Market Glossary

An investment approach where a manager or trader actively selects securities, attempts to time the market, and aims to outperform a benchmark. Typically involves higher costs and more risk than passive investing.

Trading that takes place after the regular market closes (typically 4:00–8:00 pm ET). Commonly driven by earnings announcements; liquidity is lower and moves can be exaggerated.

The excess return of a portfolio or strategy above its benchmark, after adjusting for market risk (beta). Positive alpha means the manager outperformed the market on a risk-adjusted basis.

A professional opinion from a research analyst about whether to buy, hold, or sell a stock. Ratings are usually accompanied by a price target — the analyst's 12-month price forecast.

Over-relying on the first piece of information encountered (the 'anchor') when making decisions. Traders anchor to purchase price or a 52-week high, making it hard to objectively assess current value.

The lowest price that a seller in the market is currently willing to accept for a security. When you buy at market price, your order fills at or near the ask.

The strategic division of a portfolio among different asset classes (e.g., stocks, bonds, cash, real estate) based on an investor's goals, time horizon, and risk tolerance.

An option whose strike price is equal (or very close) to the current market price of the underlying security. ATM options have the most time value and the greatest sensitivity to price moves.

A volatility indicator measuring how much a security moves on average in a given period. ATR helps traders set position sizes and stop-loss distances proportionate to current volatility.

A financial statement that summarises a company's assets, liabilities, and shareholders' equity at a specific point in time. Assets always equal liabilities plus equity.

A sustained period of falling stock prices, typically defined as a 20% or more decline from recent highs. Often accompanied by economic contraction and pessimistic investor sentiment.

A standard index or reference point used to measure the performance of a portfolio. Common benchmarks include the S&P 500 for US equities and the Bloomberg Aggregate for bonds.

A measure of a stock's volatility relative to the overall market. A beta of 1 moves in line with the market; above 1 is more volatile; below 1 is less volatile; negative beta moves inversely.

The highest price that a buyer in the market is currently willing to pay for a security. When you sell at market price, your order fills at or near the bid.

The difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller will accept (ask). Tighter spreads indicate higher liquidity and lower transaction costs.

Shares in a large, well-established, financially stable company with a long track record of reliable performance. Blue-chip stocks tend to be less volatile and are often included in major indices.

A volatility indicator consisting of a 20-period SMA with two bands set two standard deviations above and below it. Price touching the outer bands signals potential overbought/oversold conditions.

A fixed-income debt instrument issued by governments or corporations to raise capital. Bondholders receive regular interest (coupon) payments and the principal back at maturity.

The return an investor receives on a bond, calculated as annual coupon payments divided by the bond's current market price. Yields move inversely to bond prices.

The net asset value of a company as reported on its balance sheet: total assets minus total liabilities. Represents the theoretical liquidation value per share.

When price moves decisively above a resistance level or below a support level, often on increased volume. Breakouts signal the potential start of a new directional move.

A sustained period of rising stock prices, typically defined as a 20% or more increase from recent lows. Bull markets are associated with strong economic growth and investor optimism.

A contract giving the buyer the right, but not the obligation, to purchase 100 shares of the underlying stock at a specified strike price before the expiry date.

A chart element that displays a security's open, high, low, and close prices for a given period. The 'body' shows the open-to-close range; 'wicks' extend to the high and low.

A financial statement showing how cash moves in and out of a company from operating, investing, and financing activities. Free cash flow (FCF) is a key metric for valuation.

An event or announcement expected to significantly move a stock's price, such as an earnings beat, product launch, regulatory approval, or merger announcement.

A regulatory mechanism that halts trading temporarily when a market index drops by a preset percentage (e.g., 7%, 13%, or 20% for the S&P 500) to prevent panic-driven crashes.

Earning interest (or returns) on both the original principal and the accumulated interest from prior periods. Compounding accelerates wealth building exponentially over long time horizons.

The risk of loss stemming from a large exposure to a single stock, sector, or asset class. A highly concentrated portfolio can deliver outsized gains but equally outsized losses if that bet goes wrong.

