Glossary of trading: A-L

Below you will find some terms and names that can be good to know as you move through the world of finance and trading.

American-style option

An option that can be exercised on any date until it has expired.

BBC Global 30

A stock market index based on 30 of the world’s largest stock companies. BBC Global 30 is regarded as a global barometer. The index was created by the BBC in 2004.

Bear market

A market where the prices of securities are dropping (long-term trend).

Bull market

A market where the prices of securities are rising (long-term trend).

Corporate bond

A bond issued by a corporation.

Dow Jones Industrial Average

This is a stock market index consisting of 30 large stock companies based in the United States. The industrial part of the name is largely historical, and many of the currently included companies are not heavy industry companies. The index is commonly referred to as Dow 30 or simply The Dow. It has been in use since 1896.

EAGLES

In 2010, the bank BBVA coined the acronym EAGLES for Emerging And Growth-Leading Economies. Back then, BBVA included Russia, Mexico, Brazil, Turkey, Egypt, India, China, South Korea, Taiwan, and Indonesia on their list of EAGLES.

European-style option

An option that can only be exercised on the expirty date.

Fallen angel

This is a nickname for a bond that was issued at a BBB rating or higher, but fell to BB or lower.

Fully invested (portfolio)

A portfolio is fully invested when all the money has been invested and there is no cash left available for future purchases.

Granny bond

In the United Kingdom, the government issues certain bonds with pensioners as the intended bond buyers. These bonds are nicknamed ”granny bonds”. One example of a granny bond is the National Savings Pensions Guaranteed Income Bond, which can be purchased by buyers aged 60 or above.

Hang Seng Index

This index is considered the main indicator of he overall market performance in Hong Kong. It is based on the share price of 50 large companies listed on the Main Board of the Stock Exchange of Hong Kong.

Heavy market

A market is considered heavy when there are significantly more sell orders than buy orders. A situation like that tend to result in stagnant or dropping prices.

Income stock

Shares in a stock company known to consistently pay dividends is commonly referred to as income stock, especially if the dividends are consistently high.

In the money

An option or warrant is said to be ”in the money” if it currently has a positive intrinsic value.

Examples:

• The exercise price for this call option is $50 and the market price of the underlying instrument is $75. Thus, the option is in the money right now.
• The exercise price for this put option is $50 and the market price of the underlying instrument is $45. Thus, the option is in the money right now.

Junk bond

A junk bond is a bond with a low credit rating. In the United States, a bond rated BB or lower is considered a junk bond. Because of the high risk associated with junk bonds, they usually have a high interest rate, because otherwise they wouldn’t be appealing to investors. The high interest rate makes them high-yield bonds.

KSOP

KSOP is a type of retirement plan in the United States. The KSOP combines an employee’s stock ownership plan (ESOP) with a 401(k) retirement savings plan. The employer will match the employee’s contributions, but with stock instead of cash.