Most Important Glossary of Stock Market Terms
T+1 : T+1 (T+2, T+3) abbreviations refer to the settlement date of security transactions. The T stands for transaction date, which is the day the transaction takes place. The numbers 1, 2 or 3 denote how many days after the transaction date the settlement or the transfer of money and security ownership takes place.
T+1 means that if a transaction occurs on a Monday, settlement must occur by Tuesday. Likewise, T+3 means that a transaction occurring on a Monday must be settled by Thursday, assuming no holidays occur between these days. But if you sell a security with a T+3 settlement date on a Friday, ownership and money transfer does not have to take place until the following Wednesday.
Technical Analysis : A method of evaluating securities by relying on market data, such as price charts and volume to predict future market trends. It is believed that investor psychology has a significant influence on the market, creating patterns that can be used to estimate whether the price of a security will rise or fall. In contrast to fundamental analysis, understanding of a company’s intrinsic value is not necessary for technical analysis
Ticker : A stock ticker is a report of the price for certain securities, updated continuously throughout the trading session by the various stock exchanges. A “tick” is any change in price, whether that movement is up or down. (Interesting Trivia: The first stock ticker was invented by Edward A. Calahan in the year 1867)
Trade Confirmation : A verification of a transaction, with information concerning the transaction, sent to the client on or before the first business day following the trade date.
Transferable Security: A security that can be transferred from one party holder to another, without restrictions, provided that all proper documentation is included (security in lock in period are not freely transferable before the lock in period gets over)
Uncovered Call : An uncovered call is a short call option position in which the writer (seller) of the call sells the call without owning shares of underlying security of the option contract. It is also called a naked call. Simply , in an uncovered call option, the seller sells the call option on a stock that he/she doesn’t own.
Uncovered Put : An uncovered put is a short put option position in which the writer (seller) of the put does not have a short position of the underlying security of the option contract. It is also called a naked put. If the buyer of the put uses the option, one would be forced to buy the underlying stock at the exercise price.
Uptick : A stock is said to be on an uptick when the last trade occurred at a higher price than the one before it.
Venture Capital : Venture capital is financing that investors provide to startup companies and small businesses that are believed to have long term growth potential. Venture capital generally comes from well-off investors, investment banks and any other financial institutions.
Volatility : A relative measure of a security’s price movement during a specific time period, calculated mathematically using standard deviation of daily price changes. This refers to the price movements of a stock or the stock market as a whole. Highly volatile stocks are ones with extreme daily up and down movements and wide intraday trading ranges.
Volume : The total number of shares of a stock traded during a specific time period, normally measured in average daily trading volume. High volumes usually correspond to news announcements regarding the company.
VWAP : This is the volume weighted average price. VWAP identifies the true average price of a stock by factoring the volume of transactions at a specific price point and is not based on the closing price. VWAP reacts to price movements based on the volume during a given period. It is the ratio of the value traded to total volume traded over a particular time horizon. It is a measure of the average price a stock traded at over the trading horizon.
Writer : The seller of an option contract. The writer has an obligation associated with the contract to either purchase or sell a specified number of shares at the strike price on or before expiry.
Yield (Bond) : The interests earned on a bond investment. If the security was bought on the primary market, the yield will be equal to the interest rate. If the bond was acquired on the secondary market, the yield could be higher or lower depending whether the bond was bought at a premium or discount to face value.
Yield (Stock) : The annual rate of return on a stock as paid in dividends, calculated by dividing the latest dividend rate by the latest closing price, expressed as a percentage. This usually refers to the measure of the return on an investment that is received from the payment of a dividend. This is determined by dividing the annual dividend amount by the price paid for the stock. If one bought a share for Rs. 100/share and it pays a Rs.10/year dividend, the stock would have a “yield” (Dividend yield to be specific) of 10%.