Stock / Share noun
A unit of ownership in a company, entitling the holder to dividends and voting rights proportionally.
An investor buys 100 shares of Apple at $150 each, owning a tiny piece of the company.
Common Stock noun
Standard equity shares with voting rights and variable dividends; higher risk/reward than preferred.
Common shareholders vote on board members but are last in line if the company liquidates.
Preferred Stock noun
Shares with fixed dividends and priority over common stock for payouts, but usually no voting rights.
A retiree holds preferred shares paying a 6% dividend, providing stable income.
Dividend noun
A portion of a company's earnings distributed to shareholders, often quarterly.
Coca‑Cola pays a $0.46 quarterly dividend per share – a $10,000 investment yields ~$600/year.
Dividend Yield noun
Annual dividend per share divided by share price; measures income return.
A stock at $100 paying $4/year has a 4% yield. If price drops to $80, yield rises to 5%.
Ex-Dividend Date noun
The cutoff date to be on the company's books to receive the next dividend; buy before this date to qualify.
If ex‑div is March 10, buying on March 9 gets the dividend; March 10 does not.
Stock Split noun
Increasing shares outstanding by dividing existing shares (e.g., 2‑for‑1), lowering price per share while market cap stays same.
A $1,000 stock does a 10‑for‑1 split; you now have 10 shares at $100 each.
Buyback noun
A company repurchases its own shares from the market, reducing outstanding shares and often boosting EPS.
Apple announces a $90 billion buyback, signaling confidence and supporting share price.
Market Cap noun
Total value of a company's outstanding shares = share price × shares outstanding. Categories: large‑cap (>$10B), mid‑cap ($2B‑$10B), small‑cap (<$2B).
A company with 1B shares at $50 has a $50B market cap (large‑cap).
Growth Stock noun
Shares of companies expected to grow faster than the market; often reinvest earnings rather than pay dividends.
Tesla is a classic growth stock – high P/E, reinvesting heavily in expansion.
Value Stock noun
Stocks that appear undervalued based on fundamentals (low P/E, P/B) and often pay dividends.
A regional bank trading at 8x earnings with a 4% yield is considered a value stock.
Blue Chip noun
Large, well‑established, financially sound companies with a history of reliable performance (e.g., Coca‑Cola, IBM).
A conservative investor holds a portfolio of blue chips like Johnson & Johnson and Procter & Gamble.
Penny Stock noun
Low‑priced, highly speculative stocks (usually under $5) that trade on smaller exchanges; high risk.
A biotech penny stock jumps 200% on positive trial news but is also prone to manipulation.
IPO noun
The first sale of a company's shares to the public, transitioning from private to public.
Reddit's 2026 IPO priced at $45, opened at $55, giving early investors a pop.
SPAC noun
Special Purpose Acquisition Company – a shell company that raises funds via IPO to merge with a private company, taking it public.
A EV startup merges with a SPAC at a $2B valuation, avoiding a traditional IPO.
ETF noun
A basket of securities (stocks, bonds, commodities) that trades on an exchange like a single stock; offers diversification.
An investor buys $10,000 of SPY (S&P 500 ETF) to instantly own 500 companies.
Index Fund noun
A mutual fund or ETF that tracks a specific index (S&P 500, NASDAQ) with low fees.
VOO (Vanguard S&P 500 ETF) has a 0.03% expense ratio – popular for passive investing.
REIT noun
Real Estate Investment Trust – a company that owns income‑producing real estate and must distribute 90% of taxable income as dividends.
A REIT investor receives monthly dividends from a portfolio of apartments and warehouses.
Mutual Fund noun
A professionally managed investment pool that collects money from many investors to buy securities; priced once daily.
A 401k participant allocates to a target‑date mutual fund that automatically rebalances.
Hedge Fund noun
Private investment pool for accredited investors using advanced strategies (long/short, leverage, derivatives) to generate high returns.
A hedge fund shorts overvalued tech stocks while going long on energy, aiming for absolute returns.
Call Option noun
A contract giving the buyer the right, but not obligation, to buy 100 shares at a set price (strike) before expiration.
Buy a $150 AAPL call for $5/share ($500 total). If AAPL hits $170, the option is worth at least $20/share – profit $1,500.
Put Option noun
A contract giving the buyer the right to sell 100 shares at a strike price before expiration – used to hedge or bet on declines.
Buy a $100 SPY put for $3. If SPY drops to $90, the put is worth at least $10 – profit $700.
Strike Price noun
The predetermined price at which an option can be exercised.
A $200 strike call on TSLA means you can buy TSLA at $200 even if it's trading at $250.
In the Money (ITM) adj
A call option is ITM if stock price > strike; a put is ITM if stock price < strike. Has intrinsic value.
With stock at $110, a $100 call is ITM (intrinsic value $10). A $120 call is OTM (worthless if expiring now).
Covered Call noun
Selling a call option on shares you already own, generating income but capping upside.
Own 100 AAPL at $150, sell a $160 call for $5/share. You keep the $500 premium; if AAPL stays under $160, you win.
Protective Put noun
Buying a put option on shares you own as insurance against a price drop.
