Reference

Wall Street Dictionary

Every term you will meet on a trading screen, in an earnings release or in a Fed statement, defined in one to three sentences without circular jargon. Where a term has a full guide, it is linked.

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10-K Stocks & valuation: The detailed annual report US public companies file with the SEC, including audited statements, risk factors and management commentary. It is the primary source behind most stock research. Read the full guide →
2s10s spread Bonds & rates: The 10-year Treasury yield minus the 2-year yield. It is the most quoted measure of curve shape, and a negative reading is what people mean by an inversion. Read the full guide →
4% rule Portfolio & investing: A retirement guideline of withdrawing 4% of the starting portfolio in year one and adjusting that dollar amount for inflation thereafter. It came from historical US data over 30-year windows and assumes a particular stock and bond mix. Read the full guide →
401(k) Portfolio & investing: A US employer-sponsored retirement account funded by payroll deferrals, often with an employer contribution on top. Contributions and growth are tax-deferred, and withdrawals before age 59 and a half usually carry a penalty. Read the full guide →
52-week high Technical analysis: The highest price a security has traded over the past year. Screens use distance from it as a quick measure of relative strength. Read the full guide →

A

Accruals Stocks & valuation: The part of reported profit that comes from accounting entries rather than cash, such as revenue booked before payment arrives. Profit that runs far ahead of operating cash flow for several quarters is worth investigating. Read the full guide →
Active management ETFs & funds: A fund manager choosing which securities to hold and when, aiming to beat a benchmark. Higher fees and trading costs mean the manager has to add value before you see any. Read the full guide →
Adjusted earnings Stocks & valuation: A company's own profit measure that strips out items it calls one-off, such as restructuring charges or stock-based compensation. Compare it with the GAAP number to see what was removed and how often the same item recurs. Read the full guide →
Adverse selection Markets & market structure: The risk a market maker takes that the person trading against it knows something it does not. Quotes widen when that risk rises, which is why spreads blow out before news. Read the full guide →
After-hours trading Markets & market structure: Trading after the 4:00 p.m. Eastern close, when most earnings reports land. Only limit orders are accepted at most brokers and liquidity is a fraction of the regular session. Read the full guide →
Alpha Portfolio & investing: The return left over after accounting for the return explained by market exposure. Positive alpha is rare, expensive to find and often turns out to be an unnamed risk factor. Read the full guide →
Ask Markets & market structure: The lowest price a seller is currently willing to accept for a share. You pay the ask when you buy with a market order. It always sits above the bid. Read the full guide →
Asset allocation Portfolio & investing: How you divide money across stocks, bonds, cash and other assets. This split explains most of the variation in a portfolio's return over time, well ahead of which individual securities you pick. Read the full guide →
Assignment Options & derivatives: Being required, as an option seller, to deliver or buy the shares because the holder exercised. It is allocated at random among short positions and can happen any day on American-style contracts. Read the full guide →
Authorized participant ETFs & funds: A large broker-dealer permitted to create and redeem ETF shares directly with the fund by swapping baskets of securities. Its arbitrage keeps the ETF price near the value of the underlying holdings. Read the full guide →
Average hourly earnings Economy & the Fed: The monthly measure of wage growth in the jobs report. The Fed watches it because rapid wage gains can keep services inflation elevated. Read the full guide →
Average True Range Technical analysis: The average size of a period's full range including gaps, usually over 14 periods. Traders use it to set stops and position sizes that fit how much a stock actually moves. Read the full guide →