The tendency to seek out and favour information that confirms your existing beliefs while ignoring contradictory evidence. In investing, it leads to holding bad positions while ignoring warning signs.

A statistical measure of how two assets move relative to each other, ranging from -1 (perfectly opposite) to +1 (perfectly identical). Low-correlation assets provide the best diversification benefits.

The annual interest rate paid by a bond's issuer to its holder, expressed as a percentage of the bond's face value. A $1,000 bond with a 5% coupon pays $50 per year.

Selling a call option on shares you already own, generating premium income in exchange for capping your upside at the strike price. A conservative options strategy popular with long-term investors.

A measure of the average change in prices paid by consumers for a basket of goods and services. The most widely quoted inflation gauge; used by the Fed in policy decisions.

A bullish continuation pattern resembling a tea cup — a rounded base (cup) followed by a short consolidation (handle). A breakout above the handle's resistance is the entry signal.

Stocks in sectors like consumer discretionary, industrials, and technology that tend to rise in economic expansions and fall in contractions, moving closely with the economic cycle.

A private exchange where large institutional investors trade blocks of securities away from public exchanges, minimising market impact. Trades are not reported until after execution.

An order that is automatically cancelled if not filled by the end of the current trading session. The default order duration for most retail brokerages.

A bearish signal that occurs when a shorter-term moving average (e.g., 50-day) crosses below a longer-term moving average (e.g., 200-day), suggesting downward momentum.

Total liabilities divided by shareholders' equity, measuring how much a company is financing itself through debt vs. investor capital. Higher ratios indicate more financial leverage and risk.

Stocks in sectors like utilities, healthcare, and consumer staples that tend to hold their value during economic downturns because demand for their products remains relatively stable.

A sustained fall in the general price level, the opposite of inflation. While lower prices seem positive, deflation often signals weak demand and can trigger a damaging economic spiral.

The rate at which an option's price changes per $1 move in the underlying stock. A delta of 0.5 means the option gains $0.50 for every $1 rise in the stock. Also approximates the probability of expiring ITM.

A valuation method that estimates the present value of future cash flows by discounting them at an appropriate rate. DCF is the foundation of most professional stock valuations.

The tendency for investors to sell winning investments too quickly and hold losing investments too long. Driven by loss aversion and the desire to avoid realising a loss.

Spreading investments across multiple assets, sectors, or geographies to reduce risk. Diversification works because assets that are not perfectly correlated don't fall at the same time or by the same amount.

A portion of a company's earnings distributed to shareholders, usually paid quarterly in cash. Dividend yield (annual dividend / share price) is a key metric for income investors.

The annual dividend per share divided by the current share price, expressed as a percentage. A 3% yield means you receive $3 per year for every $100 invested.

A candlestick pattern where the open and close are nearly identical, creating a very small body with wicks. A doji signals indecision between buyers and sellers and may precede a reversal.

Investing a fixed dollar amount at regular intervals regardless of market price. DCA reduces the impact of volatility and avoids the risk of investing a lump sum at a market peak.

A bullish reversal pattern where price finds support at the same level twice and then breaks above the intervening resistance. It signals the end of a downtrend.

A bearish reversal pattern where price reaches a high twice, fails both times, and breaks below the intervening support (neckline). It signals exhaustion of the prior uptrend.

The percentage decline from a portfolio or account's peak to its subsequent trough. Maximum drawdown is a key risk metric — a 50% loss requires a 100% gain to break even.

A company's net profit divided by its number of outstanding shares. EPS is one of the most commonly used measures of company profitability and is a key driver of stock valuation.

A quarterly or annual financial disclosure filed by public companies showing revenue, expenses, and profit results. Earnings beats (above analyst estimates) often drive stock price increases.

Earnings Before Interest, Taxes, Depreciation, and Amortisation — a proxy for operating cash flow used to compare companies' profitability independently of financing and accounting decisions.

The recurring pattern of expansion (growth), peak, contraction (recession), and recovery in an economy. Different asset classes tend to outperform at different cycle phases.

A durable competitive advantage that protects a company's market share and profits from competitors. Types include cost advantages, network effects, switching costs, and intangible assets.

