This directory is an index of finance and trading terminology for Elephants operating in global markets. Each linked entry contains a short summary and a more expansive definition of the word. The individual term pages also include a practical example of how the concept works in everyday investing. The links are organized alphabetically so readers can locate specific financial vocabulary.
- A behavioral finance term describing the cognitive bias where investors rely too heavily on the first piece of information encountered (the “anchor”) when making decisions.
- A bond with no maturity date, paying interest indefinitely.
- A company created specifically to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.
- A customized contract between two parties to buy or sell an asset at a specified future date at a price agreed upon today.
- A financial instrument whose value is based on the performance of an underlying asset, such as options or futures.
- A financial ratio that measures the profitability and efficiency of a company’s capital investments.
- A form of market manipulation where a trader buys and sells the same security to create misleading activity, typically to inflate volume.
- A form of market manipulation where multiple orders are placed to create the appearance of demand or supply, only to be canceled before execution.
- A globally recognized professional designation awarded by the CFA Institute to financial analysts who complete a series of exams and meet other requirements.
- A graph that shows the potential profit or loss of an options strategy at different prices of the underlying asset at expiration.
- A hedge fund that uses quantitative strategies, often involving mathematical models and algorithms, to identify trading opportunities.
- A hybrid of debt and equity financing that gives the lender the right to convert to an equity interest in the company if the loan is not paid back in time and in full.
- A large order divided into smaller orders to avoid moving the market price, revealing only a small portion of the order at a time.
- A market in which there is not much trading activity, making it difficult to buy or sell securities without affecting the price.
- A mathematical model used to estimate the potential outcomes of an uncertain event by running multiple simulations.
- A method of settling futures and options contracts in cash rather than delivering the underlying asset.
- A monetary policy tool where central banks reduce the amount of liquidity in the financial system, often by selling bonds or letting them mature.
- A percentage reduction applied to the value of an asset when calculating the amount of collateral required for a loan or margin account.
- A practice where traders offer to buy a stock at a price slightly higher than the highest current bid to jump ahead in the queue of buy orders.
- A quarterly report filed by institutional investment managers with at least $100 million in assets, disclosing their equity holdings.
- A situation in which a security or market deviates from the general predictions of financial models, creating opportunities for excess returns.
- A situation in which increased government borrowing leads to reduced capital investment by the private sector.
- A situation where monetary policy becomes ineffective because interest rates are already low, and people hoard cash instead of investing.
- A situation where the bid price of a security is higher than the ask price, typically caused by delays in updating quotes.
- A situation where the price of a security jumps significantly between two trading sessions, often due to news or events outside of trading hours.
- A statistical measure of how two securities move in relation to each other, often used in portfolio diversification.
- A stock that experiences significant price movement based on viral trends and retail investor interest, rather than traditional financial factors.
- A strategy involving the purchase of a bull call spread and a bear put spread with the same strike prices, used to profit from pricing inefficiencies.
- A strategy that seeks to exploit mispricings in assets based on their beta or systematic risk.
- A strategy used by options traders to manage risk by dynamically adjusting their hedge as the delta of their options changes.
- A system that matches large buy and sell orders at predetermined prices without exposing the orders to the public market.
- A technical analysis tool that uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the price continues in its original direction.
- A threshold set by an exchange to halt trading in order to prevent panic selling during steep market declines.
- A trade or order for less than the standard trading unit (usually 100 shares), which may carry different costs or execution risks.
- A trading order that must be executed immediately in its entirety or canceled (killed).
- A type of algorithmic trading characterized by rapid execution of orders, often in fractions of a second, to capitalize on small price differences.
- A type of financial chart used to represent price movements over time, commonly used in technical analysis.
- A type of investment account that allows a broker to make trades without consulting the account holder for each transaction.
- A type of moving average that places more weight on recent prices, often used in technical analysis to smooth price data.
- Actual Volatility
- Alpha
- Alpha Generation
- An agreement where a brokerage firm provides research or other services to a fund manager in exchange for executing trades.
- An economic condition characterized by high inflation, high unemployment, and stagnant demand.
- An exchange-traded fund that mimics the behavior of a traditional ETF but uses derivatives like swaps to track the index rather than holding the actual securities.
- An exotic option that only comes into existence once the underlying asset hits a specific price level.
- An intermediary between buyers and sellers in financial markets, ensuring the successful transfer of assets and payments.
- An investment strategy that involves shifting investments between different sectors of the economy in response to the economic cycle or market conditions.
- An option that is canceled if the underlying asset reaches a certain price level, effectively eliminating the position.
- An order that becomes a market order once a specific price is reached.
- An order that must be completely filled or not filled at all; partial execution is not allowed.
- An order to buy or sell a security once the price reaches a specified level, used to limit losses or lock in profits.
- An unpredictable or unforeseen event that has significant and far-reaching consequences, often in the financial markets.
- Arbitrage
- Bear Market
- Bear Trap
- Beta
- Beta Coefficient
- Bid-Ask Spread
- Block Trade
- Blue Chip Stock
- Book Value
- Book-to-Market Ratio
- Brokerage Fee
- Bull Market
- Bull Trap
- Buy-and-Hold
- Buyback (Share Repurchase)
- Capital Allocation – The process by which management decides how to distribute the company’s financial resources to maximize shareholder wealth.
- Capital Efficiency
- Capital Gains
- Capitalization-Weighted Index
- Cash Flow
- Circuit Breaker
- Circuit Breaker Halt
- Compound Interest
- Contrarian Indicator
- Contrarian Investing
- Convexity
- Cost Basis
- Covered Call
- Cross
- Dark Pool
- Day Trading
- Death Cross
- Debt that is not backed by collateral and is therefore riskier than secured debt.
