Financial glossary — Finabase Learn

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401(k) plan: A US employer-sponsored retirement plan that lets workers contribute part of their pay before tax or as Roth, often with a match.
52-week high and low: The highest and lowest prices a security has traded at over the past year, a common reference for range and momentum.

A

Accounts payable: Money a company owes its suppliers for goods and services it has received but not yet paid for; a current liability.
Accounts receivable: Money customers owe a company for sales already made on credit; a current asset on the balance sheet.
Accrual accounting: Recording revenue when it is earned and expenses when they are incurred, not when cash actually changes hands.
Accumulation: A phase in which informed buyers quietly build positions after a decline, often seen as a sideways range on rising volume.
Activist investor: An investor who buys a sizable stake to push management for changes such as cost cuts, a sale or new board members.
Advance-decline line: A running total of advancing minus declining stocks each day, used to check whether an index move is broadly supported.
After-hours trading: Trading in US stocks after the 4:00 p.m. ET close, typically until 8:00 p.m., with thinner liquidity and wider spreads.
All-time high: The highest price a security or index has ever reached; a stock at an all-time high has no overhead resistance from past buyers.
Alpha: The part of a portfolio's return not explained by its market exposure; positive alpha means it beat its risk-adjusted benchmark.
American depositary receipt (ADR): A US-traded certificate that represents shares of a foreign company, letting investors buy it in dollars on a US exchange.
American-style option: An option that can be exercised on any business day up to expiration; most US single-stock options are American style.
Amortization: Spreading the cost of an intangible asset, or the repayment of a loan, over a series of periods instead of all at once.
Analyst rating: A sell-side analyst's recommendation on a stock, such as buy, hold or sell, often with a price target.
Annual report: A company's yearly report to shareholders summarizing results; in the US the detailed regulatory version is the Form 10-K.
Annualized return: A multi-year return restated as the steady yearly rate that would compound to the same result, making periods comparable.
Arbitrage: Profiting from a price difference for the same or equivalent asset in two places by buying the cheap one and selling the dear one.
Ask price: The lowest price a seller is currently willing to accept for a security; buyers who want to trade immediately pay the ask.
Asset: Anything a company or person owns that has economic value and is expected to provide a future benefit, from cash to factories.
Asset allocation: How a portfolio is divided among asset classes such as stocks, bonds and cash; the main driver of a portfolio's risk.
Assignment: The notice that an option seller must fulfill the contract: deliver shares on a short call or buy shares on a short put.
At the money (ATM): An option whose strike price equals, or is very close to, the current price of the underlying asset.
Auditor: An independent accounting firm that examines a company's financial statements and gives an opinion on whether they are fairly stated.
Authorized shares: The maximum number of shares a company's charter allows it to issue; issued and outstanding shares are usually far fewer.
Average true range (ATR): A volatility measure averaging each bar's true range, which includes any gap from the prior close; usually over 14 periods.
Averaging down: Buying more of a holding after its price falls, lowering the average cost per share but raising the position's size and risk.

B

Backtesting: Testing a trading rule on historical data to see how it would have performed, before risking money on it.
Balance sheet: A snapshot of what a company owns, owes and the owners' stake at one date: assets equal liabilities plus shareholders' equity.
Basis point: One hundredth of a percentage point (0.01%), the standard unit for quoting changes in interest rates, yields and fees.
Bear market: A broad decline of 20% or more from a recent high in a major index, usually lasting months and accompanied by pessimism.
Bear trap: A false breakdown below support that lures traders into selling short just before price reverses higher.
Benchmark: A standard, usually an index, against which the performance of a portfolio, fund or manager is measured.
Beta: A measure of how much a stock tends to move with the market; a beta of 1.5 means it has moved about 1.5 times as much on average.
Bid price: The highest price a buyer is currently willing to pay for a security; sellers who want to trade immediately receive the bid.
Bid-ask spread: The gap between the best bid and the best ask, an implicit cost paid by anyone who trades immediately at market.
Bitcoin: The first cryptocurrency, launched in 2009, with a fixed maximum supply of 21 million coins secured by proof of work.
Black swan: A rare, extreme and largely unforeseen event with major market consequences, rationalized only after the fact.
Block trade: A single large trade, conventionally 10,000 shares or more, usually negotiated privately to limit market impact.
Blockchain: A shared, append-only ledger of transactions grouped in linked blocks and maintained by a network of computers.
Blue-chip stock: A share in a large, long-established, financially sound company with a record of steady earnings, often paying dividends.
Bollinger Bands: Bands set two standard deviations above and below a 20-period moving average, widening and narrowing with volatility.
Bond: A loan from an investor to a government or company that pays interest on a schedule and returns the principal at maturity.
Book value: A company's total assets minus total liabilities as recorded on the balance sheet; the accounting value of shareholders' equity.
Breakout: A move of price through a support or resistance level or out of a chart pattern, often watched for a pickup in volume.
Broker: A firm or person that executes buy and sell orders for clients and holds their accounts, in exchange for fees or other revenue.
Broker-dealer: A firm registered with the SEC and FINRA that trades securities for customers (broker) and for its own account (dealer).
Bull market: A sustained rise in a major index, commonly dated from a 20% gain off a bear-market low, accompanied by optimism.
Bull trap: A false breakout above resistance that draws in buyers just before price turns back down.
Business cycle: The recurring rise and fall of economic activity through expansion, peak, contraction and trough.
Buy and hold: A long-term approach of buying investments and keeping them through market ups and downs instead of trading in and out.

