to financial matters.

Fiscal year

(US) A year-long period that a company or government uses for accounting and annual reports. (UK) The year from 6 April to 5 March each year.

Fixed costs

Stay the same regardless of a company’s output.

Flash crash

A very rapid, deep, and volatile fall in security prices occurring within an extremely short time period. The May 6, 2010, flash crash was a trillion-dollar stock market crash on Wall Street, which started at 2:32pm EDT and lasted for 36 minutes.

Flotation

The process of a privately-owned company becoming a listed company.

Forking

Splitting from the original blockchain and creating a new version of an existing cryptocurrency.

Forex market

Foreign exchange market. Where one currency is exchanged for another.

Forward contract

A private agreement to buy or sell something in the future.

FOMO

Fear of missing out. Investing, without any analysis, just because everyone else is and they seem to be making money.

FUD

Fear, uncertainty and doubt. Baseless negativity spread intentionally by a short seller who benefit if price of something to drop.

FUDster

Short-seller spreading FUD.

Fundamental analysis

Analysis of the value of a company using its accounts, its competition and the economy in general.

Futures contract

A more formal version of a forward contract, often used to hedge against movements in price of the underlying asset.

FX

Foreign exchange market. Where one currency is exchanged for another.

G

GDP

Gross domestic product. The sum of all goods and services produced in the economy.

GDR

Global depository receipt. Derivative equities traded on foreign markets.

Gearing

A company’s debt as a proportion of its equity capital. Also known as leverage.

Gilts

Sterling bonds issued by the British government.

Go long

Invest expecting the price to go up.

Go short

Sell first expecting the price to go down, aiming to buy later, at lower price

Goggs

The UK Treasury. From Government Office Great George Street.

Gold

Quoted in US$ per troy ounce.

Golden handcuffs

Incentives for executives to stay with a firm.

Golden handshake

A contractual clause guaranteeing an executive a substantial payoff if they lose their job.

Golden hello

Offering to executives to tempt them into changing jobs.

Golden parachute

A large payment to an executive if they lose their job through a merger or takeover.

Grand

One thousand

Greenback

US dollar

Grey knight

An ambiguous intervener in a takeover battle, who makes a counterbid for the shares of the target company without having made their intentions clear.

Growth investing

Focus on companies with above-average capital growth, even if the share price appears expensive using traditional metrics such as price-to-earnings or price-to-book ratios.

Guinea

A unit of GBP - £1.05 (21 shillings), still used in come contracts and in horse racing. The origin guinea coins contained 7.7g of gold and are worth that weight at the prevalent gold spot price.

H

Hang Seng

The main index of the Hong Kong stock exchange.

Hawk

Someone whose top monetary policy priority is low inflation.

Hedge

Taking on a new risk to offset an existing risk.

Hedge Fund

An investment fund that uses leverage and long and short positions across different asset categories to make an absolute return .Known for aggressive strategies.

High net worth

Categorisation of the wealthy, used in insurance and financial advice.

High yield bonds

High yield bonds pay out a higher level of income than an investment grade bond. This is because high yield bonds are deemed as riskier, often because the firms issuing such debt are small, start up companies or have a relatively high level of debt.

Horizontal merger

Companies at the same production stage in the same industry merging.

Hostile takeover

A takeover approach not supported by the board of the company being acquired.

I

ICO

Initial Coin Offering. Launch of a new cryptocurrency.

IPO

Initial public offering. Shares in a company offered to the market for the first time.

ISIN

International Securities Identification Numbering System. The unique code given to a security and used worldwide.

Illiquid

Not easily converted into cash.

Illiquid market

One without sufficient buyers and sellers. Often results in bumpy price changes.

Index

An indicator of trends in a market or economy. It moves as its component data changes value.

Inflation

The increase in prices of goods and services over time.

Infrastructure

The physical assets necessary to run a business.

Initial margin

The deposit needed by a broker before a margin transaction can be carried out.

Insider trading

The illegal use of inside information to make a profit or avoid a loss on market transactions.

Institutional investor

Companies such as pension funds and life-insurance funds. The big hitters of the financial markets.

Intangible assets

Things of value such as patents.

Interest rate

Fee paid to borrow money.

Interim dividend

Dividend based on performance during part of a company’s financial year.