B

Backtest Trading & risk: Running a set of rules over historical data to see how they would have performed. Realistic costs, slippage and survivorship handling are what separate a useful backtest from a flattering one. Read the full guide →
Backwardation Options & derivatives: A futures curve where further-dated contracts trade below nearer ones, usually when spot supply is tight. Rolling a long position then adds to returns. Read the full guide →
Basis point Bonds & rates: One hundredth of a percentage point, so 25 basis points is 0.25%. Rates, spreads and fund fees are quoted this way to avoid ambiguity. Read the full guide →
Benchmark ETFs & funds: The index a fund or portfolio is measured against. Choosing an easy benchmark is the oldest way to make a mediocre record look good. Read the full guide →
Beta Portfolio & investing: How much a security tends to move relative to the market, where 1.0 matches the index. A beta of 1.3 implies roughly a 13% move for a 10% market move, on average and with wide scatter. Read the full guide →
Bid Markets & market structure: The highest price a buyer is currently willing to pay for a share. You receive the bid when you sell with a market order. Read the full guide →
Bid-ask spread Markets & market structure: The gap between the best bid and the best ask, quoted in cents or as a percentage of price. It is the immediate cost of getting in and out, and it widens when a stock is thinly traded or when news is pending. Read the full guide →
Black-Scholes model Options & derivatives: The standard formula for pricing European options from the stock price, strike, time, rates and volatility. It assumes constant volatility and smooth prices, which real markets do not deliver. Read the full guide →
Bollinger Bands Technical analysis: A moving average with bands set a number of standard deviations above and below it, normally two. The bands widen when volatility rises and narrow when it falls. Read the full guide →
Bollinger squeeze Technical analysis: A period when the bands narrow sharply because volatility has collapsed. It says a larger move is likely and gives no clue about the direction. Read the full guide →
Bond Bonds & rates: A loan you make to a government or a company, repaid at a set date with interest along the way. You are a lender rather than an owner, so you rank ahead of shareholders if the borrower fails. Read the full guide →
Bond ETF ETFs & funds: A fund holding a portfolio of bonds that trades on an exchange. It never matures, so you hold a rolling basket with a roughly steady duration instead of a bond that returns your principal on a set date. Read the full guide →
Borrow fee Trading & risk: The annualized rate you pay the lender of shares while a short position is open. On a hard-to-borrow stock it can run to tens of percent a year and change daily. Read the full guide →
Breakeven inflation rate Bonds & rates: The gap between the yield on a nominal Treasury and a TIPS of the same maturity. It shows the average inflation rate at which the two would deliver the same return, which is the market's rough inflation expectation. Read the full guide →
Breakout Technical analysis: A move through a level that has held price back, often on rising volume. Many breakouts fail, so the question is always what invalidates the idea. Read the full guide →
Broker Markets & market structure: A firm licensed to route your orders to trading venues and hold your securities. In the US it must be registered with the SEC and belong to FINRA. Read the full guide →
Bull call spread Options & derivatives: Buying a call and selling a higher-strike call in the same expiration. Maximum profit is the strike difference minus what you paid, and maximum loss is the net debit. Read the full guide →