C

Call option: A contract giving the buyer the right, not the obligation, to buy the underlying asset at the strike price before expiration.
Candlestick: A price bar that shows the open, high, low and close for a period, with a filled or hollow body between open and close.
Capital expenditure (capex): Cash a company spends on long-lived assets such as buildings, equipment and software, shown in investing cash flows.
Capital gain: The profit from selling an asset for more than its cost basis; in the US it is taxed differently for short and long holdings.
Capital loss: The loss from selling an asset for less than its cost basis, which can offset capital gains for US tax purposes.
Capitulation: A burst of panic selling, often on very high volume, as holders give up; it sometimes marks the late stage of a decline.
Cash flow: The net amount of cash moving into and out of a business over a period, reported as operating, investing and financing flows.
Cash flow statement: The financial statement that reconciles net income to the actual change in cash through operating, investing and financing activities.
Cash-secured put: Selling a put option while holding enough cash to buy the shares if assigned, collecting premium in the meantime.
Central bank: A national institution that manages a country's currency, money supply and short-term interest rates, such as the Federal Reserve.
Chart pattern: A recognizable shape in price action, such as a head and shoulders or a triangle, that traders read for continuation or reversal.
Churning: Excessive trading in a customer account by a broker mainly to generate commissions; it violates FINRA rules.
Circuit breaker: An exchange-wide trading halt triggered when the S&P 500 falls 7%, 13% or 20% in a day, giving markets time to pause.
Closed-end fund: A fund with a fixed number of shares that trade on an exchange, often at a premium or discount to the value of its holdings.
Collateral: An asset pledged to secure a loan, which the lender may take if the borrower fails to repay.
Commission: A fee a broker charges for executing a trade; most US online brokers now charge zero commission on stock trades.
Commodity: A basic, interchangeable raw good such as oil, gold, wheat or copper, traded in bulk on spot and futures markets.
Common Stock: The ordinary ownership shares of a company, which carry voting rights and a residual claim on profits after creditors and preferred holders.
Compound Interest: Interest earned on both the original principal and on interest already earned, so growth accelerates over time.
Consensus Estimate: The average of analysts' forecasts for a company's earnings or revenue, the benchmark results are judged against.
Consolidation: A period in which price trades sideways in a range, pausing after a move while buyers and sellers reach balance.
Consumer Confidence: Survey measures of how households feel about the economy and their finances, such as the Conference Board and Michigan indexes.
Consumer Price Index (CPI): A monthly BLS measure of the average change in prices urban consumers pay for a basket of goods and services; the main US inflation gauge.
Contango: A futures market in which later-dated contracts trade above nearer ones or the spot price, which erodes returns when rolling long positions.
Contrarian: An approach that deliberately goes against prevailing sentiment, buying when others are fearful and selling when they are greedy.
Convertible Bond: A corporate bond that the holder can exchange for a set number of the issuer's shares, trading a lower coupon for equity upside.
Corporate Bond: Debt issued by a company to raise money, paying interest and carrying more credit risk than government bonds of similar maturity.
Correction: A decline of roughly 10% to 20% from a recent high in a stock or index, shorter and shallower than a bear market.
Correlation: A statistic from -1 to +1 describing how closely two series move together; low correlation is what makes diversification work.
Cost Basis: The original value of an investment for tax purposes, usually the purchase price plus fees, used to compute gains and losses.
Cost of Goods Sold (COGS): The direct costs of producing the goods or services a company sold in a period, subtracted from revenue to get gross profit.
Coupon: The annual interest a bond pays, stated as a percentage of its face value; a 5% coupon on a $1,000 bond pays $50 a year.
Covered Call: Selling a call option against shares already owned, collecting premium in exchange for capping the upside above the strike.
Credit Default Swap (CDS): A contract in which one party pays a regular fee to another for protection against a borrower defaulting on its debt.
Credit rating: A letter grade from agencies such as S&P, Moody's and Fitch that estimates a borrower's ability to repay its debt.
Credit Risk: The risk that a borrower fails to make promised interest or principal payments in full and on time.
Credit Spread: The extra yield a corporate or other risky bond pays over a Treasury of similar maturity, reflecting perceived credit risk.
Credit spread (options): An options position that sells one option and buys a further out-of-the-money one, collecting a net premium with capped risk.
Crude Oil: Unrefined petroleum, traded mainly as WTI and Brent futures, and a key driver of energy stocks and inflation.
Cryptocurrency: A digital asset recorded on a decentralized blockchain ledger and secured by cryptography, such as Bitcoin or Ether.
Currency Pair: Two currencies quoted against each other, such as EUR/USD, showing how much of the second buys one unit of the first.
Current Assets: Assets expected to be turned into cash or used up within one year, such as cash, receivables and inventory.
Current Liabilities: Obligations due within one year, such as accounts payable, short-term debt and accrued expenses.
Current Ratio: Current assets divided by current liabilities; a basic test of whether a company can cover its short-term obligations.
Custodian: A financial institution that holds customers' securities and cash for safekeeping and handles settlement and record-keeping.
Cyclical Stock: A stock whose earnings rise and fall strongly with the business cycle, such as automakers, airlines and industrial firms.

