Glossary

  • Abenomics – the name given to a suite of measures introduced by Japanese prime minister Shinzo Abe after his December 2012 re-election to the post he last held in 2007. His aim was to revive the sluggish economy with "three arrows": a massive fiscal stimulus, more aggressive monetary easing from the Bank of Japan, and structural reforms to boost Japan's competitiveness.
  • Alpha – Measure of risk-adjusted performance. Alpha takes into account the volatility of a particular portfolio and matches the risk-adjusted performance of that portfolio against a benchmark index. (Or, return greater than the market.)
  • Benchmark – An unmanaged group of securities whose performance is used as a standard to measure investment performance. Commonly known as a market index. Some commonly used benchmarks are the Dow Jones Industrial Average and the S&P 500.
  • Beta – The measure of a fund's or a stock's risk in relation to the market or to an alternative benchmark. A beta of 1.5 means that a stock's excess return is expected to move 1.5 times the market excess returns. E.g., if market excess return is 10%, then we expect, on average, the stock return to be 15%. Beta is referred to as an index of the systematic risk due to general market conditions that cannot be diversified away.
  • Black Swan  low probability high impact event.
  • Blue chips  giant companies with solid reputations. Think of General Electric, Intel, Visa, Wal-Mart and Walt Disney — financially fit corporations with dependable earnings, usually paying additional income to investors in the form of dividends.
  • Brexit – An abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of the United Kingdom's withdrawal from the European Union.
  • Breakout – The action by a stock when it surpasses its resistance level: usually a price ceiling at which the stock has previously encountered selling. In many cases, but not always, that resistance level is the highest point in a "handle" portion of a base pattern.
  • BRIC – a grouping acronym that refers to the countries of Brazil, Russia, India and China. In 2001, Jim O’Neill, a British economist formerly of Goldman Sachs, grouped these countries to represent the economic shift away from developed countries toward emerging nations. He came up with the bold prediction that “by 2041 (later revised to 2039, then 2032) the BRICs would overtake the six largest western economies in terms of economic might.” (also see: MINT)
  • BRICS – the acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa. The grouping was originally known as "BRIC" before the inclusion of South Africa in 2010.
  • Buyside – professional investors
  • CAN SLIM® – Acronym for William J. O'Neil's investment strategy. CAN SLIM® is based on the seven common characteristics found in his study of the greatest stock market winners of the last 45 years. A thorough discussion of CAN SLIM® can be found in William J. O'Neil's book, How to Make Money in Stocks.  C = Current Earnings Growth A = Annual Earnings Growth N = New Products, New Services, New Management, New Price Highs S = Supply & Demand L = Leader or Laggard I = Institutional Sponsorship M = Market
  • Carry Trade – Borrowing of a currency of a low interest rate country, such as the US, converting it to a currency in a higher interest rate country and investing it in high yielding assets of that country and elsewhere.
  • Climax Top –  When a stock suddenly advances at a much faster rate for one or two weeks after an advance of many months. Generally occurs in the final "stages" of a stock's price advance, indicating a leveling off or decrease in future price movements. Often accompanied by a gap up in price. Based on William J. O'Neil's research, many big market leaders top in this fashion. (Also, see Gap and Exhaustion gap)
  • Contango  a situation in which futures prices are meaningfully above current spot levels.
  • CoCo bond   A contingent convertible capital instrument, or CoCo, is a type of bond designed by regulators after the financial crisis. The bonds allow banks to skip interest payments without defaulting, and they’re designed to convert to common equity or suffer a principal writedown if a bank runs into trouble. This provides a buffer in times of stress while inflicting losses on CoCo investors.
  • COT   Commitments of Traders Report. The report is issued on Thursday evenings by the Commodity Futures Trading Commission.  It breaks down the amount of buying and selling done by three groups: Commercials, Large Traders, and Small Traders.
  • Crude oil inventory – The American Petroleum Institute reports weekly inventory levels of US crude oil, gasoline and distillates stocks. The figure shows how much oil and product is available in storage.The indicator gives an overview of US petroleum demand.