The set of optimal portfolios that offer the highest expected return for a defined level of risk. Portfolios below the frontier are suboptimal; those above are unattainable.

A two-candle reversal pattern where the second candle's body completely covers the first. A bullish engulfing (large green after small red) signals a potential upward reversal.

A comprehensive measure of a company's total value: market capitalisation plus debt minus cash. Used in valuation ratios like EV/EBITDA to compare companies regardless of capital structure.

In investing, equity refers to ownership interest in a company represented by shares of stock. It can also mean the value of an asset minus any liabilities against it.

A fund that trades on a stock exchange like an individual share, holding a basket of securities. ETFs offer diversification, low fees, and intraday liquidity — making them popular for passive investing.

The cutoff date you must own shares before in order to receive the next dividend payment. Buying on or after the ex-dividend date means you are not entitled to that dividend.

The annual fee charged by a fund to cover management and operating costs, expressed as a percentage of assets. A 0.05% expense ratio on a $10,000 investment costs $5 per year.

The date on which an options contract expires and becomes worthless if not exercised. Options lose time value (theta) as the expiry date approaches.

A moving average that gives more weight to recent prices, making it more responsive to new information than a simple moving average. Commonly used in MACD and other indicators.

The central bank of the United States, responsible for monetary policy including setting the federal funds rate, controlling money supply, and acting as lender of last resort.

A technical tool that uses horizontal lines at Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%, 78.6%) to identify potential support and resistance levels during a pullback.

The execution of a trade order. A 'full fill' means the entire order quantity was executed; a 'partial fill' means only some shares were bought or sold.

A short-term consolidation pattern that forms after a sharp directional move. The flag is a small rectangular range sloping against the trend; a breakout in the original direction confirms continuation.

The number of shares available for public trading, excluding shares held by insiders and institutions under lock-up. Low-float stocks tend to be more volatile and susceptible to short squeezes.

The anxiety that others are profiting from a rally you are not participating in, leading to impulsive, poorly-timed entries. FOMO often causes investors to buy near market tops.

A price-to-earnings ratio calculated using analysts' projected earnings for the next 12 months instead of trailing earnings. Useful for comparing growth companies with rapidly changing profits.

Operating cash flow minus capital expenditures. FCF represents the cash a company generates after maintaining and growing its asset base — a reliable indicator of financial health.

The rate of change of delta per $1 move in the underlying stock. High gamma means the option's delta changes rapidly — useful to know when managing hedges near expiration.

The total monetary value of all goods and services produced within a country's borders in a given period. GDP growth signals economic expansion; contraction for two quarters defines a recession.

A bullish signal that occurs when a shorter-term moving average (e.g., 50-day) crosses above a longer-term moving average (e.g., 200-day), suggesting upward momentum.

An order duration instruction that keeps a limit or stop order active until it is executed or manually cancelled, rather than expiring at the end of the trading day.

Revenue minus cost of goods sold, expressed as a percentage of revenue. A high gross margin indicates pricing power and efficient production; a declining margin may signal competitive pressure.

An investment strategy focused on companies expected to grow revenues and earnings faster than the broader market, often accepting higher valuations for the expectation of future profitability.

A company's management forward outlook on expected revenue, earnings, or other metrics for coming quarters. Raising guidance is bullish; cutting it is bearish, often more so than a miss on past results.

A bullish reversal candlestick with a small body near the top of the candle and a long lower wick, at least twice the body length. It signals that sellers pushed prices down but buyers recovered strongly.

A bearish reversal pattern consisting of three peaks — a higher central peak (head) flanked by two smaller peaks (shoulders). A break below the neckline confirms the pattern.

An investment taken to reduce the risk of adverse price movements in an existing position. For example, buying a put option hedges a long stock position against a decline.

The tendency for individuals to follow and copy the behaviour of a larger group, assuming the crowd has superior information. In markets, it amplifies bubbles and crashes.

A comprehensive indicator displaying support, resistance, trend direction, and momentum simultaneously using five lines and a shaded 'cloud.' Popular in Japanese candlestick trading.

The market's expectation of future price swings embedded in an option's premium. High IV makes options expensive; low IV makes them cheap. IV typically spikes around earnings announcements.