D

Dark Pool: A private trading venue that does not display orders publicly before execution, used mainly by institutions for large trades.
Day Order: An order that expires automatically at the end of the trading session if it has not been filled; the default at most brokers.
Day Trading: Buying and selling securities within the same trading day, closing all positions before the market closes.
Dead Cat Bounce: A brief, short-lived rebound in a falling stock or market that fails and gives way to further declines.
Death Cross: A chart signal where the 50-day moving average crosses below the 200-day moving average, read by some as a bearish shift.
Debt-to-Equity Ratio: Total debt (or total liabilities) divided by shareholders' equity; a measure of how much a company relies on borrowing.
Default: A borrower's failure to make a required interest or principal payment, or to meet other terms of a loan or bond.
Defensive Stock: A stock whose demand and earnings hold up in recessions, such as utilities, consumer staples and healthcare.
Deflation: A sustained fall in the general price level, the opposite of inflation, which can raise real debt burdens and delay spending.
Delisting: The removal of a stock from an exchange, either voluntarily or because it no longer meets listing standards.
Delta: How much an option's price is expected to change for a $1 move in the underlying; also a rough probability of finishing in the money.
Depreciation: Spreading the cost of a tangible asset such as equipment over its useful life as a yearly non-cash expense.
Derivative: A contract whose value depends on another asset, rate or index, such as options, futures and swaps.
Dilution: The reduction in existing shareholders' ownership percentage and per-share earnings when a company issues new shares.
Direct Listing: Taking a company public by listing existing shares on an exchange without underwriters selling new shares in an IPO.
Discount Rate: The rate used to convert future cash flows to present value; also the rate the Fed charges banks at its discount window.
Discounted Cash Flow (DCF): A valuation method that estimates what a business is worth today by discounting its expected future cash flows.
Distribution: A topping phase in which large holders sell into strength, often seen as a range with heavy volume on down days.
Divergence: When price and an indicator move in opposite directions, such as a new price high with a lower RSI high, hinting momentum is fading.
Diversification: Spreading money across many investments that do not move in lockstep, so no single loss can do too much damage.
Dividend: A payment a company makes to its shareholders out of profits, usually in cash and often quarterly in the US.
Dividend Payout Ratio: The share of a company's earnings paid out as dividends; a ratio above 100% means it pays more than it earns.
Dividend Yield: A stock's annual dividends per share divided by its share price, expressed as a percentage.
Dollar-Cost Averaging: Investing a fixed dollar amount at regular intervals regardless of price, so more shares are bought when prices are low.
Dot Plot: The Fed chart showing where each FOMC participant expects the federal funds rate to be at the end of coming years.
Double Bottom: A bullish reversal pattern of two troughs at about the same price, completed when price rises above the peak between them.
Double Top: A bearish reversal pattern of two peaks at about the same price, completed when price falls below the trough between them.
Dow Jones Industrial Average (DJIA): A price-weighted index of 30 large US companies, first published in 1896 and the oldest widely followed US stock average.
Downtrend: A series of lower highs and lower lows in price, showing that sellers have the upper hand.
Drawdown: The decline from a portfolio's or price's peak to its subsequent trough, usually stated as a percentage.
DRIP (Dividend Reinvestment Plan): A program that automatically uses cash dividends to buy more shares of the same stock or fund, often in fractions.
Due Diligence: The research and analysis done before an investment or deal to understand the business, its risks and its valuation.
Duration: A measure of a bond's price sensitivity to interest rates: a duration of 7 means about a 7% price drop for a one-point rise in yields.

E

Earnings: A company's profit for a period, the bottom line of the income statement; usually used interchangeably with net income.
Earnings Call: A conference call where management discusses quarterly results and answers analysts' questions, usually right after the report.
Earnings guidance: A company's own forecast of its future revenue, earnings or other metrics, often given with quarterly results.
Earnings Per Share (EPS): Net income available to common shareholders divided by the weighted average number of shares outstanding.
Earnings Season: The weeks after each quarter ends when most public companies report results, peaking roughly three to six weeks into the quarter.
Earnings Surprise: The difference between a company's reported earnings and the consensus estimate, positive for a beat and negative for a miss.
EBIT: Earnings before interest and taxes: profit from operations before financing costs and income tax.
EBITDA: Earnings before interest, taxes, depreciation and amortization; a rough, non-GAAP proxy for operating cash profit.
Efficient Market Hypothesis (EMH): The theory that prices quickly reflect available information, so consistently beating the market after costs is very hard.
Emerging markets: Economies in transition to developed status, such as India and Brazil, offering higher growth with higher political and currency risk.
Enterprise value (EV): Market capitalization plus debt minus cash; a fuller measure of what it would cost to buy a whole business.
Equity: Ownership in a company: shares of stock, or on the balance sheet the assets left after subtracting liabilities.
European-style option: An option that can be exercised only at expiration; most index options such as SPX are European style.
EV/EBITDA: Enterprise value divided by EBITDA, a valuation multiple that compares companies regardless of how they are financed.
Ex-dividend date: The first trading day on which a stock trades without its next dividend; buyers on or after this date do not receive it.
Exchange rate: The price of one currency in terms of another, set in the forex market or managed by a central bank.
Exchange-traded fund (ETF): A fund that holds a basket of assets and trades on an exchange like a stock throughout the day, usually tracking an index.
Exercise: Using the right an option grants: buying the underlying with a call or selling it with a put at the strike price.
Expected return: The probability-weighted average of possible outcomes for an investment; an estimate, not a promise.
Expense ratio: The annual fee a fund charges as a percentage of assets, deducted from the fund's returns; 0.03% costs $3 a year per $10,000.
Expiration date: The last day an option or futures contract is valid, after which it is exercised, settled or expires worthless.
Exponential moving average (EMA): A moving average that weights recent prices more heavily, so it reacts faster than a simple moving average of the same length.
Extended-hours trading: Trading outside the regular 9:30 a.m.–4:00 p.m. ET session, in the premarket and after-hours sessions.