C

CAGR ETFs & funds: The compound annual growth rate, the single yearly rate that would take a starting value to an ending value over the period. It smooths away the path, so two investments with the same CAGR can feel completely different to hold. Read the full guide →
Call option Options & derivatives: A contract giving the buyer the right to buy 100 shares at a set price until expiration. The buyer pays a premium for it and the seller takes on the obligation to deliver. Read the full guide →
Callable bond Bonds & rates: A bond the issuer may repay early at a set price. Issuers call when rates have fallen, which hands you your money back exactly when reinvesting it pays less. Read the full guide →
Candlestick Technical analysis: A chart element showing the open, high, low and close for one period as a body with wicks. A long body means the period closed far from where it opened. Read the full guide →
Cash-secured put Options & derivatives: Selling a put while holding enough cash to buy the shares if assigned. You collect premium and agree to buy the stock at the strike, which is the risk when it falls much further. Read the full guide →
Circuit breaker Markets & market structure: An exchange rule that pauses trading across the whole market when the S&P 500 falls by set percentages during the session. The pause gives buyers and sellers time to reassess before trading resumes. Read the full guide →
Closing auction Markets & market structure: The auction at the end of the regular session that sets the official closing price. Index funds and benchmarks use that price, so it is the busiest moment of the trading day. Read the full guide →
Cointegration Trading & risk: A statistical property where two price series wander individually yet their combination stays within a stable range. Correlation over a recent window is far weaker evidence for a pair trade than this is. Read the full guide →
Compounding Portfolio & investing: Earning returns on your previous returns as well as on your original money. The effect is small in early years and does most of its work in the final stretch of a long holding period. Read the full guide →
Consensus estimate Economy & the Fed: The median or average forecast economists submit before a data release. Markets react to the gap between the actual figure and this number rather than to the figure itself. Read the full guide →
Consumer Price Index Economy & the Fed: The Bureau of Labor Statistics measure of what a fixed basket of goods and services costs urban households. It is released monthly and is the reference for Social Security adjustments and TIPS. Read the full guide →
Contango Options & derivatives: A futures curve where contracts further out cost more than nearer ones. A fund rolling positions in contango sells the cheap expiring contract and buys the dearer next one, which drags on returns. Read the full guide →
Convexity Bonds & rates: The curvature in the relationship between a bond's price and its yield, which duration alone misses. Positive convexity means prices rise slightly more on a yield fall than they drop on an equal yield rise. Read the full guide →
Core CPI Economy & the Fed: Consumer price inflation excluding food and energy, the two most volatile components. Policymakers watch it because it tracks the underlying trend more steadily than the headline. Read the full guide →
Correlation Portfolio & investing: A measure from minus one to plus one of how closely two assets move together. Correlations between risky assets tend to rise toward one during a crisis, which is when diversification is most needed. Read the full guide →
Coupon Bonds & rates: The fixed interest a bond pays each year, quoted as a percentage of par and usually paid in two installments. A 4% coupon on $1,000 of par pays $40 a year whatever the bond currently trades at. Read the full guide →
Covered call Options & derivatives: Selling a call against 100 shares you already own to collect premium. You keep the premium and give up the upside above the strike if the stock rallies through it. Read the full guide →
Creation unit ETFs & funds: The large block of ETF shares, often 25,000 or 50,000, in which new shares are created or redeemed. Only authorized participants deal in these blocks. Read the full guide →
Credit spread Bonds & rates: The extra yield a corporate bond pays over a Treasury of similar maturity, compensation for the risk of not being repaid. Spreads widen fast when investors worry about the economy. Read the full guide →
Cup and handle Technical analysis: A rounded base followed by a small pullback near the old high before a breakout attempt. The handle should be shallow, since a deep one says supply is still heavy. Read the full guide →
Current yield Bonds & rates: The annual coupon divided by the bond's current price. It ignores any gain or loss you will book when the bond repays par, so it overstates the return on a bond bought above par. Read the full guide →