A call option is in the money when its strike price is below the current market price. A put option is ITM when its strike is above the market price. ITM options have intrinsic value.

A financial statement showing a company's revenues, costs, and profit over a specific period. Also called the profit and loss (P&L) statement; key inputs are revenue, gross profit, and net income.

A passively managed fund that tracks a market index (e.g., S&P 500) by holding the same securities in the same proportions. Typically lower cost than active funds and often outperforms them long-term.

The rate at which the general level of prices for goods and services rises, eroding purchasing power. Measured by CPI (Consumer Price Index) and PCE; the Fed targets roughly 2% annual inflation.

The cost of borrowing money, typically set or influenced by a central bank. Rising interest rates increase borrowing costs, reduce corporate profits, and lower the present value of future earnings.

The estimated 'true' value of a security based on fundamental analysis — typically future cash flows discounted to present value. When market price is below intrinsic value, a stock may be undervalued.

For an option, intrinsic value is the amount by which the option is in the money. A $50 strike call with the stock at $55 has $5 of intrinsic value. OTM options have zero intrinsic value.

The first time a private company offers shares to the public on a stock exchange. IPOs allow companies to raise capital and give early investors a way to cash out.

Using borrowed capital or financial instruments to amplify potential returns (and losses) on an investment. 2x leverage means a 10% market move produces a 20% gain or loss.

An instruction to buy or sell a security at a specified price or better. A buy limit order executes only at the limit price or lower; a sell limit order executes only at the limit price or higher.

How quickly and easily an asset can be bought or sold without significantly moving its price. Highly liquid assets (e.g., large-cap stocks) have tight spreads and deep order books.

The process by which a company's shares are admitted to trading on a stock exchange. An Initial Public Offering (IPO) is the most common way to achieve a listing.

A cognitive bias where the pain of losing money feels roughly twice as powerful as the pleasure of gaining the same amount. It leads traders to hold losing positions too long and sell winners too early.

A trend-following momentum indicator showing the relationship between two EMAs (typically 12 and 26 days). A signal line crossover and histogram help identify momentum shifts.

Borrowed money from a broker used to purchase securities, amplifying both potential gains and losses. A margin call occurs when account equity falls below the broker's minimum requirement.

A broker's demand that an investor deposit additional funds or sell assets to bring a margin account back up to the minimum required equity level.

The difference between a stock's intrinsic value and its current market price, expressed as a percentage. A large margin of safety provides a buffer against estimation errors and market downturns.

A rapid, unsustainable rise in asset prices driven by speculative demand rather than fundamentals. Bubbles eventually burst when sentiment reverses and prices collapse toward intrinsic value.

The total market value of a company's outstanding shares, calculated as share price × shares outstanding. Used to categorise companies as small-cap, mid-cap, or large-cap.

A short-term decline in a stock or index of 10%–19.9% from its recent peak. Corrections are considered healthy resets that can extend the longevity of a broader bull market.

The recurring pattern of expansion, peak, contraction, and recovery that stock markets experience over time, usually driven by economic and investor sentiment cycles.

The scheduled time during which a stock exchange is open for trading. The NYSE and Nasdaq operate 9:30 am–4:00 pm ET on weekdays, with pre-market and after-hours sessions on either side.

A weighted collection of securities that measures the performance of a specific segment of the market. The S&P 500 tracks 500 large US companies; the Dow Jones Industrial Average tracks 30 blue-chip stocks.

A firm or individual that continuously quotes buy (bid) and sell (ask) prices for a security, providing liquidity to the market. They profit from the bid-ask spread.

An instruction to buy or sell a security immediately at the best available current price. Market orders guarantee execution but not price, making them best for highly liquid stocks.

The largest loss a trade experiences from entry to its worst point during the holding period. Analysing MAE helps traders set stop-loss distances that cut losers without being triggered by normal noise.

Treating money differently based on its source or intended use rather than fungibly. Investors might take more risk with 'house money' (profits) than with original capital, despite both being equal in value.

A framework by Harry Markowitz showing that an investor can construct a portfolio to maximise expected return for a given level of risk by diversifying among assets with different correlations.