F

Face value (par value): The amount a bond pays back at maturity, commonly $1,000, on which coupon payments are calculated.
Fair value: An estimate of what an asset is really worth based on its fundamentals, which may differ from its current market price.
Federal funds rate: The overnight rate at which US banks lend reserves to each other; the Federal Reserve sets a target range for it.
Federal Open Market Committee (FOMC): The Federal Reserve committee that votes on interest-rate policy at eight scheduled meetings a year.
Federal Reserve: The central bank of the United States, which sets monetary policy, supervises banks and aims for maximum employment and stable prices.
Fibonacci retracement: Horizontal levels at 23.6%, 38.2%, 50%, 61.8% and 78.6% of a prior move, which traders watch as possible support or resistance.
Fiduciary: A person or firm legally bound to act in a client's best interest, such as a registered investment adviser.
Fill: The execution of an order; a partial fill means only part of the requested quantity traded.
Fill or kill (FOK): An order that must be executed immediately and in full, or cancelled entirely; no partial fills are allowed.
FINRA: The Financial Industry Regulatory Authority, the self-regulatory organization that oversees US broker-dealers under the SEC.
Fiscal policy: Government decisions on taxes and spending used to influence the economy, as distinct from the central bank's monetary policy.
Fiscal year: The 12-month period a company uses for its accounts, which may not match the calendar year; Apple's ends in late September.
Float: The number of a company's shares available for public trading, excluding shares held by insiders and restricted holders.
Foreign exchange (forex): The global over-the-counter market for trading currencies, the largest financial market by daily volume.
Form 10-K: The annual report US public companies file with the SEC, with audited financial statements, risk factors and management discussion.
Form 10-Q: The quarterly report US public companies file with the SEC for each of the first three fiscal quarters, with unaudited statements.
Form 13F: The quarterly SEC report institutional managers with $100 million or more in US equities file to disclose their holdings.
Form 4: The SEC filing in which company insiders report their purchases and sales of the company's stock, generally within two business days.
Form 8-K: A filing US public companies must make with the SEC within four business days of a major event such as an acquisition or CEO change.
Forward P/E: Share price divided by analysts' expected earnings per share for the next 12 months or fiscal year.
Fractional shares: Portions of a single share, offered by many brokers so investors can buy by dollar amount rather than whole shares.
Free cash flow (FCF): Operating cash flow minus capital expenditures: the cash a business generates that is left for owners and lenders.
Fundamental analysis: Evaluating a security by studying the business, its financial statements, industry and economy to estimate its intrinsic value.
Futures contract: A standardized exchange-traded agreement to buy or sell an asset at a set price on a future date, marked to market daily.
Futures roll: Closing an expiring futures contract and opening one in a later month to keep a position, with the price gap as a cost or gain.

G

GAAP: Generally Accepted Accounting Principles, the accounting standards US public companies must use in their financial statements.
Gamma: The rate at which an option's delta changes for a $1 move in the underlying, highest for at-the-money options near expiry.
Gold: A precious metal traded as a commodity and held as a store of value and hedge, quoted in US dollars per troy ounce.
Golden cross: A chart signal where the 50-day moving average crosses above the 200-day moving average, read by some as a bullish shift.
Good 'til canceled (GTC): An order that stays open across sessions until it fills or the trader cancels it, subject to the broker's maximum duration.
Goodwill: An intangible asset recorded when a company buys another for more than the fair value of its net identifiable assets.
Gross domestic product (GDP): The total market value of goods and services produced in a country over a period; the broadest measure of economic output.
Gross margin: Gross profit divided by revenue: the share of each sales dollar left after paying the direct costs of what was sold.
Gross profit: Revenue minus cost of goods sold, before operating expenses, interest and tax.
Growth stock: A share in a company expected to grow revenue and earnings faster than average, usually priced at high valuation multiples.

H

Hawkish and dovish: Shorthand for central bank stances: hawks favor higher rates to fight inflation, doves favor lower rates to support jobs.
Head and shoulders: A reversal chart pattern of three peaks, the middle one highest, with a neckline whose break completes the pattern.
Hedge: A position taken to offset the risk of another, such as buying a put option to protect a stock holding against a fall.
Hedge fund: A privately offered pooled fund for accredited investors that can use leverage, short selling and derivatives, usually with performance fees.
Heikin-Ashi: A candlestick variant built from averaged prices, which smooths noise and makes trends easier to see at the cost of true prices.
High-frequency trading (HFT): Automated trading that uses very fast computers and data links to place and cancel large numbers of orders in fractions of a second.
High-yield bond: A bond rated below investment grade (below BBB- or Baa3), paying higher interest to compensate for greater default risk.
Holding period: How long an investment is owned; in the US, assets held more than one year qualify for long-term capital gains rates.

I

Implied volatility: The future volatility the market is pricing into an option, backed out from its premium with a pricing model.
In the money (ITM): A call with a strike below the underlying price, or a put with a strike above it; the option has intrinsic value.
Income statement: The financial statement that reports revenue, expenses and profit over a period, ending in net income and EPS.
Index fund: A mutual fund or ETF that aims to match the return of a market index by holding its constituents, usually at low cost.
Individual retirement account (IRA): A US tax-advantaged retirement account opened by an individual, in traditional (pre-tax) or Roth (after-tax) form.
Inflation: A sustained rise in the general price level, which reduces the purchasing power of money over time.
Initial margin: The share of a purchase price an investor must pay with their own money when buying on margin; 50% for US stocks under Regulation T.
Initial public offering (IPO): The first sale of a private company's shares to the public, after which they trade on a stock exchange.
Insider trading: Trading by corporate insiders; legal when reported to the SEC, illegal when based on material non-public information.
Institutional investor: An organization that invests large pools of money for others, such as pension funds, mutual funds, insurers and endowments.
Intangible asset: A non-physical asset such as a patent, brand, software or goodwill that has value but no physical form.
Interest coverage ratio: Operating profit (EBIT) divided by interest expense; how many times over a company can pay the interest on its debt.
Interest rate: The price of borrowing money, stated as a yearly percentage of the amount borrowed, and the return paid to savers and lenders.
Interest-rate risk: The risk that rising interest rates lower the price of existing bonds and other rate-sensitive investments.
Intrinsic value: The estimated true worth of a business from its fundamentals; for an option, the amount by which it is in the money.
Inventory: Goods a company holds for sale, plus raw materials and work in progress; a current asset on the balance sheet.
Inverse ETF: An ETF designed to return the opposite of an index's daily move, using derivatives; it decays when held over volatile periods.
Inverted yield curve: A yield curve on which short-term yields exceed long-term yields, which has preceded most US recessions since the 1960s.
Investment grade: A credit rating of BBB- (S&P/Fitch) or Baa3 (Moody's) or higher, indicating relatively low default risk.
Iron condor: A four-leg options strategy that sells an out-of-the-money put spread and call spread, profiting if price stays in a range.