  • Crude oil trading hours (on the CME Globex electronic platform): 6:00 PM until 5:15 PM, Sunday through Friday with a 45-minute break each day between 5:15 PM (current trade date) and 6:00 PM (next trade date), New York Time. Open Outcry (pit session): 9:00 AM until 2:30 PM, New York Time.  (crude oil futures - WSJ)
  • Cup with handle – Technical charting pattern coined by IBD founder William J. O'Neil. It is one of three positive chart patterns to look for when doing technical analysis of a stock. It is named such because it resembles the outline of a coffee cup with a handle.  The pattern can last from seven weeks to as long as a year, but most are three to six months. The decline is usually 12% to 35% from the stock's high. The handle area should slant lower as the last remaining sellers exit the stock. The buy point is 10 cents above the high point of the handle.
  • DAX –  A stock index that represents 30 of the largest and most liquid German companies that trade on the Frankfurt Exchange. The DAX was created in 1988 with a base index value of 1,000. (live 4-month chart)
  • Doctor Copper –  Copper is frequently used as the leading indicator of economic growth.  Traders joke that the base metal is reputed to have a Ph.D. in economics because of its ability to predict turning points in the global economy.
  • Downstream – oil companies involved in drilling; upstream – companies involved in refining, selling, etc.
  • Drawdown  –  The measure of the decline from a peak during a specific period of an investment, fund or commodity. A drawdown is usually quoted as the percentage between the peak and the trough.
  • Dual Listing – Listing of a security on more than one exchange, thus increasing the competition for bid and offer prices, the liquidity of the securities, and the length time the stock can be traded daily (if listed on both the east and west coasts).
  • FANG – four of the most popular and best-performing tech stocks in recent memory – Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOG) (GOOGL).
  • Feeder cattle – steers (castrated males) or heifers (females) mature enough to be placed in a feedlot where they will be fattened prior to slaughter.
  • FOMC minutes – released three weeks after the date of the policy decision. See FOMC calendar.  Federal Open Market Committee (the FOMC) holds 8 regularly scheduled meetings during the year. The minutes of regularly scheduled meetings are released 3 weeks after the date of the policy decision.
  • FTSE 100 – an index of blue-chip stocks on the London Stock Exchange. (live 4-month chart)
  • Grexit – the possibility that Greece might exit the Euro Zone.
  • Ichimoku Cloud – a versatile indicator that defines support and resistance, identifies trend direction, gauges momentum and provides trading signals. The Ichimoku Cloud was developed by Goichi Hosoda, a Japanese journalist, and published in the late 1960s.
  • Index – Statistical composite that measures changes in the economy or in financial markets, often expressed in percentage changes from a base year or from the previous month. Indexes measure the ups and downs of stock, bond, and some commodities markets, in terms of market prices and weighting of companies in the index.
  • Insider trading – The longest insider-trading sentence of 12 years was given to attorney Matthew Kluger in 2012 for a $37 million scheme. The second-longest of 11 years was imposed upon Galleon Group LLC co-founder Raj Rajaratnam for a $72 million scheme.
  • Inversion – A (tax) inversion is when a larger U.S. company buys a smaller foreign-based company and relocates overseas in order to lower its tax bill. The company still has to pay U.S. taxes on U.S. income, but it can avoid paying U.S. taxes on overseas income. What’s more, most companies doing inversions relocate to countries with lower corporate tax rates than the U.S.   For example, Ireland, where many companies are based after such deals, has one of the lowest corporate tax rates on the planet at 13.5% .
  • Key reversal – A key reversal occurs when the market jumps up at the open to a new high and then closes below the previous day's lows. It tells us that something happened during the day to cause a sea change in mood for the worse.
  • LEAPS – derivative instruments for stocks and indices. They were first introduced in 1990. Equity LEAPS always expire in January. For example, if today were November 2013, one could buy a Microsoft January call option that would expire in 2014, 2015, or 2016. The latter two are LEAPS.
