CA Piyali Parashari

33 stock market
terms you must
know
(series A, B, C, D)
 01
Arbitrage:
1/5
It refers to buying an asset from one market and
selling it to another market where the selling
price is higher so you get a profit

Ask:
The price at which a seller is ready to sell his
shares

Alpha:
It is the relative return on investment as
compared to the overall market or index. Alpha
of +10% means the shares have outperformed
index by 10% and vice versa
 02
Asset Allocation:
1/5
It refers to an investment strategy which aims to
balance risk and reward by dividing the
investment into various asset classes.

Averaging Down:
Buying more of a share whose price has gone down
to reduce the overall cost price of investment

Annual Report:
A snapshot of the financial condition and
operations of a company. It has the audited
statements of income, financial situation, cash
flow, and may even include management’s
discussion and analysis,
 03
Active Return:
1/5
It is the excess returns generated by the portfolio
as compared to the benchmark, index or market as
a whole. It is the returns earned due to active
management of the portfolio by the manager

Absolute Returns:
It is the rate of return obtained over a specific
period. It shows the gain or loss expressed as a
percentage over the initial investment

At the money:
A situation at which an options strike price is equal
to the price of the underlying securities. Options
trading tends to be high when options are at the
 04
Beta:
1/5
It measures the risk of the asset vs the market.
If market has 1 beta and stock has 1.5 it means
that stock will move 50% more than the market.
High beta indicates higher risk

Bid:
The price that a buyer is willing to pay for a
share

Bid-Ask Spread
Difference between what buyers are
willing to pay and the price sellers are
asking for a stock.
 05
Blockchain:
A blockchain
1/5 is a record-keeping database in
which transactions made in Bitcoin or other
cryptocurrencies are recorded across multiple
computers and distributed across the entire
network of those computers.

Blue Chip Stocks:

Stocks of well known companies known for their
track record of growth and profitability

Bond
A debt security which represents a loan given by
the investor to the company or govt
 06 Bull Market:
A 1/5
market where prices are expected to rise. It
means the aggregate prices of the shares are rising

Buyback:
When a company repurchases shares from
investors to reduce the number of shares in the
market. It generally causes the remaning shares to
increase in value.

Bear Market:
It is a downward trend in the overall market. The
cumulative market prices of the stocks listed on
the stock market are declining.
 07
Bonus Shares:
1/5
Additional number of shares given by the company
to its existing shareholders as “BONUS” in lieu of
cash dividend.

Book Runner
The managing underwriter for a new issue of
shares. He maintains the book of securities sold.

Bear Hug:
A Hostile takeover attempt in which the
purchaser offers an exceptionally large premium
over the market value of the shares so as to as to
squeeze (hug) the target into acceptance.
08
Capital Gains
1/5Profit earned after selling an asset or
investment for a price higher than your buy
price

Common Stock:
It refers to the ordinary share capital of the
company which entitles the investor for
ownership of the company

Current Ratio
The excess of Current Assets over Current
Liabilities. It shows short term liquidity
 09
Capitalisation
The
1/5 total market value of all a company’s
outstanding shares, calculated by multiplying the
total number of shares by the
current share price.

Call Option:
It gives the buyer the right but not the obligation to
buy an underlying asset at a strike price on or
before the expiry date. Call option buyers are
bullish on share prices.

Compound Annual Growth Rate:

Return calculated based on previous years balance
of principal + Interest
 10
Day Trading
Also1/5
called intraday trading it means buying and
selling shares in same day

Derivatives:
A financial instrument that derives its value
from an underlying asset. Futures and options
are examples of derivatives. Underlying assets
are market indices, shares, commodities,
currencies.

Dividend Yield:
Dividend expressed as a percentage of its stock
price.
 11
Daily price limit
The
1/5 price level within which many commodity,

futures, and options markets are allowed to rise or

fall in a day. Exchanges usually impose a daily price
limit on each contract. Also called upper circuit or
lower circuit

Debt Equity Ratio

It compares assets provided by creditors to assets
provided by shareholders. Determined by dividing
long-term debt by common stockholder equity.

Delivery:
When the financial instrument is actually credited to
demat account