J

JOLTS: The BLS Job Openings and Labor Turnover Survey, reporting monthly US job openings, hires, quits and layoffs.
Junk bond: The informal name for a high-yield bond: debt rated below investment grade that pays more for its higher risk of default.

L

Large-cap stock: A stock of a company with a large market value, commonly defined as $10 billion or more.
Level 2 quotes: A market-data view showing the bids and asks at several price levels beyond the best quote, with the size at each.
Leverage: Using borrowed money or derivatives to increase the size of a position, magnifying both gains and losses.
Leveraged ETF: An ETF that aims for a multiple, such as 2x or 3x, of an index's daily return; compounding makes long-run results diverge.
Liabilities: What a company owes to others, such as loans, bonds, payables and deferred revenue, shown on the balance sheet.
Limit order: An order to buy at or below, or sell at or above, a stated price; it controls price but may not fill.
Limit up-limit down (LULD): A US mechanism that pauses trading in a single stock when its price moves outside a percentage band around its recent average.
Liquidity: How quickly and cheaply an asset can be bought or sold without moving its price; deep markets have tight spreads.
Listing: Admission of a company's shares to trade on an exchange, which requires meeting and maintaining the exchange's standards.
Lockup period: A stretch after an IPO, often 90 to 180 days, during which insiders and early investors agree not to sell shares.
Long position: Owning a security in expectation that its price will rise; the opposite of a short position.
Long-term capital gain: A US capital gain on an asset held more than one year, taxed at 0%, 15% or 20% depending on taxable income.
Lot: A quantity of shares bought at one time and price; a round lot is 100 shares, and tax lots track each purchase's cost basis.

M

MACD: Moving average convergence divergence: the 12-period EMA minus the 26-period EMA, with a 9-period signal line.
Maintenance margin: The minimum equity that must be kept in a margin account, at least 25% under FINRA rules; falling below it triggers a margin call.
Margin account: A brokerage account that lets the holder borrow from the broker against securities to buy more or to sell short.
Margin call: A broker's demand to add cash or securities, or sell holdings, when a margin account's equity falls below the required level.
Market breadth: How many stocks are participating in a market move, measured with advancers versus decliners or the share above a moving average.
Market capitalization: A company's share price times its shares outstanding: what the market values the whole company's equity at.
Market index: A calculated value that tracks a group of securities, such as the S&P 500, used as a benchmark and as the basis for index funds.
Market maker: A firm that continuously quotes both a bid and an ask in a security, providing liquidity and earning the spread.
Market order: An order to buy or sell immediately at the best available price; it guarantees execution but not the price.
Market sentiment: The overall mood of investors toward a market or stock, from fear to greed, and the surveys, ratios and volatility gauges used to measure it.
Maturity: The date on which a bond's principal is due to be repaid and interest payments stop.
Mean reversion: The tendency of a price or ratio to move back toward its long-run average after an unusual move away from it.
Merger and acquisition (M&A): The combination of two companies, or one buying another, paid for in cash, shares or both.
Micro-cap stock: A stock of a very small company, commonly $50 million to $300 million in market value, often thinly traded and volatile.
Mid-cap stock: A stock of a company with a medium market value, commonly between about $2 billion and $10 billion.
Momentum: The tendency of assets that have risen or fallen strongly to keep moving in the same direction for a time.
Monetary policy: A central bank's management of interest rates and the money supply to control inflation and support employment.
Money market fund: A mutual fund that invests in short-term, high-quality debt and aims to keep a stable value, used as a cash alternative.
Moving average: The average price over the last N periods, recalculated each period, which smooths noise and shows the trend.
Municipal bond: A bond issued by a US state, city or other local government, whose interest is often exempt from federal income tax.
Mutual fund: A pooled investment that buys a portfolio of securities and is bought and sold at its net asset value once a day.

N

Naked option: Selling an option without owning the underlying or an offsetting position; a naked call has theoretically unlimited risk.
Nasdaq: A US electronic stock exchange, home to many technology companies, and the name of its main indexes such as the Nasdaq-100.
Nasdaq-100: An index of about 100 of the largest non-financial companies listed on the Nasdaq, weighted by modified market cap.
National best bid and offer (NBBO): The highest bid and lowest ask for a US stock across all exchanges, which brokers must generally execute at or better.
NBER Business Cycle Dating Committee: The group of economists at the National Bureau of Economic Research that officially dates US recession peaks and troughs.
Net asset value (NAV): A fund's assets minus its liabilities, divided by its shares outstanding: the per-share value of what the fund holds.
Net income: Revenue minus all expenses, interest and taxes for a period; the bottom line of the income statement.
Net profit margin: Net income divided by revenue: the share of each sales dollar that ends up as profit after all costs.
New York Stock Exchange (NYSE): The largest US stock exchange by listed company value, located at 11 Wall Street in New York and dating to 1792.
Non-GAAP earnings: Profit figures a company reports that exclude some items GAAP requires, such as stock compensation; useful but easy to flatter.
Nonfarm payrolls: The monthly BLS count of US jobs added or lost outside farming, a headline figure in the first-Friday jobs report.