Interim results

Figures for part of the financial year.

In the money

When exercising an option will make the holder money.

Investment grade

A bond is defined as investment grade if its credit rating is BBB- or higher by Standard & Poor's or Baa3 or higher by Moody's. The bonds issued by large-cap, blue-chip companies will usually be classified as investment grade debt.

Investment Trust

An investment trust is an investment vehicle that can be thought of as closed ended fund. It will be a listed company, investing in a portfolio of assets, so to buy shares in it and get exposure to the underlying investments you must acquire the shares of the investment trust on the stock exchange.

ISA

Individual Savings Account – tax free savings vehicle that can be used to invest in a range of assets and plans.

J

Jawbone

When someone uses their authority or position to influence something by speaking publicly.

Junk bond

A high-yield, lower rated bond.

K

K

A thousand (as in £10k)

L

LSE

London Stock Exchange

LIBOR

London interbank offered rate. How much it costs banks to borrow from each other.

Leverage

A company’s debt as a proportion of its equity capital. Also known as gearing.

Using borrowed money to increase the potential profits (or losses) on an investment.

Leveraged buyout

Borrowing money to buy a company.

Limit order

An order to buy or sell when a particular price is reached. Guarantees a trade at that price.

Liquid asset

One that can easily be converted into cash.

Liquid market

One with enough buyers and sellers for the price to move smoothly.

Liquidation

The process of winding up a company.

Lloyd's (of London)

A society of specialist underwriters that have pooled money as a back-up for each other, incorporated under an act of parliament of 1871 and known as the corporation of Lloyd's. It provides the premises, services, administrative staff and other facilities to enable the Lloyd's market to underwrite insurance business.

Long

Holding shares in expectation of a price rise.

Loonie

The Canadian dollar.

M

Market intervention

When a central bank or other authority enters the market (usually forex) to buy and sell with the sole intention of manipulating prices.

Mifid II

New version of the Markets in Financial Instruments Directive. Intended to make Europe’s markets safer, more transparent and more efficient.

Maintenance margin

The minimum amount of equity that must be maintained in a margin account.

Margin

The collateral needed in a margin account to trade – a proportion of the full value of the asset to be traded.

The equity in an investor’s account.

Margin account

A brokerage account where an investor is lent money to buy securities.

Margin call

A demand from a broker for more money to be put into a margin account.

Market capitalisation

The total value of a company. Price per share multiplied by number of shares.

Market order

An order to buy or sell at the current price.

Martingale

Where you double your stake each time you lose until you eventually win back your entire losses and make a profit.

Midas touch

When every trade makes a good profit (everything turns to gold).

Mining

The process of creating additional amounts of a cryptocurrency.

Mint

Government’s coin manufacturer.

Mint

Large amount of money, as in ‘He made a mint from that deal’.

Momentum investing

Going long on a stock that has shown to be continually rising. Sometimes going short on a stock that is continually falling. The belief that the momentum will continue.

Monetary Policy Committee

Sets the UK’s interest rate. Chaired by the governor of the Bank of England.

Monkey

£500

Monte Carlo simulation

Monte Carlo simulations are used to model the probability of different outcomes. It can be used as a technique to assess the impact of risk and uncertainty in forecasting investment returns.

Multi factor model

Calculations comparing two or more factors to analyse relationships between variables and the resulting performance, often to help build portfolios that have specific characteristics.

N

NASDAQ

National Association of Securities Dealers Automated Quotation system. Major US exchange. Where many tech stocks are listed.

NAV

Net Asset Value. A company’s assets minus its liabilities.

Naked short selling

Selling stock short without borrowing it. Illegal in some countries.

Net asset value per share

NAV divided by the number of shares.

Net profit

Profit left after all the overheads have been accounted for.

New York Stock Exchange

The world’s largest stock exchange. Based in Wall Street.

Nicker

One pound sterling (£).

Nikkei 225

The leading index of the Tokyo Stock Exchange.

Nominal value

The face value of a security.

O

ONS

Office for National Statistics. The UK government’s statistics unit.

OPEC

Organisation of petroleum exporting companies. Cartel of most of the world’s oil exporters.

OTC

Over the counter. A financial contract, such as a derivative, that is tailor-made for a client and not traded on an exchange.