- Delta
- Delta Neutral
- Dilution
- Dividend
- Dividend Reinvestment Plan (DRIP)
- Dividend Yield
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)
- EPS (Earnings Per Share)
- ETF (Exchange-Traded Fund)
- Ex-Dividend Date
- Flash Crash
- Float
- Float-Adjusted Market Cap
- Form 10-K
- Form 10-Q
- Form 8-K
- Form S-1
- Forward Guidance
- Fundamental Analysis
- Futures
- Gamma
- Golden Cross
- Growth Investing
- Hedge Fund
- High-risk, high-yield bonds that are rated below investment grade.
- Hot Issue
- Implied Volatility
- Index
- Index Fund
- Inflation
- Initial Margin
- Insider Trading
- Interest that has accumulated on a bond or other fixed-income security since the last interest payment was made.
- IPO (Initial Public Offering)
- Leverage
- Limit Order
- Liquidity
- Liquidity Provider
- Liquidity Ratio
- Load Fund
- Lock-Up Period
- Maintenance Margin
- Margin
- Market Capitalization (Market Cap)
- Market Depth
- Market Order
- Market Sentiment
- Momentum
- Momentum Indicator
- Moving Average (MA)
- Mutual Fund
- NAV (Net Asset Value)
- No-Load Fund
- Options
- Over-The-Counter (OTC)
- Overbought
- Oversold
- Overweight
- P/E Ratio (Price-to-Earnings Ratio)
- Pairs Trading
- Pattern Day Trader
- Payout Ratio
- PEG Ratio (Price/Earnings-to-Growth Ratio)
- Penny Stocks
- Pink Sheets
- Point and Figure Chart
- Price Action
- Prime Brokerage
- Prospectus
- Quantitative Easing (QE)
- Quants (Quantitative Analysts)
- Rebalancing
- Refers to stocks that are difficult to borrow for short-selling because they are in high demand and short supply.
- Refers to the trading volume created by institutional orders that are not openly available to the public, helping large investors execute trades without affecting the market price.
- Resistance Level
- Return on Investment (ROI)
- Reverse Stock Split
- Risk-Free Rate
- ROA (Return on Assets)
- ROE (Return on Equity)
- RSI (Relative Strength Index)
- SEC (Securities and Exchange Commission)
- Sector
- Sector Fund
- Sector Rotation
- Securities Lending
- Sell-Off
- selling losing stocks and buying high-flying ones.
- Sentiment Indicator
- Sharpe Ratio
- Short Selling
- Smart Money
- Spin-Off
- Stock Option
- Stock Split
- Stockholder Equity
- Stop Loss
- Stop-Limit Order
- Support Level
- Swing Trading
- Synthetic Position
- Tapering
- Tax-Loss Harvesting
- Taxes
- Technical Analysis
- The additional return expected by investors for holding a less liquid asset.
- The difference between the price buyers are willing to pay for a security (bid) and the price sellers are willing to accept (ask).
- The effect that a large trade can have on the market price of a security.
- The entity (usually a corporation or government) that develops, registers, and sells securities to finance its operations.
- The first currency listed in a currency pair in forex trading, used to compare against the quote currency.
- The first time a company offers its shares to the public through a stock exchange.
- The main underwriter or lead manager in the issuance of new equity or debt securities.
- The most recently issued U.S. Treasury securities of a particular maturity, often more liquid and in demand than older securities.
- The number of shares a seller is willing to sell at the ask price.
- The peak-to-trough decline during a specific recorded period of an investment or fund, often used to measure downside risk.
- The practice by financial institutions of using client assets posted as collateral to secure their own borrowings.
- The practice of closing an existing position in a contract and simultaneously opening a new one with a later expiration date.
- The practice of short-selling a security without first borrowing the shares or ensuring that they can be borrowed.
- The process of testing a trading strategy using historical data to see how it would have performed.
- The process where fund managers use ideas or recommendations from external sources to generate alpha, i.e., excess returns over the market.
- The ratio of a position in a hedging instrument to the size of the position being hedged, used to minimize risk.
- The ratio of dividends paid to net income, indicating the proportion of earnings distributed to shareholders.
- The reduction in existing shareholders’ ownership percentage due to the issuance of additional shares by the company.
- The return of an investment over and above the return of a benchmark or risk-free rate.
- The risk that a trade will not be executed at the desired price due to market conditions, such as low liquidity or high volatility.
- The risk that an investment will lose value due to changes in the broader economic environment, such as inflation, interest rates, or GDP growth.
- The risk that the price of the underlying asset
- The sale of new or closely held shares of a company after an initial public offering, usually by investors or company insiders.
- The total change in the value of an investment over a set period, expressed as a percentage.
- The use of computer algorithms to automate trading decisions based on predetermined criteria such as timing, price, or quantity.
- The use of financial instruments to offset the systematic risk of an investment, making the portfolio less sensitive to market movements.
- Theta
- Trailing Stop
- Trailing Stop Limit
- Treasury securities that are not the most recently issued, typically less liquid than on-the-run Treasuries.
- Treasury Stock
- Triple Witching
- Underweight
- Value Investing
- Various measures of the risk involved in an options position, including delta, gamma, theta, vega, and rho.
- Vega
- VIX (Volatility Index)
- Volatility
- Volume
- Volume Weighted Average Price (VWAP)
- Wash Sale
- Weekend Gap Risk
- Window Dressing
- Yield