O

Odd lot: An order or trade of fewer than 100 shares, smaller than a standard round lot.
Open interest: The number of option or futures contracts outstanding that have not yet been closed, exercised or expired.
Operating cash flow: Cash generated by a company's normal business operations, the first section of the cash flow statement.
Operating income: Gross profit minus operating expenses such as research, sales and administration; profit from the core business.
Operating margin: Operating income divided by revenue: what share of sales remains after the costs of running the business, before interest and tax.
Option: A contract that gives the holder the right, but not the obligation, to buy or sell an asset at a set price before a set date.
Option chain: A table listing all available option contracts for an underlying, by expiration and strike, with bids, asks, volume and open interest.
Option Greeks: Delta, gamma, theta, vega and rho: measures of how an option's price responds to changes in price, time, volatility and rates.
Option premium: The price paid by an option buyer to the seller, made up of intrinsic value plus time value.
Order book: The list of open buy and sell limit orders for a security at each price level, showing market depth.
Oscillator: An indicator that moves within a band or around a center line, such as RSI or stochastics, used to gauge momentum and extremes.
Out of the money (OTM): An option with no intrinsic value: a call whose strike is above the stock price, or a put whose strike is below it.
Over the counter (OTC): Trading in securities that are not listed on a national exchange, arranged through broker-dealer networks such as the OTC Markets tiers.
Overbought: A reading that price has risen far and fast relative to its recent history, flagged by oscillators such as RSI above 70.
Oversold: A reading that price has fallen far and fast relative to its recent history, flagged by oscillators such as RSI below 30.

P

Paper trading: Simulated trading with virtual money and real market prices, used to practice a strategy or learn a platform without risking capital.
Passive investing: Owning a whole market or index through low-cost funds and holding it, instead of picking stocks or timing trades to beat it.
Pattern day trader: The FINRA label for a margin customer making 4+ day trades in 5 business days, with a $25,000 minimum; replaced in 2026 with a phase-in to 2027.
Payment for order flow (PFOF): Compensation a broker receives from a market maker for routing customer orders to it, disclosed quarterly in SEC Rule 606 reports.
PCE price index: The Commerce Department’s measure of prices for personal consumption spending, and the inflation gauge behind the Fed’s 2% target.
PEG ratio: The P/E ratio divided by the expected annual earnings growth rate, used to compare valuations across companies growing at different speeds.
Penny stock: A low-priced, usually small and thinly traded share; the SEC generally treats stocks under $5 as penny stocks, with exceptions.
Pip: The standard smallest quoted move in a currency pair: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen.
Portfolio: The full collection of investments a person or fund holds, such as stocks, bonds, funds and cash, managed as a single whole.
Position size: How many shares or contracts a trade uses, usually set so that a loss at the stop costs only a fixed slice of the account.
Preferred stock: A class of shares that pays a set dividend ahead of common stock and ranks above it in liquidation, usually without voting rights.
Premarket trading: Trading in US stocks before the 9:30 a.m. ET open, from as early as 4:00 a.m. on some venues, with thinner volume and wider spreads.
Present value: What a future sum of money is worth today, found by discounting it at a rate that reflects time and risk.
Price action: The movement of a security’s price over time, and the style of analysis that reads it directly from bars and levels rather than indicators.
Price gap: A space on a chart where a bar opens above the prior high or below the prior low, leaving a range where no trading occurred.
Price target: An analyst’s estimate of where a stock will trade, typically 12 months out, derived from a valuation model and earnings forecasts.
Price-to-book ratio (P/B): Market price divided by book value per share, comparing what investors pay with the accounting net worth of a company.
Price-to-earnings ratio (P/E): Share price divided by earnings per share: how many dollars investors pay for each dollar of a company’s annual profit.
Price-to-sales ratio (P/S): Market capitalization divided by annual revenue: what investors pay per dollar of sales, often used for companies without profits.
Primary market: Where new securities are created and sold for the first time, with the cash going to the issuer, as in an IPO or a new bond sale.
Principal: The original sum invested or borrowed, as distinct from interest or returns; for a bond, the face amount repaid at maturity.
Producer Price Index (PPI): The BLS monthly measure of selling prices received by US producers, watched as an early signal of inflation pressure in the supply chain.
Prospectus: The disclosure document for a securities offering or fund, describing the business, risks, terms and fees, filed with the SEC.
Protective put: Buying a put option on a stock you own so that losses below the strike price are capped, in exchange for the premium paid.
Proxy statement: The SEC filing (Schedule 14A, DEF 14A) a company sends before a shareholder vote, covering board nominees, executive pay and proposals.
Pullback: A short, shallow decline against a prevailing uptrend, which traders often treat as a pause rather than the end of the trend.
Purchasing managers' index (PMI): A monthly survey-based gauge of business conditions in which a reading above 50 means activity is expanding and below 50 means it is contracting.
Put option: A contract giving the buyer the right, but not the obligation, to sell 100 shares of a stock at a set strike price before expiration.
Put-call ratio: The volume (or open interest) of put options divided by that of calls, read as a gauge of how bearish or hedged options traders are.

Q

Quantitative easing (QE): A central bank buying large amounts of bonds with newly created reserves to push down longer-term interest rates and ease credit.
Quantitative tightening (QT): A central bank shrinking its bond holdings, usually by letting them mature without reinvesting, to reverse quantitative easing.
Quick ratio: Cash, marketable securities and receivables divided by current liabilities: a strict test of short-term liquidity that leaves out inventory.