Old Lady of Threadneedle Street

The Bank of England. Derives from an 18th century cartoon by James Gillroy.

Open Ended Investment Company (OEIC)

An OEIC is a type of open ended investment vehicle available in the UK. The fund manager can create shares when money is invested and redeem shares as requested by shareholders, who thereby gain exposure to the underlying assets chosen by the fund manager that determine the shareholders´ returns.

Open position

A trade that has not yet been closed with an opposing trade and can still incur a profit or a loss.

Opening bell

The start of the trading day on the New York Stock Exchange and NASDAQ.

Operating profit or loss

The profit or loss from a company’s main trading activity. EBIT and EBITDA are examples of this.

Options

The right to buy (a call option) or to sell (a put option) a specific product at a specific price within a specified time.

Ordinary shares

An ownership interest in a listed company. Holders are entitled to vote on certain company issues and to receive dividends.

Ostrich

One who ignores bad news.

Out of the money

When it would not be profitable to exercise an option.

Overweight

Holding more of a stock or sector than the benchmark index.

P

Paid in capital

The amount of capital contributed by investors during common or preferred stock issuances.

Par Value

Face value of a bond.

PE ratio

Price/earnings ratio. The current market price divided by earnings per share.

PEG ratio

The price/earnings to growth ratio is a relative measure of a stock's value. By taking the company´s earnings growth into account, it is often thought of as being more comprehensive than the P/E ratio. The lower the PEG ratio, the more attractively valued the stock.

Pig

An investor who lets greed cloud their judgement.

Pip

The smallest unit of price for any foreign currency. Equals 0.0001.

Poison pill

Strategy designed to foil a hostile takeover.

Pony

£25

Preference shares

These rank above ordinary shares. They have fixed rate dividends and no voting rights unless the dividend is in arrears.

Premium

The amount by which a bond or share sells above its par value.

Price to book ratio

The price-to-book ratio can be used to assess a security’s market value to its book value. It can be calculated by dividing the current closing price of the stock book value per share. A lower ratio could mean the stock is good value.

Private key

A secret number that allows access to a cryptocurrency account. Known only by the account holder.

Private equity

Funds invested in new and growing businesses. Also known as venture capital.

Profit and loss account

Gives a company’s financial results over a period, usually a financial year.

Profit margin

Net income divided by revenue.

Public key

A public code number attached to a cryptocurrency account. Available to people who want to trade with you.

Pump and dump

When the market is bullish and praises an asset, leading to a fast price increase, followed by a crash.

Put option

The right to sell an agreed amount of a commodity or security for an agreed price by an agreed date.

Q

Quantitative easing

A central bank way of increasing the money supply.

Quarterly report

US companies have to report every quarter.

Quid

Pound

Quis custodiet ipsos custodes?

Who will guard the guards? What happens when a regulator fails to regulate correctly?

R

RPI

Retail Price Index. A measure of inflation in the UK.

Rally

A rise in prices after a fall.

Rate of return

The annual income from an investment as a percentage of the original investment cost.

Return

The gain on an investment.

Reuters Instrument Code (RIC)

Internationally agreed standard for tradable currency units (including cryptocurrencies) represented by three letters: USD – US Dollar, GBP – Great British pound sterling, BTC – Bitcoin, ETH – Etherium.

Reverse takeover

When a smaller company buys a larger company.

Rights issue

An opportunity for existing shareholders to buy new shares at a discount.

R-Squared

R-squared represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index.

S

S&P 500

Standard & Poor’s 500 index. A general market index of 500 stocks.

Scalping (forex)

Forex scalping is taking advantage of mini currency movements for profit.

SEC

Securities and Exchange Commission. The government agency which regulates markets in the US.

Scrip issue

Extra shares issued free to existing shareholders. Also known as a bonus issue.

Seller’s market

High prices and limited supply.

Settlement

The completion of a purchase or sale.

Share buy back

When a company buys some of its own shares to reduce its issued share capital.

Share capital

Funding raised through the issue of shares.

Sharpe ratio

The most common method of computing risk-adjusted return. It is the average return earned in excess of the risk-free rate per unit of risk.

Sheep

Someone without a clear investment strategy.

Shop Price Index

Measures changes in retail prices. Conducted by the British Retail Consortium.

