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Before one can start investing in the stock market, he or she should have an idea about the basic stock market glossary for beginners used here. This article shall help you to know about the basic terms that are used in stock market and create a stronger foundation for diving in deeper into the basket of investing.
45 Stock Market Glossary for Beginners
1. Agent
1. AgentA brokerage firm acts on behalf of the client while buying and selling of securities in the securities market. This brokerage firm happens to be the agent during such transactions and it, in no way shall become the owner of securities.
2. Asset
A company’s total ownership including cash, equipment, property, etc accounts for the company’s total wealth. These possessions are also known as assets.
3. Ask or offer
This is the price at which the owner agrees to sell the security.
4. At the money
In options, the strike price (price selected for executing the trade) is same as the spot price (current market price of the stock) under call option. This case is reversed in case of put option.
5. Bear market
It refers to the market in which the share prices are constantly falling.
6. Bid
It is the price that the investor is ready pay for a particular security.
7. Blue chip stocks
These stocks are of those companies that have very high market capitalization. These companies are financially sound and have a record of providing increased dividends to its shareholders.
8. Bonds
It is a fixed income instrument issued by a company/government to primary markets for raising funds for its operations. Each bond has a maturity date that is mentioned at the time of issue along with the rate of interest. They are long term investment tools and offer principal returns.
9. Broker
A broker is an intermediary, i.e.; it acts as a middleman, facilitating the trade between the investor and the stock exchange.
10. Brokerage firm
It is a registered firm which conducts his act of buying and selling stocks on behalf of the investor. The brokerage firm is a middleman between the buyers and sellers. It charges a fee for the transactions occurred while trading.
11. Bull market
It refers to the market where the prices of the stocks are constantly rising.
12. Call option
Under call option, an investor has the right to buy a stock at a pre-determined price and within a specific time period provided they are in the money.
13. Cash segment
Under this equity, securities are bought and sold at the point of sale.
14. Close price
On the trading day, the final price at which the stock is traded at the time of market closure is called the close price.
15. Commodities
These are products (agricultural products and natural resources) that are traded on an authorized commodities platform.
16. Currency
A currency contract can be used for trading one currency with another on a previously set date for the future. This trading is similar to trading in stocks and future options, with the only difference that the underlying resources are currency pairs like USDINR or EURINR instead of stocks.
17. Derivatives
The price of this security is derived from the price of the underlying assets which includes bonds, commodities, currency, market indexes, etc.
18. Diversification
Investors purchasing shares of different companies that are operating in different sectors so that the risk factor can be reduced.
19. Dividend
This is a fund that is provided to the shareholders from the company’s earnings in return to their investments in the company. The dividend is declared on the face value of the share.
20. Equity
These are shares that account for a company’s ownership. The shareholder shall receive the total investment amount if the assets are liquidated. By owning shares of a company, the shareholder becomes a partial owner of the company
21. Expiration date
This is the date on which the options contract expires.
22. Futures
These are financial contracts that have a pre-determined date on which they are to be bought or sold. These contracts are traded in lot sizes and have an expiry date.
23. Hedge
It is an attempt to reduce the risk of adverse price movements of securities.
24. Index
An index is a benchmark of the respective stock exchange. It is a statistical measurement that has its own method of calculation. In India, there are two indexes, Nifty 50 and Sensex 30.
25. Initial Public Offering (IPO)
IPO refers to a company’s first issue of shares to the public. These are mostly issued by smaller companies that have targeted on expansion and growth. Even larger companies get involved in this practice to develop into publicly traded companies.
26. Inflation
An increase in the price of good and services that are usually measured by a percentage change in the Consumer Price Index.
27. In the money
In options, the strike price (price selected for executing the trade) is less than the spot price (current market price of the stock) under call option. This is reversed in case of put option.
28. Large-cap stocks
These stocks mark a very high market capitalization and are less risky. Further they even have a history of providing stable returns. Large-cap stocks should be a part of Nifty 100.
29. Leverage
In stock market, leverage refers to the act of borrowing capital for buying in more shares. It is the amplification of smaller investments that can provide a greater return. While the profit which can be high, there is an equal chance of making loss. Leverage works only in Intraday Trading.
30. Liquidity
It refers to the easy buying and selling of securities in the securities market. A security can only be liquid if there are ample units left for a large transaction. It is also one of the important features of a good market as well as the stock itself.
31. Margin
Using the margin account, an investor can borrow money for buying additional securities. He/she pays a percentage for the stocks bought and the rest is taken to be a loan from the broker. This account is used for investing in the cash segment.
32. Mid-cap stocks
These stocks are of those companies that are part of the Nifty 150 Mid-caps. They might have a possibility of earning returns in the long-run.
33. Mutual funds
Mutual fund is a pool of funds where investors put in their money. This money is later utilised for purchasing stocks, bonds and other securities by the fund manager. Security selections are based on the objectives of the scheme investment document.
34. New Funds Offer
New Funds Offer, also known as NFO is the launching of a new scheme by an Asset Management Companies (AMCs) to raise funds.
35. Nifty 50
It is a basket of the top 50 stocks based on market capitalization that are listed on the NSE and are among the most actively traded stocks.
36. One-sided market
One sided market is a scenario where the market consists of only buyers or a seller, i.e., the market is trending in one direction (either bullish or bearish). Such markets can only provide the bid price or the ask price.
37. Open Interest
It refers to the total number of derivative contracts that are to be settled. The time duration from when the buyer and the seller initiated the contract till it is closed by the counter-party; the contract is considered to be open.
38. Options
Options are a derivative contract where the investor of the particular stock can buy and sell the asset at a pre-determined price and pre-determined time.
39. Out of the money
In options, the strike price (price selected for executing the trade) is more than the spot price (current market price of the stock) under the call option. This case is reversed in case of put option.
40. Portfolio
When an investor owns a basket of investment, the collection is called a portfolio. In it, an investor can own multiple securities in his/her portfolio.
41. Put option
The seller has the right to sell a stock at a pre-determined price and pre-determined date even when the strike price falls below the spot price.
42. Small-cap stocks
All stocks that fall below market capitalization of Nifty 150 fall under small-cap stocks. They provide low revenues and inconsistent returns. Also, the information about these companies is not much available.
43. Securities
All kinds of financial elements like equity, bonds, stocks, mutual funds, derivatives, etc fall under securities.
44. Sensex 30
It is an index which consists of the 30 biggest and most actively traded stocks listed on the Bombay Stock Exchange (BSE).
45.Strike price
Strike price is refers to the pre-determined price at which the contract will be executed while trading in the market provided it is in the money.
We hope that we have provided you with most of the stock market glossary for beginners and helped you understand about the important terminologies of the securities market. You can now start trading in the market by opening a free demat account with SMIFS. We also offer free call-n-trade services and have an experienced research team that will provide you with daily trading and investing recommendations.
