™Adjusted basis
An investment’s original tax basis after required increases or decreases, including certain wash-sale adjustments.
A–Z market terms
Financial language, translated.
Search foundational investing and trading terms explained in direct, practical language.
148 terms
After-hours trading
Trading that occurs after the regular exchange session, often with lower liquidity and wider spreads.
Alpha
Return above or below what a chosen benchmark or risk model would imply.
American depositary receipt (ADR)
A U.S.-traded certificate representing shares of a foreign company.
Ask
The lowest displayed price at which a seller is currently willing to sell.
Asset allocation
How a portfolio is divided among asset classes such as stocks, bonds and cash.
Assignment
The requirement for an option seller to fulfill the contract after the holder exercises.
At the money (ATM)
An option whose strike price is near the current price of the underlying asset.
Average daily volume
The average number of shares or contracts traded per day over a stated period.
Averaging down
Buying more after a price decline, which lowers average cost but increases exposure and risk.
Basis point
One hundredth of one percentage point; 100 basis points equals 1%.
Bear market
A broad, sustained market decline, commonly associated with a drop of roughly 20% or more.
Beta
A measure of how an asset’s returns have varied relative to a benchmark.
Bid
The highest displayed price a buyer is currently willing to pay.
Bid-ask spread
The difference between the best displayed bid and ask prices.
Block trade
A transaction involving a large quantity of securities, often handled to reduce market impact.
Bond
A debt security representing money lent to an issuer under stated terms.
Bond price
The market value of a bond, which generally moves inversely to market yields, all else equal.
Book value
A company’s accounting assets minus liabilities, often expressed on a per-share basis.
Breakout
A price move beyond a defined support, resistance or chart range.
Broker
A firm or person that handles securities transactions for customers, subject to applicable regulation.
Bull market
A broad, sustained period of rising prices and generally positive market sentiment.
Buying power
The amount available in an account to purchase securities, including permitted margin where applicable.
Call option
A contract generally giving the buyer the right, but not the obligation, to buy at the strike price.
Candlestick
A chart mark showing the open, high, low and close for a specific time period.
Capital gain
A gain that results when an asset is sold for more than its adjusted cost basis.
Capital loss
A loss that results when an asset is sold for less than its adjusted cost basis.
Cash flow
Cash generated or used by a business during a period, categorized by operating, investing and financing activity.
Circuit breaker
A rule-based trading pause designed to slow extraordinary market declines or security-specific volatility.
Commission
A fee a broker may charge for executing a transaction or providing a service.
Common stock
An ownership security generally carrying residual economic rights and often voting rights.
Compounding
Growth that earns additional growth on prior gains or reinvested income over time.
Consumer price index (CPI)
A measure of average price changes for a basket of consumer goods and services.
Correlation
A statistical measure of how two assets have moved in relation to one another.
Cost basis
The value used to calculate a taxable gain or loss, generally adjusted for certain transactions and events.
Coupon rate
The annual interest stated on a bond as a percentage of its face value.
Current yield
A bond’s annual coupon income divided by its current market price.
Day order
An order that expires if it is not executed by the end of that trading session.
Day trading
Opening and closing positions within the same trading day, an activity involving significant risk.
Debt-to-equity ratio
Total debt divided by shareholder equity, used to evaluate financial leverage.
Delta
An estimate of how much an option’s price may change for a one-unit move in the underlying, all else equal.
Dilution
A reduction in existing owners’ percentage interest when a company issues additional shares or equivalents.
Discount rate
A rate used to convert expected future cash flows into a present value.
Distribution yield
A fund’s recent distributions expressed relative to its market price or net asset value under a stated method.
Dividend
A distribution a company may make to shareholders, often from earnings or reserves.
Dividend yield
Annual dividends per share divided by the current share price.
Dollar-cost averaging
Investing set amounts at regular intervals regardless of price; it does not assure a profit or prevent loss.
Drawdown
A decline from an asset or portfolio’s previous peak to a later low.
Duration
A measure of a bond’s price sensitivity to changes in interest rates.