Short

Having sold shares first expecting the price to fall.

Short covering

Buying securities to close a short position.

Short sale

Selling first with the aim of buying back at a lower price to make a profit.

SIPP

Self-invested personal pension – the holder chooses the investments in the pension.

Soft commodities

Commodities other than metals.

Solvency

The ability of a company to cover its liabilities.

Sovereign

A pound

Sovereign debt

Government bonds/gilts

Spread

Difference between the bid and offer prices (or bid and ask price).

Spot market

A market where financial instruments and commodities are traded for instant delivery.

Square Mile

The City of London

Stag

Someone who buys a new share issue with the intention of selling it quickly for a profit.

Stagflation

When economic stagnation meets inflation.

Stamp duty

A 0.5% tax charged on purchases of certain shares.

Stock

US term for an ordinary share.

Stop-loss order

An order to sell at a price below the current market price if the price falls, designed to minimise losses.

Stop order

An order to buy or sell once a certain price has been reached.

Structured products

Set investment strategies where returns are based on the performance of the underlying assets, which may include a single security, a basket of securities, options, indices, commodities, debt, forex or even derivatives.

Supply chain finance (SCF)

AKA supplier finance or reverse factoring; a set of solutions to optimise cash flow that enables businesses to lengthen their payment terms to suppliers.

Swap

A type of derivative where two parties agree to exchange assets or cashflows for an agreed period.

T

Take-profits order

Order specifying the exact rate or variation from the current price point at which to close out an open order for a profit.

Target Return Funds

Aim to deliver positive returns in all market conditions. The funds set their target, (usually against Libor) aiming to beat it by two or three percentage points.

Tariff

A tariff is a tax on imports or exports between sovereign states.

Tax

A compulsory contribution to state coffers, levied by the government on the income of workers and the profits of businesses or on the sales of classes of products.

Technical analysis

Focus on the statistical analysis of price movements, assuming the price correctly reflects all the available information about that stock.

TIPS

Treasury Inflation Protected Securities. Bonds backed by the US Treasury that track inflation.

Takeover bid

An offer to a firm’s shareholders to buy their shares for a specified price.

Tangible assets

Assets you can touch.

Tick

The minimum price change possible in a financial market.

Ton

100

Top-down

An investment approach based on looking at the market and the economy and picking stocks that could benefit from the situation.

Trailing stop

Stop loss order that moves with the price of the stock.

Treasury

The UK government department in charge of public finance and economic policy.

Treasury bill

A form of short-term government borrowing.

Turnover

A company’s total sales in a set period.

U

Uberrima fides

Latin for utmost good faith, the principle behind insurance that requires the policyholder to be honest and disclose all information that could affect the price.

Ultra vires

Beyond one's legal power or authority.

Underlying

The underlying asset on which a derivative is based.

Underweight

Holding less of a stock or sector than your policy, or that is recommended.

Underwriter

A financial institution that guarantees to buy a proportion of any unsold shares when a new issue is offered for sale to the public.

Unicorn

A private company valued at over $1bn. Derives from the rarity factor.

Uptick

Sale of a stock at one tick up from the previous sale price.

Uptick rule

US short selling rule.

V

Value investing

An investment strategy that focuses on buying securities that appear undervalued, focusing on investments that appear to be trading at a discount based on measures of relative value.

Variable costs

Change according to the level of a company’s output.

Vertical merger

A merger between two companies in the same industry but at different production stages.

VIX

Volatility index

Volatility

The amount and frequency with which an investment fluctuates in value.

Volume

The number of shares traded in a day.

W

Weighting

The amount of stock in an index relative to the total index.

Whale

Someone who owns large amounts of cryptocurrency.

Whipsaw

Rapid change in direction of a share price.

White knight

A friendly bidder when a company is subject to a hostile takeover bid.

With profits

Diverse, pooled investment fund, usually offered by an insurer, with profits and annual bonuses added to the policy.

WTI

West Texas Intermediary. Grade of crude oil used as a pricing benchmark.

X

 

Y

Yield

Income generated by an asset on an annual basis, expressed as a percentage of the asset's purchase or market price.

Z

Zero uptick

A trade at the same price as the one immediately before it but higher than the transaction before that.

Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

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