  • Long/Short Equity – An investing strategy of taking long positions in stocks that are expected to appreciate and short positions in stocks that are expected to decline. A long/short equity strategy seeks to minimize market exposure, while profiting from stock gains in the long positions and price declines in the short positions. 
  • Market capitalization – The total dollar value of all outstanding shares. Computed as shares times current market price. Capitalization is a measure of corporate size.
  • Master Limited Partnerships, or MLPs –  publicly traded partnerships in the natural resources, commodity or real estate industries.
  • Millennial generation (millennials) – loosely defined as those born between 1980 - 2000.
  • MINT – a grouping acronym that refers to the countries of Mexico, Indonesia, Nigeria and Turkey. (also see: BRIC)
  • Nikkei  – Short for Nikkei 225 Stock Average, a price-weighted index comprised of Japan's top 225 blue-chip companies on the Tokyo Stock Exchange. The index has been calculated since Sept 1950.  (live 4-month chart)
  • NYSE Arca – An all-electronic U.S trading platform that provides fast execution with open, direct and anonymous market access.
  • Open interest –  the total number of derivative contracts, like futures and options, that have not been settled in the immediately previous time period for a specific underlying security. A large open interest indicates more activity and liquidity for the contract.  An increase in open interest along with an increase in price confirms an upward trend.
  • Penny stock – a low-priced, speculative security of a very small company, regardless of market capitalization or whether it trades on a securitized exchange or an "over the counter" listing service.
  • Pivot Point (or Buy Point) –  Optimal buy point of a stock as it emerges from a sound and proper basing area or chart pattern (the most common of which include the 'cup with handle,' 'flat base' and 'double bottom') and breaks out into a new high in price. This is the point of least resistance and has shown, through William J. O'Neil's research, to have the greatest chance of moving substantially higher based on its current and historical price and volume activity.
  • Positive divergence 
  • Resistance –  In technical analysis, a price level at which a stock has a tendency to stay below. When a stock moves above such a level on high volume, it is sometimes viewed as a bullish indication.
  • S&P 500 (or SPX) – a stock market index containing the stocks of 500 American Large-Cap corporations. The index is owned and maintained by Standard & Poor's, a division of McGraw-Hill. The S&P 500 is often quoted using the symbol SPX or INX, and may be prefixed with a caret (^) or with a dollar sign ($).
  • SDR (or XDR) – Special drawing rights are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund (IMF). Their value is based on a basket of key international currencies reviewed by IMF every five years. Currently U.S. dollars represent around 40% of SDRs.
  • Shakeout –  situation in which many investors exit their positions, often at a loss, because of uncertainty or recent bad news circulating around a particular security or industry.
  • Sin stocks – stocks representing companies that operate in ethically questionable industries such as tobacco, alcohol, or gambling.
  • Selling Short – Selling a stock not actually owned. If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug. 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short.
  • Stealth rally – rally without widespread participation from either individual investors or professional money. 
  • Too big to fail – The idea that a business has become so large and ingrained in the economy that a government will provide assistance to prevent its failure.
  • Transaction tax –  On September 2nd, 2013 Italy became the first country in the world to extend its financial-transaction tax to high-frequency share trading. Such levies have been dubbed "Tobin taxes" after James Tobin, a Nobel Laureate in economics, who in 1972 first suggested taxing financial transactions.
  • Volume –  The number of shares or contracts traded in a security or an entire market during a given period of time. It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity. If a buyer of a stock purchases 100 shares from a seller, then the volume for that period increases by 100 shares based on that transaction.
  • VWAP –  volume-weighted average price
  • Yieldco –  a dividend growth-oriented public company, created by a parent company (e.g., SunEdison), that bundles renewable and/or conventional long-term contracted operating assets in order to generate predictable cash flows.  Similar to master limited partnerships (MLPs) and real estate investment trusts (REITs), YieldCo’s are designed to be pass-through entities, pushing much of their cash flows back to investors via high distributions. 

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