Stock market terms and definitions | StockChase

Stock experts from investment analysis industry have their own industry jargon. They expect the audience to understand a lot of it. They often even use words that are not in the dictionary (contorted from words that are). Our editors try to understand industry jargon and paraphrase so as to retain the meaning and make it easier for our readers to understand. This being said, understanding the finance industry basic terms and definitions can help you a lot when reading the opinions published on Stockchase.

A few Terms and Definitions

Common Stock
Common stock is a security that gives you ownership in a corporation. It is the less secure than bonds or preferred stocks as it comes last in case of financial difficulties.

Preferred Shares
Preferred shares confer part ownership like a normal stock, but also pay a fixed dividend like a bond. In case of financial difficulties, Bonds are the most secure, followed by Preferreds while Common Stock come last.

Derivatives
Instruments such as options and futures contracts, which derive their value from an underlying security. For example a farmer wishes to sell his crop to a speculator before the harvest, this would be a futures contract.

Short Selling
The selling of a stock or security that the seller does not own but has borrowed. Short selling is a trading strategy where the seller hopes to be able to buy the stock at a lower price, cover the outstanding short and take a profit from the difference.

Bull/Bear Market
A Bull Market is associated with increasing investor confidence and increased investing in anticipation of future price increases, whereas a Bear Market is where prices of stocks and securities are falling and widespread pessimism cause the negative sentiment to be self-sustaining.

Market Capitialization Calculation (Market Cap)
The total dollar value of a company's outstanding shares. Calculated by multiplying the company's outstanding shares by the current market price. Used to understand how big a company is, rather than sales or assests.

Contango
When the price of a forward or futures contract is trading above the expected spot price at contract maturity

Hold

Sell

Buy

Wait

Bias

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Our list of terms and definitions is not extensive. Please add new definitions or words you don’t understand and you would like us to define in the comments below.


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