D

Daily reset ETFs & funds: The mechanism by which a leveraged or inverse fund rebalances its exposure at every close so the stated multiple applies to the next single day. It is the reason these funds are tools for days rather than years. Read the full guide →
Dark pool Markets & market structure: A private trading venue where orders are not displayed to the public before they execute. Large institutions use them to move size without pushing the price against themselves, and the trades are still reported after the fact. Read the full guide →
Day trading Trading & risk: Opening and closing positions within the same session so nothing is held overnight. It removes gap risk and demands far more trades, which means costs and execution quality dominate results. Read the full guide →
Days to cover Trading & risk: Short interest divided by average daily volume, an estimate of how long shorts would need to buy back their shares. A high figure says an unwind would be crowded. Read the full guide →
Death cross Technical analysis: A 50-day moving average crossing below the 200-day. It is a lagging description of weakness that has already occurred, and it has marked plenty of bottoms as well as tops. Read the full guide →
Delta Options & derivatives: How much an option's price changes for a one dollar move in the stock. A 0.40 delta call gains about $0.40 per share on a one dollar rise, and delta also approximates the chance of finishing in the money. Read the full guide →
Diluted EPS Stocks & valuation: Earnings per share calculated as if all stock options, restricted shares and convertible securities had turned into common stock. It is the more conservative figure and the one to compare across years. Read the full guide →
Direct listing Markets & market structure: A way of going public in which existing shares start trading on an exchange without banks underwriting a new offering. No fresh capital is raised in the classic version, and there is no set offer price. Read the full guide →
Discounted cash flow Stocks & valuation: A valuation method that projects a company's future free cash flows and converts them to today's value using a discount rate. Small changes in the growth and discount assumptions move the answer a great deal. Read the full guide →
Divergence Technical analysis: A situation where price makes a new extreme and the indicator does not follow. It flags weakening momentum, and it can persist for a long time before price responds. Read the full guide →
Diversification Portfolio & investing: Spreading money across holdings whose returns do not move together, so one bad outcome does not sink the portfolio. Owning thirty stocks from one sector spreads names without spreading risk. Read the full guide →
Dividend Stocks & valuation: A cash payment a company makes to shareholders out of profits, usually quarterly in the US. Boards set the amount and can cut it at any time. Read the full guide →
Dividend yield Stocks & valuation: The annual dividend per share divided by the share price. A yield can rise simply because the price fell, which is often the first sign of a coming cut. Read the full guide →
Doji Technical analysis: A candle whose open and close are almost identical, leaving a very small body. It marks indecision, and it means little without the context of the candles around it. Read the full guide →
Dollar-cost averaging Portfolio & investing: Investing a fixed amount at regular intervals regardless of price. You buy more shares when prices are low, and the main benefit is behavioral because it keeps you investing. Read the full guide →
Dot plot Economy & the Fed: The chart in the Fed's quarterly projections showing where each policymaker expects rates to be at the end of coming years. The dots are anonymous and they are forecasts rather than commitments. Read the full guide →
Double top Technical analysis: Two peaks at a similar price separated by a pullback, signaling that buyers failed twice at the same level. The break of the middle low is the trigger traders watch. Read the full guide →
Dovish Economy & the Fed: A stance that leans toward easier policy, meaning lower rates to support jobs and growth. Dovish surprises usually lift both bonds and stocks. Read the full guide →
Dow Jones Industrial Average Markets & market structure: An index of 30 large US companies weighted by share price rather than company size. A $400 stock moves it far more than a $40 stock, whatever the two companies are worth. Read the full guide →
Drawdown Trading & risk: The fall from an account's peak value to its trough before a new peak is set. A 50% drawdown needs a 100% gain to recover, which is why controlling it matters more than chasing returns. Read the full guide →
DRIP Stocks & valuation: A dividend reinvestment plan, which automatically uses each cash dividend to buy more shares of the same company or fund. It compounds the position and still creates a taxable event in a regular account. Read the full guide →
Dual mandate Economy & the Fed: The two goals Congress gave the Federal Reserve: maximum employment and stable prices. The Fed defines stable prices as 2% inflation over the longer run. Read the full guide →
Duration Bonds & rates: A measure of how much a bond's price moves when yields change, expressed in years. A duration of 7 implies roughly a 7% price fall if yields rise by one percentage point. Read the full guide →

E

E-mini Options & derivatives: The standard smaller-sized stock index futures contract, most commonly the E-mini S&P 500. Each index point is worth $50 on that contract. Read the full guide →
Earnings call Stocks & valuation: The conference call management holds after releasing results, with prepared remarks and questions from analysts. The question section often carries more new information than the press release. Read the full guide →
Earnings per share Stocks & valuation: Net income divided by the share count, the profit attributable to each share. It is the number most earnings headlines compare against analyst estimates. Read the full guide →
Earnings yield Stocks & valuation: Earnings per share divided by share price, the inverse of the P/E. Comparing it with the 10-year Treasury yield shows what you earn for taking equity risk. Read the full guide →
EBITDA Stocks & valuation: Earnings before interest, taxes, depreciation and amortization. It approximates operating cash generation and ignores the real cost of replacing assets. Read the full guide →
Economic calendar Economy & the Fed: The schedule of data releases and central bank events with their times and consensus forecasts. Knowing which releases land before the open is the simplest way to avoid being surprised. Read the full guide →
Engulfing pattern Technical analysis: A two-candle shape where the second candle's body fully covers the first and closes in the opposite direction. Volume on the second candle is what separates a real shift from noise. Read the full guide →
Enterprise value Stocks & valuation: Market capitalization plus net debt, the cost of buying the whole business including its borrowings. It lets you compare companies with very different capital structures. Read the full guide →
ETF ETFs & funds: An exchange-traded fund, a pooled fund whose shares trade on an exchange all day like a stock. Most track an index, and large institutions create and redeem shares in blocks to keep the price close to the value of the holdings. Read the full guide →
EV/EBITDA Stocks & valuation: Enterprise value divided by EBITDA, a valuation multiple that works across companies with different debt loads and tax rates. It is the standard measure in mergers and in capital-heavy industries. Read the full guide →
Ex-dividend date Stocks & valuation: The first day a stock trades without the right to the next dividend. Buy on or after that date and the seller keeps the payment, and the share price typically opens lower by roughly the dividend amount. Read the full guide →
Exercise Options & derivatives: Using an option's right to buy or sell the underlying shares at the strike. Selling the contract instead usually captures more value, because exercising throws away any remaining time value. Read the full guide →
Expectancy Trading & risk: The average profit per trade, calculated as win rate times average win minus loss rate times average loss. A 40% win rate with 3R winners and 1R losers gives an expectancy of 0.6R. Read the full guide →
Expense ratio ETFs & funds: The annual percentage of your money a fund charges, deducted daily from the fund's assets. On $100,000, a 0.60% ratio costs $600 a year against $30 for a 0.03% index fund. Read the full guide →
Expiration date Options & derivatives: The last day an option can be exercised, after which it either settles or expires worthless. Most listed US equity options expire on a Friday. Read the full guide →
Exponential moving average Technical analysis: A moving average that weights recent prices more heavily than older ones. It turns faster than a simple average of the same length and gives more false signals in a range. Read the full guide →
Extrinsic value Options & derivatives: The part of an option's price above its intrinsic value, paid for the time remaining and the expected movement. It decays to zero by expiration. Read the full guide →