Central bank actions to control the money supply and interest rates to achieve economic goals like price stability and full employment. Tools include rate changes, open-market operations, and quantitative easing.

A calculated line that smooths price data by averaging closing prices over a set number of periods. Common periods include 20-, 50-, and 200-day moving averages.

A pooled investment vehicle where many investors contribute capital that a professional manager invests in a diversified portfolio of stocks, bonds, or other securities. Priced once per day at NAV.

The per-share value of a mutual fund or ETF, calculated as total assets minus liabilities divided by outstanding shares. Mutual funds trade at NAV; ETFs trade at market price which may differ slightly.

A company's total profit after all expenses, taxes, interest, and depreciation have been deducted from revenue. Also called 'bottom line'; flows into earnings per share calculations.

The four key data points recorded for a security in each trading period. OHLC data forms the basis for candlestick charts and most technical indicators.

A cumulative volume indicator that adds volume on up days and subtracts it on down days. Divergence between OBV and price can signal an upcoming reversal.

The total number of outstanding options contracts that have not been settled or cancelled. Rising open interest alongside price moves can confirm trend strength.

A table displaying all available call and put options for a given security, organised by expiry date and strike price. The chain shows bid/ask prices, volume, open interest, and the Greeks.

The price paid by the option buyer to the seller for the contract. It consists of intrinsic value (how much the option is in the money) plus time value.

A real-time electronic list of all open buy and sell orders for a security, organised by price level. The order book reveals supply and demand dynamics and is used by market makers and algorithmic traders.

A call option is out of the money when its strike price is above the current market price. A put is OTM when its strike is below market. OTM options have only time value, no intrinsic value.

A condition where a security has risen too far, too fast, and may be due for a pullback. Identified by momentum indicators like RSI exceeding 70 or Stochastic above 80.

The tendency to overestimate one's own abilities, knowledge, or the accuracy of one's predictions. Overconfident traders trade too frequently, take excessive risk, and attribute success to skill over luck.

A condition where a security has fallen too far, too fast, and may be due for a bounce. Identified by momentum indicators like RSI falling below 30 or Stochastic under 20.

The ratio of a company's market capitalisation to its book value (total assets minus total liabilities). A P/B below 1 may indicate undervaluation, though it varies by industry.

The ratio of a company's share price to its earnings per share. A high P/E suggests investors expect strong future growth; a low P/E may indicate undervaluation or declining earnings.

A trend-following indicator that places dots above or below price to signal potential reversals. 'SAR' stands for Stop and Reverse — when price crosses the dots, a trend change may be occurring.

An investment approach that seeks to match market returns by tracking an index rather than actively selecting individual stocks. Characterised by low costs, broad diversification, and long holding periods.

The proportion of earnings paid out as dividends, expressed as a percentage. A ratio above 100% means the company is paying more in dividends than it earns — often unsustainable.

Price-to-Earnings-to-Growth ratio — P/E divided by the expected annual earnings growth rate. A PEG below 1 suggests a stock may be undervalued relative to its growth.

A continuation pattern similar to a flag but with converging trend lines, forming a small symmetrical triangle after a strong price move. The breakout typically mirrors the initial move.

A low-priced stock, typically trading below $5 per share, usually from small companies. Penny stocks are highly speculative, often illiquid, and susceptible to manipulation.

A technical indicator derived from the previous day's high, low, and close. Traders use pivot points and their derived support/resistance levels to anticipate intraday turning points.

The complete collection of investments held by an individual or institution — including stocks, bonds, cash, ETFs, and other assets. Portfolio construction aims to balance return and risk according to the investor's goals.

An investor's stake in a particular security. A long position profits if the price rises; a short position profits if the price falls. Position size determines how much capital is at risk.

Determining how many shares or contracts to trade based on account size and risk tolerance. The 1% rule means risking no more than 1% of total capital on any single trade.

Trading that occurs before the official market open (typically 4:00–9:30 am ET). Volume is usually lower, spreads wider, and price moves can be more volatile than during regular hours.

A trading approach that focuses purely on a security's price movements — candlestick patterns, support/resistance, and trend analysis — without relying on lagging indicators.