R

Rally: A sustained rise in the price of a stock, index or other asset, from a short bounce lasting days to an advance lasting months.
Real estate investment trust (REIT): A company that owns or finances income-producing real estate and must pay out at least 90% of its taxable income as dividends.
Real GDP growth: The inflation-adjusted percentage change in GDP, reported quarterly in the US at a seasonally adjusted annual rate.
Real return: An investment’s return after subtracting inflation, showing the change in actual purchasing power rather than in dollars.
Rebalancing: Trading a portfolio back to its target mix after market moves have pushed the weights of stocks, bonds or other assets off target.
Recession: A significant, widespread decline in economic activity lasting more than a few months; in the US the dates are set by the NBER.
Record date: The date a company checks its shareholder list to decide who receives a dividend or can vote; with T+1 it usually equals the ex-date.
Regulation T: The Federal Reserve rule (12 CFR 220) on broker credit: up to 50% of a margin purchase can be borrowed, plus cash-account payment rules.
Relative strength: How a stock has performed compared with a benchmark or its peers, often charted as a ratio line; not the same thing as the RSI.
Relative Strength Index (RSI): A 0–100 momentum oscillator that compares the size of recent gains with recent losses, with 70 and 30 as common extreme levels.
Resistance: A price level where rallies have repeatedly stalled because selling pressure has tended to overwhelm buying there.
Retained earnings: The running total of a company’s profits kept in the business rather than paid out as dividends, shown in shareholders’ equity.
Return on assets (ROA): Net income divided by total assets: how much profit a company generates from everything it owns, regardless of how it is financed.
Return on equity (ROE): Net income divided by shareholders’ equity: the profit a company earns on the money its owners have invested and left in the business.
Return on invested capital (ROIC): After-tax operating profit divided by the debt and equity invested in operations: a measure of returns that is neutral to financing.
Revenue: The money a company earns from selling its goods and services in a period, before any costs are subtracted; the income statement’s top line.
Reverse stock split: A corporate action that combines shares into fewer, higher-priced ones, such as 1-for-10, often to meet an exchange minimum price.
Rho: The option Greek measuring how much an option’s price changes for a one-percentage-point move in interest rates.
Rights offering: A sale of new shares offered first to existing shareholders, who receive rights to buy at a discount in proportion to their holdings.
Risk premium: The extra return investors demand for holding a risky asset instead of a risk-free one, such as the equity risk premium over Treasuries.
Risk tolerance: How much decline in value an investor can stand, financially and emotionally, without abandoning their plan; a key input to asset mix.
Risk-free rate: The return on an investment with essentially no default risk, usually proxied by short-term US Treasury yields, used as a baseline.
Risk-reward ratio: The distance from entry to stop compared with the distance from entry to target, used to judge whether a trade is worth taking.
Roth IRA: A US retirement account funded with after-tax money whose qualified withdrawals, including growth, are tax-free; $7,500 limit in 2026.
Round lot: The standard trading unit for a security, traditionally 100 shares for US stocks; orders smaller than a round lot are odd lots.
Russell 2000: FTSE Russell’s benchmark of about 2,000 US small-cap stocks, the smallest members of the Russell 3000; reconstituted twice a year from 2026.

S

S&P 500: S&P Dow Jones Indices’ float-weighted index of 500 leading US companies, the most widely used benchmark for US large-cap stocks.
Secondary market: Where investors buy and sell existing securities among themselves, such as on stock exchanges, with no money going to the issuer.
Secondary offering: A sale of shares after a company’s IPO, either newly issued stock that dilutes holders or existing stock sold by large shareholders.
Sector: A broad group of companies in related lines of business, such as energy or health care; the GICS system defines 11 sectors.
Sector rotation: Money shifting from one market sector to another as the economy or interest rates change, and strategies that try to follow those shifts.
Securities and Exchange Commission (SEC): The US federal agency that regulates securities markets, enforces disclosure and anti-fraud laws, and oversees exchanges, brokers and funds.
Sell side: The banks and brokers that create, underwrite, trade and research securities for clients, and the analysts whose ratings and price targets they publish.
Settlement: The final step of a trade, when the buyer’s cash and the seller’s securities actually change hands; most US stock trades settle one business day later (T+1).
Share buyback: A company repurchasing its own shares from the market, reducing the share count and returning cash to shareholders.
Shareholders' equity: What a company would have left for its owners after paying every liability: total assets minus total liabilities, as shown on the balance sheet.
Shares outstanding: The total number of a company’s shares held by all shareholders, including insiders, used to compute market cap and per-share figures.
Sharpe ratio: A measure of risk-adjusted return: how much excess return over the risk-free rate a portfolio earned for each unit of volatility it carried.
Short interest: The number of a company’s shares that have been sold short and not yet bought back, reported twice a month and read alongside float and days to cover.
Short selling: Selling borrowed shares in the hope of buying them back later at a lower price, with the profit, the borrow costs and the theoretically unlimited risk explained.
Short squeeze: A rapid price rise driven by short sellers rushing to buy back borrowed shares, which feeds the very rally that is forcing them out.
Short-term capital gain: A profit on an investment held one year or less, taxed in the US at ordinary income rates rather than the lower long-term capital gains rates.
Simple moving average (SMA): The plain average of the last N closing prices, recalculated each bar; the most common way to smooth a price series and read its trend.
Slippage: The difference between the price you expected when you placed an order and the price you actually got, caused by spreads, thin liquidity and fast markets.
Small-cap stock: A company with a relatively small stock-market value, often roughly $300 million to $2 billion, though index providers draw the lines differently.
Special purpose acquisition company (SPAC): A shell company that raises money in an IPO with no business of its own, holds the cash in trust and then merges with a private company to take it public.
Spinoff: When a company separates a division into a new independent public company and hands the new shares to its own shareholders.
Spot price: The price for buying or selling a commodity, currency or other asset for immediate delivery, as opposed to a futures price for a later date.
Stablecoin: A cryptocurrency designed to hold a steady value, usually one US dollar, backed by cash and Treasury reserves or, in riskier designs, by algorithms.
Stagflation: An economy suffering high inflation, weak or negative growth and rising unemployment at the same time, as the US did in the 1970s.
Standard deviation: A statistic that measures how widely values spread around their average; in finance, the standard yardstick for an asset’s volatility.
Stochastic oscillator: A momentum indicator that shows where the latest close sits within the high-low range of a recent window, scaled from 0 to 100.
Stock: A share of ownership in a company, giving the holder a claim on part of its assets and profits and, usually, a vote on how it is run.
Stock dividend: A dividend paid in additional shares instead of cash, raising each holder’s share count while the value of the stake stays the same.
Stock exchange: A regulated marketplace where buyers and sellers trade listed securities, such as the NYSE and Nasdaq.
Stock split: A change that multiplies a company’s share count and divides its share price by the same factor, leaving the total value of every holding unchanged.
Stop-limit order: An order that becomes a limit order once a trigger price trades, giving control over the fill price at the risk of not filling at all.
Stop-loss order: A standing order to sell (or buy back a short) once the price reaches a set level, used to cap the loss on a position without watching the screen.
Straddle: An options position that buys (or sells) a call and a put with the same strike and expiration, a bet on how much a stock moves rather than which way.
Strike price: The fixed price at which an option holder can buy (call) or sell (put) the underlying asset, set when the contract is created.
Support: A price level where a falling stock has repeatedly stopped and turned up, because buying has tended to outweigh selling there.
Swing trading: A trading style that holds positions for a few days to a few weeks to capture one price swing, sitting between day trading and longer-term investing.