Earnings
A company’s profit for a period after applicable costs and expenses.
Earnings call
A company presentation and discussion of periodic financial results, often including analyst questions.
Earnings per share (EPS)
Profit allocated across the weighted average number of shares, calculated under stated accounting rules.
EBITDA
Earnings before interest, taxes, depreciation and amortization; a non-GAAP metric with important limitations.
Economic moat
A durable competitive advantage that may help a business defend profits or market position.
Enterprise value
A valuation measure that generally combines equity value and debt while subtracting cash.
ETF
An exchange-traded fund: a pooled portfolio whose shares trade on an exchange.
Ex-dividend date
The date on or after which a buyer generally will not receive the next declared dividend.
Exchange
A regulated marketplace where securities orders can interact under established rules.
Exercise
Using the contractual right to buy or sell the underlying asset at the strike price.
Expense ratio
A fund’s annual operating expenses expressed as a percentage of average net assets.
Expiration
The date after which an option contract is no longer valid.
Face value
The principal amount an issuer agrees to repay at a bond’s maturity, subject to credit risk.
Federal funds rate
The target range set by the Federal Reserve for overnight lending between depository institutions.
Fill
The execution of all or part of an order.
Fill-or-kill order (FOK)
An order requiring immediate complete execution or immediate cancellation.
Float
Shares available for public trading, excluding certain closely held or restricted shares.
Free cash flow
Cash from operations remaining after capital expenditures under a stated calculation.
Fundamental analysis
Evaluation of a security using business, financial, competitive and economic information.
Futures contract
A standardized agreement to buy or sell an asset at a future date under exchange-set terms.
Gamma
An estimate of how an option’s delta may change when the underlying price changes.
Good-til-canceled order (GTC)
An order that remains active until filled, canceled or expired under the broker’s policy.
Gross domestic product (GDP)
The market value of final goods and services produced within an economy over a period.
Gross margin
Gross profit divided by revenue, showing what remains after direct costs under accounting rules.
Hedge
A position intended to offset some risk in another holding; hedges have costs and may be imperfect.
Implied volatility
The volatility input reflected by an option’s market price under an option-pricing model.
In the money (ITM)
An option with intrinsic value based on the relationship between strike and underlying price.
Index
A rules-based measure designed to track a defined group of securities or market segment.
Index fund
A fund designed to track the performance of a specified market index before fees and tracking differences.
Inflation
A broad rise in prices that reduces the purchasing power of money.
Initial public offering (IPO)
A company’s first registered sale of shares to the public.
Intrinsic value
The amount an option is in the money, excluding time value.
Limit order
An order to buy or sell only at a specified price or better; execution is not guaranteed.
Liquidity
The ability to transact without causing a large change in price.
Long position
Ownership or exposure that generally benefits when the asset’s price rises.
Maintenance margin
The minimum equity a margin account must maintain under applicable rules and broker requirements.
Margin
Borrowed purchasing power or collateral required to support certain positions.
Margin call
A demand to add funds or securities, or reduce positions, when account equity falls below requirements.
Market capitalization
The market value of a company’s equity: current share price multiplied by shares outstanding.
Market maker
A firm that regularly quotes prices at which it is willing to buy and sell.
Market order
An order seeking prompt execution at the best available prices; the execution price is not guaranteed.
Maturity
The date on which a bond’s principal is scheduled to be repaid, subject to issuer terms and credit risk.
Moving average
The average price over a rolling number of periods, used to smooth price data.
Mutual fund
A pooled investment vehicle that generally transacts with investors at end-of-day net asset value.
Net asset value (NAV)
A fund’s assets minus liabilities, usually expressed on a per-share basis.
Open interest
The number of outstanding derivative contracts that have not been closed, exercised or expired.
Operating margin
Operating income divided by revenue, measuring profit after operating costs under accounting rules.
Option
A contract tied to an underlying asset with defined rights, obligations, strike and expiration.
Order book
A collection of available buy and sell orders at different prices.
Out of the money (OTM)
An option with no intrinsic value based on the current underlying price.