F

Factor investing Portfolio & investing: Building portfolios around characteristics such as value, momentum, quality, size and low volatility that have been associated with different long-run returns. Each factor can underperform for many years at a time. Read the full guide →
Fallen angel Bonds & rates: A bond downgraded from investment grade into high yield. Forced selling by funds that may only hold investment grade often pushes the price down around the downgrade. Read the full guide →
False breakout Technical analysis: A push through a level that reverses back inside the prior range within a short time. It traps the traders who chased the move and often fuels a run the other way. Read the full guide →
Fed funds futures Economy & the Fed: Exchange-traded contracts on the average overnight fed funds rate in a given month. Their prices imply the rate path the market expects, which is where headline rate-cut odds come from. Read the full guide →
Federal funds rate Economy & the Fed: The overnight rate at which banks lend reserves to each other, and the rate the FOMC targets within a quarter-point range. It anchors almost every other short-term rate in the economy. Read the full guide →
Federal Reserve Economy & the Fed: The central bank of the United States, made up of a Board of Governors in Washington and twelve regional Reserve Banks. It sets short-term interest rates, supervises banks and supplies the banking system with reserves. Read the full guide →
Flag pattern Technical analysis: A short, shallow consolidation that slopes against a sharp prior move, usually on falling volume. It is read as a pause within a trend rather than a reversal. Read the full guide →
Float Markets & market structure: The number of shares actually available for public trading, which excludes stock locked up with insiders or held in restricted blocks. A small float makes a stock easier to move on modest volume. Read the full guide →
FOMC Economy & the Fed: The Federal Open Market Committee, the group that sets US monetary policy at eight scheduled meetings a year. It publishes a statement, holds a press conference and releases minutes three weeks later. Read the full guide →
Forward P/E Stocks & valuation: Share price divided by the earnings per share analysts expect over the next twelve months. It relies on forecasts, which are systematically optimistic early in a year. Read the full guide →
Free cash flow Stocks & valuation: Cash from operations minus capital spending, the cash a business generates after keeping its assets running. Dividends, buybacks and debt repayment all come out of it. Read the full guide →
Futures contract Options & derivatives: A standardized agreement to buy or sell an asset at a set price on a future date, traded on an exchange and settled daily. Margin is a performance bond rather than a loan. Read the full guide →