Two parallel trend lines that contain price action — an upper resistance line and a lower support line. Traders buy near the lower band and sell near the upper band.

An area on a chart where no trading occurred because price opened significantly above or below the prior close. Gaps can be runaway (momentum), breakaway (trend-starting), or exhaustion (trend-ending).

An analyst's forecast of a stock's price over a specified time horizon, typically 12 months. Price targets are based on valuation models and are revised when fundamentals or market conditions change.

A behavioural economics model by Kahneman and Tversky explaining how people evaluate potential losses and gains asymmetrically. People weigh losses more heavily than equivalent gains.

Buying a put option on shares you already own to limit downside risk, similar to an insurance policy on your position. The premium paid is the cost of protection.

A contract giving the buyer the right, but not the obligation, to sell 100 shares of the underlying stock at a specified strike price before the expiry date.

An unconventional monetary policy where a central bank purchases government bonds or other securities to inject money into the economy and lower long-term interest rates.

The actual profit or loss that is locked in when a position is closed by selling the security. Realised gains are typically subject to capital gains tax.

The process of restoring a portfolio to its target asset allocation by selling assets that have grown above their target weight and buying those that have fallen below it.

Placing too much weight on recent events when forecasting the future. After a bull market, recency bias leads investors to expect more gains; after a crash, they expect more pain.

A significant decline in economic activity lasting more than a few months, typically defined as two consecutive quarters of negative GDP growth. Recessions often cause bear markets and rising unemployment.

A price level where selling pressure has historically been strong enough to prevent further price advances. Resistance acts as a ceiling; a break above it is considered bullish.

Net income divided by total assets, showing how efficiently a company uses its assets to generate profit. Useful for comparing companies within the same industry.

Net income divided by shareholders' equity, expressed as a percentage. ROE measures how effectively management uses shareholder capital to generate profits.

The total income generated by a company from its primary business activities before any expenses are deducted. Also called 'top line' because it appears at the top of the income statement.

The process of identifying, assessing, and controlling threats to a portfolio's capital. Includes position sizing, stop-losses, diversification, and monitoring overall portfolio exposure.

An investor's psychological and financial capacity to endure losses or volatility without abandoning their investment strategy. Influenced by age, income, goals, and emotional temperament.

The potential profit on a trade relative to its maximum potential loss. A 3:1 ratio means you aim to make $3 for every $1 risked. Most professional traders require at least a 2:1 ratio.

A momentum oscillator that measures the speed and magnitude of recent price changes on a scale of 0–100. Readings above 70 suggest overbought conditions; below 30 suggests oversold.

The movement of investment capital from one industry sector to another as economic conditions change. For example, investors might move from growth stocks to utilities during recessions.

Financial instruments that hold monetary value and can be traded. The two main categories are equity securities (stocks) and debt securities (bonds), though derivatives and hybrids also exist.

The process by which securities are delivered and payment is made after a trade. US equities settle on a T+1 basis (trade date plus one business day).

The individual unit of ownership in a company or financial asset. When a company issues 1,000,000 shares and you own 1,000, you own 0.1% of the company.

A measure of risk-adjusted return: (portfolio return − risk-free rate) / portfolio standard deviation. A higher Sharpe ratio means better return per unit of risk taken.

A bearish reversal candlestick with a small body near the bottom of the candle and a long upper wick. It signals that buyers drove prices up during the session but sellers took control by the close.

Borrowing shares and selling them with the intention of buying them back later at a lower price to profit from a decline. Short sellers face theoretically unlimited losses if the stock rises.

When a heavily shorted stock rises sharply, forcing short sellers to buy shares to cover their positions, which drives the price even higher in a self-reinforcing loop.

The arithmetic mean of closing prices over a specified number of periods. Each day, the oldest price is dropped and the newest is added, creating a smoothly rolling average.

The difference between the expected execution price of an order and the actual price at which it fills. Slippage is most common during fast markets or with illiquid securities.

A candlestick with a small body and long wicks on both sides, signalling indecision. Unlike a doji, the open and close are not identical but are still close together.

