American Depositary Receipt (ADR)
A stock representing a specified number of shares in a foreign corporation. ADRs are bought and sold
in the American markets just like regular stocks.
American-Style Options
An option contract that may be exercised at any time between the date of purchase and the expiration date.
Arbitrage
The simultaneous purchase and sale of identical or equivalent financial instruments or futures in order to
benefit from a discrepancy in their price relationship.
Ask
Also called an “offer”. Willingness to sell a contract at a given price.
At-the-money
When the price of the underlying security is equal to the strike price, an option is at-the-money.
Bear
One who expects the prices to decrease.
Bear Market
A market in which prices are declining/falling.
Bid
The price that the market participants are willing to pay.
Blue Chip Stocks
Stock in a well-established, financially-sound, and stable company that has demonstrated its ability to pay
dividends in both good and bad times.
Book Building
The process of optimum price discovery in which the company decides the price of the security by asking
various investors about how much and at what price would they invest in the company’s equity.
Bull
One who expects prices to rise.
Bull Market
A market in which prices are rising.
Buy On Close
To buy at the end of a trading session at a price within the closing range.
Buy On Opening
To buy at the beginning of a trading session at a price within the opening range.
Call
A call option gives the buyer the right but not the obligation, to buy the underlying security at a specific
price for a specified time. The seller/writer of a call option has the obligation to sell the underlying security
should the buyer chose to exercise his option to buy..
Cash Settlement
Payment for transaction on the due date
Close Position
Getting out of a position in a particular stock or security.
Cost of carry
Cost of financing an asset
Day Order
Any order to buy or sell a security that automatically expires if not executed on the day the it is placed.
Day Trading
Traders who take positions and liquidate them prior to the close of the same trading day.
Derivatives
A derivative instrument is an instrument which derives its value from the value of one or more underlying
which can be commodities, precious metals, currency, bonds, stock, stock indices etc.
Exercise Or Strike Price
The price at which the holder of the option may buy or sell the underlying asset upon the exercise of an option.
Expiration Date
The last day on which an option may be exercised. Also, the last day of trading for a futures contract.
Futures
A Futures Contract is an agreement between a buyer and a seller to buy or sell on a future date a specified
amount of the financial instrument or physical commodity at an agreed price.
GAAP
Generally Accepted Accounting Principles
Green Shoe Option
The green shoe option allows a company to retain the amount of oversubscription in case of a fresh public issue.
GTC
A GTC order remains in the system until it is cancelled by the user.
GTD
A GTD order allows the user to specify the number of days / date till which the order should stay
in the system if not executed.
Hedging
Taking positions in securities so that eachone offsets the other
Holder of an Option
One who purchases an option.
Initial Margin
The funds required when a position (or a short position) is opened.
Insider
Any person who has or has access to valuable nonpublic information about a corporation.
Insider Trading
Trading on information which is not really available to the general public
Intial Public Offering (IPO)
The first sale of stock by a private company to the public.
Intrinsic Value
The amount by which an option is in the money
IPR
Intellectual property rights
Kerb Deals
The sale/purchase of securities before and after the official trading hours of the stock exchange.
Limit Order
An order placed with a broker to buy or sell shares at a specified price or better than the specified price.
Liquidity
The ability of a security/stock to get converted into cash without loss of time/value.
Margin Call
A demand for additional funds because of adverse price movement.
Market Capitalization
Market capitalization is the market value of the equity of a company/index.
Market Maker
A person who provides both buy and sell quotes for a security.
Market Order
An order for immediate execution to buy or sell as stock at the market price.
Mark-To-Market
The daily adjustment of margin accounts to reflect profits and losses.
NASDAQ
National Association of Securities Dealers Automatic Quotation System
NSCCL
National Securities Clearing Corporation Ltd.
NSE
National Stock Exhange Of India ltd.
Odd Lot
A lot of share that is less than the marketable lot is called an odd lot.
Offer
Also called “ask”. Indicates the willingness to sell at a given price.
Offset
Any transaction that offsets or closes out a long or short futures position.
Offset
Selling if one has bought, or buying if one has sold, a share/derivatives contract.
Open Interest
The cumulative number of either long or short contracts which have been initiated on an exchange, and
have not been offset.
Open Interest
The cumulative number of either long or short contracts which have been initiated on an exchange, and
have not been offset.
Open Order
An order to buy or sell a security that remains in effect until it is either canceled by the customer or executed.
Option
A contract giving the holder the right, but not the obligation, hence, “option,” to buy or sell a futures contract
in a given commodity at a specified price at any time between now and the expiration of the option contract.
Over the Counter (OTC)
A security which is not traded on an exchange, usually due to an inability to meet listing requirements. For
such securities, brokers/dealers negotiate directly with one another over computer networks and by phone.
Pay-in
When securities and funds are given by brokers to the Clearing House.
Pay-out
The day when the Clearing House gives securities and funds to the brokers.
Position
An interest in the market, either long or short, in the form of open contracts.
Price Discovery
Process by which buyers and sellers interact and set the price
Put
A put option gives the buyer the right, but not the obligation, to sell an underlying security at a specific price
for a specified time. The seller of a put option has the obligation to buy the underlying security should the
buyer choose to exercise his option to sell.
Rally
An upward movement of prices following a decline; the opposite of a reaction.
Range
The high and low prices or high and low bids and offers, recorded during a specified time.
RBI
Reserve Bank of India
Reaction
A decline in prices following an advance. The opposite of rally.
Rights Issue
Issue of additional equity to existing shareholders of a company
Scalping
Scalping normally involves establishing and liquidating a position quickly, usually within the same day,
hour or even just a few minutes.
SEBI
Securities and Exchange Board of India
Settlement Price
Price that is used to calculate gains and losses in futures and options market accounts.
Share
A share is the smallest unit representing the ownership in a company.
Short Selling
The selling of a security that the seller does not own, or any sale that is completed by the delivery of a
security borrowed by the seller.
Spread
Taking positions in two or more futures/options of the same type.
Stag
A person, who invests in the primary market, i.e. buys shares only in IPOs and sells on allotment.
Stock Exchange
An organised market for trading in listed securities.
Stock Split
The division of a company’s existing stock into more shares. In a 2-for-1 split, each stockholder would
receive an additional share for each share formerly held.
Stop Loss Order
An order placed with a broker to buy or sell when a certain price is reached.
Tick
Smallest increment of price movement possible
Trend
The general direction of the market.
Volume
The number of shares or contracts traded in a security or an entire market during a given period.
Writer
The seller of an option contract
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