Common Terms in Stock Market

by Gily Tenorio on June 15, 2010

in Stocks

The following terms are the most common words you will encounter as you buy and sell stocks in stock market via online stock trading. You will be familiar with these terms as you continue to learn stock market investing. Even in mutual fund investing, you will encounter some of the following terms used in stock market. Enjoy reading, this is a little bit long list.

  • Ask Price – The lowest price an investor is willing to pay for a tradable security. This is the lowest price an investor is willing to sell a stock.
  • Bid Price – The highest price an investor is willing to pay for a tradable security. This is the highest price an investor is willing to buy a stock.
  • Quote – The price of stock or security.
  • Earnings per Share (EPS) – The net earnings of a company divided by the total outstanding shares. EPS is one basis in determining a good company to buy.
  • Price to Earning Ratio (P/E) – Stock price divided by EPS. This is the most popular metric of stock analysis. If calculated with the past year’s earnings, it is called trailing P/E. If calculated with analyst’s forecast next year, it is called forward P/E.
  • Board Lot –  Determines minimum number of shares one can purchase or sell at a specific range.
  • Odd Lot – This means that the quantity of the lot is less than one board lot.
  • Portfolio – a group of securities held or owned for investment purposes by an individual or institutional investor, An investor”s portfolio may contain common and preferred shares, bonds, options and other types of securities.
  • Dividend is the share in the profits of a corporation which is paid to the stockholders out of the unrestricted retained earnings, in proportion to the number of shares owned by the stockholders. May be in the form of cash, stock or property
  • Call Option is a financial contract between two parties, the buyer and the seller of this type of option. It is the option to buy shares of stock at a specified time in the future
  • Common Stock – units of ownership of a public corporation. Owners typically are entitled to vote on the selection of directors and other important matters as well as to receive dividends on their holdings.
  • Preferred Stock – stocks issued by a firm which shareholders are given preference over common stockholders. They have limited rate of return or dividend and a specified limited redemption and liquidation price.
  • Ex- Dividend Date means the date set by the Exchange starting from which the buyer is no longer entitled to the dividends. Currently set at 3 business days before record date.
  • Record Date means the date on which stockholders must officially own shares in order to be entitled to any shareholders rights or dividends.
  • Payable Date means the date on which stockholders will be paid to any shareholders rights or dividends.
  • PSE means Philippine Stock Exchange. The only stock exchange in the Philippines.
  • PSEi means Philippine Stock Exchange Index. The index is composed of 32 biggest companies in the Philippines in terms of volume of stocks traded and market capitalization.
  • Index is a medium used to denote trends in securities market.
  • Stock Certificate is a physical paper or document evidencing ownership by a shareholder in a corporation.
  • Market Capitalization means the product of the total number of securities issued, subscribed and to be subscribed multiplied by the price per share.
  • Traded Volume means the total number of stock shares traded in a particular period.
  • Fluctuation is the price movement of a security.
  • Par Value is an arbitrary value given to the stock at the time of issuance and is used to record the value of shares on the books of the corporation.
  • Outstanding Shares is issued capital stock that is held by shareholders. This therefore represents the total issued capital stock less any treasury stock.
  • Bear Market is a prolonged period of falling prices. A bear market in stocks is usually brought on by the anticipation of declining economic activity, and a bear market in bonds is caused by rising interest rates.
  • Bull Market is a prolonged rise in the prices of stocks, bonds or commodities. Bull markets usually last at least a few months and are characterized by high trading volume.
  • Limit Order is an order to buy or sell at a specific price or at a price better that the specified price which shall be within the ceiling and floor price restrictions.
  • Good til Cancel – “good til cancelled order.” This trading choice means the order you place will remain open for a set period of time, unless the order is executed or cancelled.

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