Stock/ Options trading terminology. 

Note: Some of these are terms used in stock trading and some are specific to options trading.

Annual Report: An annual report is a report prepared by a company. It contains information about the company and is meant to show shareholders the company's profitability. When you read an annual report you're judging the company’s financial situation to help you decide whether or not to invest. 

Ask: The price that a seller is willing to take for a share of stock; This is how much you are to pay for the stock if buying. 

Averaging Down: When an investor buys more of a stock as price goes down. This makes it so your average purchase price decreases. For example: Oscar bought 100 shares of XYZ at $20, price then decreases to $10, Oscar then decides to buy 100 more shares of XYZ. This makes his average entry price $15.

Backtesting: Applying a strategy or algorithm to historical data to see if it is valid, gather data from history about your strategy. This will help you know if your strategy is effective. Highly recommend Think or Swim “on demand” for backtesting.

Bear Market: A period of declining stock value, usually accompanied by investor pessimism. The overall market declining in value. “A price decline of 20% or more over at least two months” (defined by the Vanguard Group)

Blue Chip stock: the stock of An established company with a stable record for stability, profitability, and value. 

Bull Market: A prolonged period of rising stock value, usually accompanied by investor optimism. This is the opposite of a bear market. 

Bid: The price a trader is willing to pay for a stock, how much you will sell a share for (when selling your stock) 

Catalyst: An event or other news that is likely to influence and accelerate a stocks movement.

Close: The price of the stock at the end of the trading day 4:00 Pm. The closing price of a stock refers to the last price the stock traded for the trading session.

Day Trading: The practice of buying and selling within the same trading day, before the close of the markets on that day. Day trading more than 3 times in 5 days on a margin account will put the Pattern Day Trading restriction on your account. A good way to avoid this PDT rule is to use a cash account which also has its drawbacks. I personally have 2 separate accounts one for day trading and one for my longer term investments.

Demand Zone: Area where buyers are lined up.

Dividend: A payment made out of the company’s profits to its shareholders, those who are holding shares of the stock. Not all companies pay dividends but those that have a good track record + good dividend make good long term holds. 

Dow Jones Industrial Average: One of the top stock market indexes in the U.S; it averages the value of 30 blue-chip stocks. 

Earnings Per Share (EPS): The company’s profit divided by the average number of shares in the market. Helps to show a company’s profitability.

Exchange: A place in which different securities are traded. Some of the best known exchanges in the US are the New York Stock Exchange (NYSE) and the Nasdaq.

Fundamental Analysis: Researching a company’s financial health and strength to determine its share price, future value, and earnings expectations.

Hedge: Limiting your losses or reducing risk by placing orders to cover two or more possible events in the market. Example: you are long shares on AAPL stock but you also buy a short term put option on AAPL as a hedge in case the stock goes down and you don't want to sell your shares. This will limit your losses if a downmove does happen since the put option will act as a hedge on your long position)

High: A high refers to a market milestone in which a stock or index reaches a greater price point than previously. Record highs can signal that a stock or index has never reached the current price point, but there are also time-constrained highs, such as 30-day highs.

Index: A benchmark that is used as a reference marker for traders and portfolio managers. Examples of these are the Dow Jones Industrial Average, Standard & Poor’s 500 (S&P 500), and the NASDAQ Composite.

Initial Public Offering (IPO): An IPO occurs when a company decides to go public rather than stay solely owned by private or inside investors. After the IPO the public has access to buying and selling shares of this company through an exchange. 

Limit Order: A type of order placed when you want to buy or sell a stock at a specific price or better.

Liquidity: being able to sell or buy shares in stock without the transaction seriously affecting the stock’s price; also refers to how easy it is to buy or sell shares

Lotto/ Lotto play: A high risk, high reward options trade that generally does not have a stop loss, typically placed very close to expiration. 

Low: Represents a lower price point for a stock or index.

Margin: A margin account lets a person borrow money (essentially take out a loan) from a broker to purchase an investment. The difference between the amount of the loan and the price of the securities is called the margin. Trading could be risky and could lead to bigger losses if wrong in the direction of your investment. You also have to avoid getting a margin call which is when the amount of money you have in your margin account falls below the broker’s minimum margin requirement, or the lowest amount you must have in your account. If this happens the broker will require you to deposit a certain amount to reach that minimum.

Market Capitalization: One measure of a company’s worth (the price of a share multiplied by the number of shares currently in the market.

Market Order: A type of order you place when you want to buy or sell a stock as soon as possible at the best available price. 

Moving Average: The average of a stock’s price over a period of time, adjusted daily; gives an idea of a stock’s trend.

Portfolio: A collection of investments owned by an investor makes up his or her portfolio. 

Price-to-Earnings Ratio (P/E Ratio): How much a stock costs relative to how much the company earns per share of stock.

Quad Witch: A date on which stock index futures, stock index options, stock options, and single stock futures expire simultaneously.

Quote: The bid, ask, and the last price for a stock at a given point during the trading day.

Rally: A fast increase in the general price level of the market or of the price of a stock is known as a rally.

Roll: Rolling an option position up in strike, out in expiration or both.

Runner: A small position of a profitable position left to “run” after the majority of profits have been taken on a position

Run up: The tendency of a stock to move up in price into an anticipated or known event.

Sector: A group of stocks that are in the same industry belongs to the same sector. For example: technology, energy, retail.

Short Selling: When a trader borrows shares from a brokerage, sells them, then buys them back when the stock is cheaper, returning them to the broker and pocketing the difference (the profit); used when you are bearish on a stock (you think price is going to decrease). (Sell high, buy low).

Spread: The difference between the bid and ask price. Also commonly referred to as "bid-ask spread."

Supply zone: Area where sellers are lined up.

Ticker Symbol: A ticker symbol is a one- to four-character alphabetic root symbol that represents a publicly-traded company on a stock exchange. For example Netflix ticker symbol: NFLX, Caterpillar ticker symbol: CAT. 

Scalp: A very short term trade generally lasting under an hour.

Stop Order: A type of order you place when you want to buy or sell a stock after it reaches a certain price; at that time, the order turns into a market order. Used often to limit losses or to protect profits (can also have it turn into a limit order – which is called Stop-Limit).

Technical Analysis: Examining a stock’s price through the use of metrics, indicators, past data, and other techniques (such as support and resistance, Fibonacci retracements) to identify trends.

Volatility: How much a stock’s price rises or falls over a period of time; a highly-volatile stock will have its price go up and down drastically over a period of time (Ex – TSLA is very volatile because the price changes drastically).

Volume: The number of shares being traded at a given point in time; this shows the amount of interest in the stock. I typically recommend trading stocks with high average daily volume 

Yield: The percentage of a stock’s price that is paid out in a dividend; For example, a stock that is worth $100 per share and pays out a dividend of $5 per quarter has a quarterly yield of 5%.

Common acronyms: 

FOMO: Fear Of Missing Out 

PT: Price Target

HOD: High Of Day

LOD: Low Of Day

R/G: Red to Green

G/R: Green to Red

E/R: Earnings Report

AH: After Hours

DD: Due Diligence

R/R: Risk Reward

S/R: Support & Resistance

TOS: Think Or Swim (TD Ameritrade) .