P/E ratio
Price-to-earnings: market price per share divided by earnings per share.
Panic selling
Rapid selling driven by fear, often without a disciplined review of price, risk or original thesis.
Pattern day trader
A U.S. margin-account designation triggered by specified day-trading activity under applicable rules.
Portfolio
A collection of investments and cash positions held by a person or institution.
Position sizing
Choosing how much capital or exposure to allocate to a trade or investment.
Preferred stock
A class of equity typically having priority over common stock for dividends or liquidation claims.
Premarket trading
Trading before the regular exchange session, often with lower liquidity and different risks.
Premium
The market price paid by an option buyer and received by an option seller.
Price-to-book ratio
Market price per share divided by book value per share.
Price-to-sales ratio
A company’s market value divided by revenue, commonly calculated on a per-share or enterprise basis.
Profit and loss (P&L)
The realized or unrealized financial result of a position or account over a period.
Put option
A contract generally giving the buyer the right, but not the obligation, to sell at the strike price.
Quantitative easing (QE)
Central-bank asset purchases intended to influence financial conditions and longer-term interest rates.
Realized gain or loss
A gain or loss recognized when a position is closed or otherwise disposed of.
Rebalancing
Returning a portfolio toward its intended allocation by buying or selling holdings.
Relative strength index (RSI)
A momentum oscillator comparing recent gains and losses over a chosen lookback period.
Resistance
A chart area where selling has previously limited upward price movement.
Revenue
Money generated by a business before most expenses are deducted.
Reverse split
A reduction in shares outstanding that proportionally increases price per share without itself changing total equity value.
Risk tolerance
An investor’s ability and willingness to accept uncertain outcomes and potential losses.
Sector
A group of companies with related business activities, such as technology, energy or health care.
Settlement
The process that finalizes the exchange of securities and cash after a trade.
Shares outstanding
The total shares issued and held by investors, including certain restricted holdings.
Short interest
Shares sold short that have not yet been bought back or otherwise covered.
Short selling
Selling borrowed shares in anticipation of buying them back later; losses can be substantial or theoretically unlimited.
Slippage
The difference between an expected transaction price and the actual execution price.
Stock split
An increase in shares outstanding with a proportional reduction in price per share, leaving total equity value unchanged by the split itself.
Stop order
An order that becomes a market order after a specified stop price is reached; execution price is not guaranteed.
Stop-limit order
An order that becomes a limit order after the stop price is reached and therefore may not execute.
Substantially identical
A facts-and-circumstances standard used in the wash-sale rule; related investments are not automatically identical, and a different ticker is not automatically sufficient.
Support
A chart area where buying has previously limited downward price movement.
Tax lot
A specific group of shares or units acquired in one transaction, with its own acquisition date and basis.
Technical analysis
Study of price, volume and related market data to evaluate behavior and patterns.
Theta
An estimate of how an option’s value may change as time passes, all else equal.
Time value
The portion of an option premium above intrinsic value.
Total return
The combined effect of price change and income distributions over a period.
Tracking error
The variability of a fund’s return difference versus its benchmark.
Trailing stop
A stop order whose trigger adjusts by a stated amount as the market moves favorably.
Treasury security
A debt obligation issued by the U.S. Department of the Treasury.
Unrealized gain or loss
A gain or loss on an open position based on current value versus cost basis.
Vega
An estimate of how an option’s value may change when implied volatility changes.
Volatility
The degree to which prices or returns fluctuate over time.
Volume
The number of shares or contracts traded during a period.
VWAP
Volume-weighted average price: the average traded price weighted by volume over a period.
Wash sale
A U.S. tax rule that can disallow a current loss when substantially identical stock or securities are acquired within the specified window.
Wash-sale window
The period from 30 calendar days before through 30 calendar days after a loss sale, including the sale date.
Yield
Income from an investment expressed relative to its price or value under a stated calculation.
Yield curve
A comparison of yields across bonds of similar credit quality but different maturities.
Yield to maturity
The annualized return implied by holding a bond to maturity under stated assumptions, including reinvestment and no default.