A momentum indicator comparing a security's closing price to its price range over a set period (typically 14 days). Readings above 80 indicate overbought; below 20 indicates oversold.

A share of stock represents a fractional ownership stake in a publicly traded company. Stockholders are entitled to a proportional share of company assets and, if declared, dividends.

A marketplace where buyers and sellers transact shares of publicly listed companies under regulated conditions. Major exchanges include the NYSE, Nasdaq, and London Stock Exchange.

A corporate action that increases the number of outstanding shares by issuing more to existing shareholders, while proportionally reducing the share price. Total market value remains unchanged.

An order that becomes a market order once the price reaches a specified trigger (stop) price. Used to limit losses on an open position or to enter a trade once momentum is confirmed.

A two-part order that triggers a limit order (not a market order) once the stop price is reached. Provides price control but may not fill if the market gaps past the limit price.

A stop order designed to limit a trader's loss by automatically selling a position when its price falls to a predetermined level. Essential for disciplined risk management.

The fixed price at which the holder of an option may buy (call) or sell (put) the underlying security. Also called the exercise price.

Continuing to hold or increase a position because of money already lost (a cost that cannot be recovered) rather than evaluating the investment on its current merits.

A price level where buying interest is historically strong enough to prevent the price from falling further. Support levels often act as floors; a break below is considered bearish.

Market-wide risk that cannot be eliminated through diversification, such as recessions, interest rate changes, or geopolitical events. Also called market risk; measured by beta.

Deliberately selling securities at a loss to offset capital gains tax on other investments. The loss reduces your taxable income, subject to wash-sale rules.

The rate at which an option loses value due to the passage of time, all else equal. A theta of -0.05 means the option loses $0.05 per day. Theta accelerates as expiry approaches.

A unique alphabetic abbreviation used to identify a publicly traded company on a stock exchange, such as AAPL for Apple or TSLA for Tesla.

The expected length of time an investor plans to hold an investment before needing the funds. Longer time horizons generally allow for greater risk-taking and higher equity allocations.

The portion of an option's premium beyond its intrinsic value, representing the possibility that the option could gain value before expiry. Time value decays to zero at expiration.

The total number of shares traded in a security over a given period, usually one day. Volume confirms price moves — a breakout on high volume is considered more significant than one on low volume.

A stop-loss that moves with the market price by a fixed amount or percentage. As the price rises, the stop trails behind it; if price reverses and falls to the stop, the position is sold.

A straight line drawn on a chart connecting a series of price lows (uptrend) or highs (downtrend). Trend lines help identify the direction and potential reversal points of a trend.

A chart pattern formed by converging trend lines. Ascending triangles are typically bullish; descending triangles bearish; symmetrical triangles can break either way.

The paper profit or loss on a position that is still open — i.e., the security has not yet been sold. Unrealised gains become taxable only when the position is closed.

Company- or sector-specific risk that can be reduced through diversification. Examples include a product recall, management scandal, or regulatory action against a single company.

A statistical measure estimating the maximum expected loss over a given time horizon at a certain confidence level. E.g., a 1-day 95% VaR of $10,000 means there is a 5% chance of losing more than $10,000 in a day.

An investment strategy focused on buying securities priced below their estimated intrinsic value and holding them until the market recognises their true worth. Popularised by Benjamin Graham and Warren Buffett.

The sensitivity of an option's price to changes in implied volatility. A vega of 0.10 means the option gains $0.10 for every 1% increase in implied volatility.

The CBOE Volatility Index, often called the 'fear gauge,' measures implied volatility in S&P 500 options. High VIX readings (above 30) indicate market fear; low readings suggest complacency.

A measure of how much a security's price fluctuates over time. High volatility means large price swings; low volatility means stable, gradual moves. Traders use it to size positions and set stops.

The average price at which a security has traded throughout the day, weighted by volume at each price level. Widely used by institutional traders as a benchmark for execution quality.

A tax rule that disallows a capital loss deduction if you repurchase a substantially identical security within 30 days before or after the sale. Important for tax-loss harvesting strategies.

A graph showing interest rates across different maturities for government bonds. An inverted yield curve (short-term rates higher than long-term) has historically preceded recessions.