G

GAAP earnings Stocks & valuation: Profit reported under Generally Accepted Accounting Principles, the standard US companies must follow in audited filings. It includes items management would rather you ignored. Read the full guide →
Gamma Options & derivatives: How fast delta changes as the stock moves. It peaks for at-the-money options near expiration, which is why short positions there can turn against you very quickly. Read the full guide →
Gamma exposure Trading & risk: An estimate of how much dealers must buy or sell to stay hedged as the underlying moves. When dealers are long gamma their hedging damps moves, and when they are short it amplifies them. Read the full guide →
Gap Technical analysis: A break in the chart where a session opens above the previous high or below the previous low. Gaps usually follow news released while the market was closed. Read the full guide →
GDP Economy & the Fed: Gross domestic product, the total value of goods and services produced in the economy over a quarter or a year. It is reported as an annualized rate of change after adjusting for inflation. Read the full guide →
General obligation bond Bonds & rates: A municipal bond backed by the issuer's taxing power rather than by one project's revenue. It generally carries lower risk than a revenue bond from the same issuer. Read the full guide →
GICS sectors ETFs & funds: The Global Industry Classification Standard, which sorts listed companies into 11 sectors such as technology, financials and utilities. Index providers use it to build the sector funds most investors trade. Read the full guide →
Glide path Portfolio & investing: The schedule by which a target-date fund reduces its stock weighting over the years. Two funds with the same target year can follow noticeably different paths. Read the full guide →
Golden cross Technical analysis: A 50-day moving average crossing above the 200-day. It confirms a trend that has already been running and arrives well after the low. Read the full guide →
Growth stock Stocks & valuation: A company priced for rapid future expansion, usually on a high multiple of current earnings. Because more of its value sits far in the future, it is more sensitive to rising interest rates. Read the full guide →
Guidance Stocks & valuation: Management's own forecast for revenue, profit or other metrics in coming quarters. A strong quarter paired with weak guidance regularly sends a stock lower. Read the full guide →

H

Hammer Technical analysis: A candle with a small body near the top and a long lower wick, showing sellers pushed the price down and buyers took it back. It carries more weight after a clear decline than in the middle of a range. Read the full guide →
Hawkish Economy & the Fed: A stance that leans toward tighter policy, meaning higher rates to hold inflation down. Markets read hawkish language as a reason to price fewer cuts. Read the full guide →
Head and shoulders Technical analysis: A three-peak pattern with a higher middle peak and a neckline drawn under the two troughs. The pattern is considered complete only when price closes below the neckline. Read the full guide →
High yield bond Bonds & rates: A corporate bond rated below investment grade, paying more because the risk of default is higher. Its returns behave more like equity than like Treasuries in a downturn. Read the full guide →
High-frequency trading Markets & market structure: Automated trading that competes on speed, usually holding positions for seconds or less. Much of it is market making, and some of it races to react to quote changes before slower participants. Read the full guide →

I

Idiosyncratic risk Portfolio & investing: Risk specific to one company, such as a failed product or an accounting scandal. Holding many unrelated positions is what reduces it. Read the full guide →
Implied volatility Options & derivatives: The volatility figure that makes a pricing model return the option's actual market price. It is the market's estimate of future movement, quoted as an annual percentage. Read the full guide →
In the money Options & derivatives: An option with intrinsic value, meaning a call whose strike sits below the stock price or a put whose strike sits above it. Exercising it right now would be worth something. Read the full guide →
In-kind redemption ETFs & funds: An ETF handing over a basket of securities instead of cash when shares are redeemed. Because no securities are sold for cash, the fund avoids realizing capital gains, which is the main source of ETF tax efficiency. Read the full guide →
Index fund ETFs & funds: A fund that holds the securities in an index in the index's proportions rather than choosing them. Low turnover and low fees are the point. Read the full guide →
Inflation Economy & the Fed: A sustained rise in the general price level, which reduces what each dollar buys. The Fed targets 2% a year measured by the personal consumption expenditures price index. Read the full guide →
Initial jobless claims Economy & the Fed: The weekly count of new applications for unemployment insurance. Its frequency makes it the timeliest read on layoffs available. Read the full guide →
Initial margin Options & derivatives: The cash or collateral you must post to open a leveraged position. For US stocks bought on margin it is commonly 50% of the purchase value. Read the full guide →
Intrinsic value Options & derivatives: The amount an option is already worth if exercised immediately, which is the gap between the stock price and the strike in your favor. It can never be less than zero. Read the full guide →
Inverse ETF ETFs & funds: A fund built to return the opposite of an index's move for one trading day. Held longer, the daily reset means it will not simply mirror the index over that period. Read the full guide →
Inverted yield curve Bonds & rates: A curve where short-dated yields sit above long-dated ones, meaning the market expects rate cuts ahead. It has preceded US recessions, with lags long enough to make it useless as a timing tool. Read the full guide →
Investment grade Bonds & rates: A credit rating of BBB or Baa and above, signaling a relatively low assessed risk of default. Many institutional mandates allow only bonds in this band. Read the full guide →
IPO Markets & market structure: An initial public offering, the first sale of a company's shares to public investors. Banks underwrite the deal, build a book of demand, set a price the night before and the stock begins trading the next morning. Read the full guide →
Iron condor Options & derivatives: Selling an out-of-the-money put spread and an out-of-the-money call spread on the same underlying and expiration. It profits if the stock stays between the short strikes and loses if it breaks out. Read the full guide →
ISM Purchasing Managers Index Economy & the Fed: A monthly survey of purchasing managers in manufacturing and services, where a reading above 50 means expansion. It arrives early in the month and moves markets more than its sample size suggests. Read the full guide →
IV rank Options & derivatives: Where current implied volatility sits between its lowest and highest readings over the past year, on a scale of 0 to 100. It tells you whether options are expensive relative to their own history rather than in absolute terms. Read the full guide →