T

Take-profit order: A limit order placed at a target price to close a winning position automatically, often paired with a stop-loss in a bracket order.
Target-date fund: A fund built around a retirement year that starts stock-heavy and shifts gradually toward bonds and cash along a preset glide path.
Tax-loss harvesting: Selling investments at a loss to offset taxable gains and up to $3,000 of ordinary income, while staying invested and avoiding the wash-sale rule.
Technical analysis: The study of price, volume and the patterns they form on charts to judge trends and timing, as opposed to analyzing a company’s financials.
Tender offer: A public offer to buy shares directly from a company’s shareholders at a set price, usually a premium, within a limited window.
Theta: The option Greek that estimates how much an option’s price falls with each day that passes, all else equal; the measure of time decay.
Tick size: The smallest price increment in which a security can be quoted or traded; for most US stocks, one cent per share as of 2026.
Ticker symbol: The short code of letters that identifies a stock, ETF or other listed security on an exchange and in every quote and order.
Time value: The part of an option’s premium above its intrinsic value: what buyers pay for the chance the option gains value before it expires.
Timeframe: The period each bar or candle on a chart represents, from one minute to one month, and by extension the horizon a trade is meant to play out over.
Total return: An investment’s full gain or loss over a period, counting price change plus dividends or interest received, usually assuming they are reinvested.
Trading halt: A temporary stop in trading of a single stock or the whole market, ordered for pending news, extreme price moves or regulatory concerns.
Trading volume: The number of shares or contracts that change hands in a given period, the basic measure of how actively and how liquidly a security trades.
Trailing stop: A stop order whose trigger price follows a rising stock by a set dollar amount or percentage, locking in gains while staying in the trend.
Treasury bill: Short-term US government debt maturing in one year or less, sold at a discount to face value and repaid in full at maturity.
Treasury bond: Long-term US government debt issued with a 20- or 30-year maturity, paying a fixed coupon every six months and highly sensitive to interest rates.
Treasury Inflation-Protected Securities (TIPS): US Treasury bonds whose principal rises and falls with the Consumer Price Index, so their interest and final payment keep pace with inflation.
Treasury note: US government debt with a maturity of two to ten years that pays a fixed coupon every six months; the 10-year note is a global benchmark rate.
Treasury yield: The annual return investors earn for lending to the US government at a given maturity, the benchmark that most other interest rates are priced from.
Trend: The general direction a price is moving over time, up, down or sideways, defined by its sequence of highs and lows.
Trend reversal: A change in the direction of a price trend, from up to down or down to up, as opposed to a temporary pullback within the trend.
Trendline: A straight line drawn on a chart through a series of rising lows or falling highs to show a trend’s path and the level where it would break.

U

Underlying asset: The stock, index, commodity, currency or other asset whose price determines the value of a derivative such as an option or futures contract.
Underwriter: The investment bank that manages a securities offering, sets its price with the issuer and buys or sells the new shares or bonds to investors.
Unemployment rate: The share of the labor force that is jobless, available and actively looking for work, published monthly for the US by the Bureau of Labor Statistics.
Uptrend: A market or stock whose price makes a series of higher highs and higher lows, the chart signature of sustained buying pressure.

V

Valuation: The process of estimating what a company or security is worth, using cash-flow models, comparisons with similar companies or the value of its assets.
Value stock: A stock that trades cheaply relative to its earnings, book value or cash flow, often in a mature or out-of-favor business.
Vega: The option Greek that estimates how much an option’s price changes for each one-point change in implied volatility.
VIX: Cboe's volatility index, computed from S&P 500 option prices, measuring the market's expected 30-day volatility; often called the fear gauge.
Volatility: How much and how quickly a price moves up and down, usually measured as the annualized standard deviation of returns, historical or implied.
Volume-weighted average price (VWAP): The average price a security traded at over a period, weighted by the volume at each price; the standard intraday benchmark for execution quality.

W

Warrant: A security issued by a company that gives the holder the right to buy its shares at a fixed price before a set date, creating new shares if exercised.
Wash sale: A sale at a loss followed or preceded within 30 days by a purchase of substantially identical securities; US tax law defers the loss.
Watchlist: A saved list of stocks, ETFs, indexes or crypto you want to follow, shown with live prices so you can track them without owning them.
Working capital: Current assets minus current liabilities: the short-term cushion a company has to pay its bills over the next year from assets it can turn into cash.

Y

Yield: The income an investment pays, such as interest or dividends, expressed as a percentage of its price or cost, usually per year.
Yield curve: A line plotting Treasury yields across maturities, from months to 30 years, whose slope reflects rate expectations and is read as an economic signal.
Yield to maturity (YTM): The annual return a bond delivers if bought at today’s price and held to maturity, counting every coupon plus the gain or loss to face value.

Z

Zero-coupon bond: A bond that pays no periodic interest, sold at a deep discount and repaid at full face value at maturity, so the discount is the return.

Educational content, not investment advice. Finabase Learn explains how markets and tools work. It does not recommend any security or strategy, and examples are for illustration only. Investing involves risk, including the loss of principal. Rules and figures are for the United States unless stated and can change — check the cited source before you act.