Own 100 shares at $80, buy a $75 put for $2. If stock crashes to $50, you can still sell at $75 – insurance cost $200.
Debit Spread noun
An options strategy involving buying and selling same‑type options with different strikes, resulting in a net debit.
Buy $100 call for $6, sell $110 call for $2 → net debit $4. Max profit $10‑4=$6 if stock >$110.
Straddle noun
Buying a call and put at the same strike and expiration, betting on large movement in either direction.
Before earnings, buy $100 call and $100 put for $8 total. If stock moves $15, profit exceeds cost.
Futures Contract noun
An agreement to buy or sell an asset at a future date at a predetermined price; traded on exchanges.
A farmer sells corn futures at $5/bushel to lock in price; a speculator buys hoping price rises.
Margin noun
Borrowing money from a broker to buy securities, amplifying gains and losses.
With $5,000 cash and 2:1 margin, you can buy $10,000 of stock. If it rises 10%, you gain $1,000 (20% return).
Margin Call noun
A broker demand to deposit more cash or securities when account value falls below maintenance requirement.
Stock drops 30% on margin; broker demands $2,000 or will liquidate positions.
Short Selling noun
Borrowing shares to sell, hoping to buy back later at lower price; profits from price declines.
Borrow 100 shares at $50, sell for $5,000. Buy back at $40 for $4,000, return shares, profit $1,000 (minus fees).
Short Squeeze noun
A rapid price increase forcing short sellers to cover, fueling further rises.
GameStop 2021: shorts covered at skyrocketing prices, creating a massive squeeze.
Bull Market noun
A prolonged period of rising prices, typically 20%+ from recent lows.
The 2020‑2021 bull market saw the S&P 500 double from pandemic lows.
Correction noun
A 10‑20% decline from a recent peak, often healthy for markets.
After a 15% drop, the index enters a correction; many see it as buying opportunity.
Support noun
A price level where buying interest is strong enough to prevent further decline.
AAPL repeatedly bounces off $140 support; traders place stop‑losses just below.
Moving Average noun
Average price over a specified period, smoothing price data to identify trends.
The 50‑day EMA crosses above the 200‑day EMA – a “golden cross” bullish signal.
RSI noun
A momentum oscillator (0‑100) measuring speed/change of price moves; above 70 overbought, below 30 oversold.
RSI hits 25, suggesting oversold; a trader looks for a bounce.
MACD noun
Moving Average Convergence Divergence – trend‑following momentum indicator showing relationship between two moving averages.
MACD line crosses above signal line – bullish buy signal.
Bollinger Bands noun
Volatility bands plotted above and below a moving average; price touching upper band may be overextended.
Price touches the lower band, RSI is 30 – potential bounce signal.
Fibonacci Retracement noun
Technical analysis tool using horizontal lines to indicate potential support/resistance at key Fibonacci levels (38.2%, 50%, 61.8%).
After a rally from $100 to $200, price retraces to $161.80 (61.8%) and bounces.
Volume noun
Number of shares traded in a period; high volume confirms price moves.
Breakout on 2x average volume suggests strong conviction.
VWAP noun
Volume‑Weighted Average Price – average price weighted by volume, used by institutions to assess execution quality.
Day traders buy when price is below VWAP, expecting reversion.
ATR noun
Average True Range – measures market volatility by averaging price ranges; used to set stop‑loss distances.
ATR of 2.50 suggests a $2.50 average daily move; trader sets stop 1.5× ATR = $3.75 away.
Doji noun
A candlestick with open and close nearly equal, indicating indecision; can signal reversal.
After a long uptrend, a doji forms – possible trend exhaustion.
EPS noun
Net income divided by shares outstanding; core measure of profitability.
Company reports EPS of $2.50 vs expected $2.00 – stock jumps 5%.
P/E Ratio noun
Price‑to‑Earnings = share price divided by EPS; valuation metric.
Stock at $100, EPS $5 → P/E = 20. Historical S&P 500 average P/E ~16‑18.
PEG Ratio noun
P/E divided by earnings growth rate; <1 may indicate undervaluation given growth.
Stock has P/E 20 and expected growth 25% → PEG = 0.8, considered attractive.
Beta noun
Measure of a stock's volatility relative to the market (S&P 500 = 1). Beta >1 means more volatile.
Tech stock beta = 1.5; if market up 10%, stock tends to up 15%.
Alpha noun
Excess return of an investment relative to its benchmark; positive alpha indicates outperformance.
A fund returned 12% vs benchmark 10% → alpha = 2%.
Sharpe Ratio noun
Risk‑adjusted return measure: (return – risk‑free rate) / standard deviation. Higher is better.
A Sharpe of 1.5 indicates good risk‑adjusted performance.
VIX noun
CBOE Volatility Index – measures expected S&P 500 volatility; often called “fear gauge.”
VIX spikes above 30 during market turmoil, dropping below 15 in calm periods.
Diversification noun
Spreading investments across different assets to reduce risk.
A portfolio holds US stocks, international stocks, bonds, and REITs to weather various cycles.
The Stock Market & Trading Lexicon — v.2026 — Dollarland Central Bank of Knowledge