K

Kelly criterion Trading & risk: A formula for the bet size that maximizes long-run growth given your edge and odds. Full Kelly is very volatile and relies on knowing your edge precisely, so practitioners use a fraction of it. Read the full guide →

L

Labor force participation rate Economy & the Fed: The share of the working-age population either employed or looking for work. A falling rate can hold the unemployment rate down even when hiring is weak. Read the full guide →
Leading Economic Index Economy & the Fed: A composite of ten forward-looking series published by the Conference Board, including claims, building permits and the yield spread. It is used as an early warning and it has given false alarms. Read the full guide →
Leveraged ETF ETFs & funds: A fund that aims to deliver a multiple of an index's return for a single day, commonly two or three times. It resets its exposure daily, so results over longer periods depart from the simple multiple. Read the full guide →
Limit order Markets & market structure: An instruction to trade only at a stated price or better. You control the price you pay and accept that the order may never fill. Read the full guide →
Limit up limit down Markets & market structure: A rule that stops a single stock from trading outside a price band set around its recent average price. If the stock sits at the band edge for fifteen seconds, it goes into a short trading pause. Read the full guide →
Liquidity Markets & market structure: How easily you can trade a meaningful amount without moving the price. It shows up as tight spreads, real size on the book and steady volume through the day. Read the full guide →
Lockup period Markets & market structure: A contractual window after an IPO, often about 180 days, during which insiders and early backers may not sell their shares. Supply can rise sharply when it ends. Read the full guide →
Long-term capital gain Portfolio & investing: A profit on an asset held longer than one year, taxed at lower US federal rates than ordinary income. Crossing that one-year line can change the tax bill substantially. Read the full guide →
Loss aversion Trading & risk: The tendency to feel a loss more strongly than an equivalent gain. In practice it shows up as holding losers too long and selling winners too early. Read the full guide →
Lump sum investing Portfolio & investing: Putting the whole amount to work at once instead of spreading it over months. Because markets rise more often than they fall, it has produced higher average outcomes and a harder ride. Read the full guide →

M

MACD Technical analysis: The moving average convergence divergence indicator, the gap between a 12-period and a 26-period exponential average plus a 9-period signal line. Crossovers and the histogram show momentum shifting. Read the full guide →
Macro regime Economy & the Fed: A period in which growth and inflation are both moving in a particular direction, shaping which assets perform. Regimes are easy to label after the fact and hard to identify while you are inside one. Read the full guide →
Maintenance margin Options & derivatives: The minimum equity you must keep in a margin account to hold a position. Drop below it and the broker issues a margin call. Read the full guide →
Margin call Options & derivatives: A broker's demand for more cash or collateral once account equity falls under the maintenance requirement. If you do not meet it, the broker can liquidate positions without asking which ones. Read the full guide →
Market breadth Technical analysis: How many stocks are taking part in a market move, measured by advancers against decliners, new highs against new lows, or the share above a moving average. A rally led by a handful of names shows up here first. Read the full guide →
Market capitalization Stocks & valuation: The total market value of a company's shares, calculated as share price multiplied by shares outstanding. It tells you what the equity is priced at and says nothing about debt. Read the full guide →
Market index Markets & market structure: A rule-based basket of securities used to measure the performance of a market or a slice of it. The rules cover which companies qualify, how they are weighted and when the basket changes. Read the full guide →
Market maker Markets & market structure: A firm that quotes both a bid and an ask in a stock and stands ready to trade at those prices. It earns the spread in exchange for supplying liquidity and carrying inventory risk. Read the full guide →
Market order Markets & market structure: An instruction to buy or sell immediately at the best price currently available. You get speed and give up price control, which hurts most in thin or fast-moving stocks. Read the full guide →
Maturity Bonds & rates: The date a bond repays its par value and stops paying interest. Longer maturities usually mean more price movement when interest rates change. Read the full guide →
Maximum drawdown Portfolio & investing: The largest peak-to-trough decline a portfolio suffered over a period. It is the number that tells you whether you could have held on. Read the full guide →
Mean reversion Trading & risk: Trading on the tendency of stretched prices to snap back toward an average. It works in ranges and loses badly when a market trends. Read the full guide →
Modified duration Bonds & rates: Macaulay duration adjusted for the bond's yield, giving the estimated percentage price change for a one percentage point move in yield. It is the version quoted on fund fact sheets. Read the full guide →
Momentum trading Trading & risk: Buying what has already been going up on the evidence that recent relative strength tends to persist for a while. The method's weakness is that it turns violently when leadership changes. Read the full guide →
Municipal bond Bonds & rates: Debt issued by a US state, city or local authority, with interest usually exempt from federal income tax. The exemption is why the headline yield looks low next to a corporate bond. Read the full guide →
Mutual fund ETFs & funds: A pooled fund whose shares are bought and sold directly with the fund company at one price per day. Orders placed during the day all settle at the net asset value struck after the close. Read the full guide →

N

NBBO Markets & market structure: The National Best Bid and Offer, meaning the highest bid and the lowest ask available across all US exchanges at one moment. Your broker has to fill your order at a price at least as good as the NBBO. Read the full guide →
Net asset value ETFs & funds: The value of a fund's holdings minus its liabilities, divided by shares outstanding. Mutual funds transact at it once a day, while an ETF trades around it all day. Read the full guide →
Nonfarm payrolls Economy & the Fed: The monthly count of jobs added or lost across US businesses and governments, excluding farms. It comes from the survey of employers and is the headline number in the jobs report. Read the full guide →

O

On-balance volume Technical analysis: A running total that adds the day's volume when price closes up and subtracts it when price closes down. Its direction is read as a rough measure of accumulation or distribution. Read the full guide →
Open interest Options & derivatives: The number of option contracts at a strike that are currently open and not yet closed or expired. It shows where positions actually sit, while volume shows only what traded today. Read the full guide →
Opening auction Markets & market structure: The single call auction that sets the official opening price at the start of the regular session. Orders accumulate before the bell and are matched at the price that trades the most shares. Read the full guide →
Option premium Options & derivatives: The price of an option contract, quoted per share and multiplied by 100 for the cash cost. A quote of 2.40 means $240 for one standard contract. Read the full guide →
Order book Markets & market structure: The live list of resting buy and sell orders at each price for a security. Its shape shows where size is willing to trade, though displayed orders can be pulled in an instant. Read the full guide →
Out of the money Options & derivatives: An option with no intrinsic value, so its price is entirely time and volatility value. It expires worthless unless the stock moves through the strike. Read the full guide →
Overbought Technical analysis: A reading showing price has risen a lot in a short time relative to its recent range. It describes speed rather than value, and strong stocks stay overbought during the best part of a run. Read the full guide →

P

P/E ratio Stocks & valuation: Share price divided by earnings per share, the price paid for each dollar of annual profit. A high P/E means the market expects growth, and it can be high simply because earnings are temporarily depressed. Read the full guide →
Pairs trading Trading & risk: Going long one security and short a related one to bet on the gap between them closing. Market direction largely cancels out, leaving the relationship itself as the risk. Read the full guide →
Par value Bonds & rates: The face amount a bond repays at maturity, typically $1,000 for a US corporate bond. Prices are quoted as a percentage of it, so a price of 97 means $970. Read the full guide →
Passive investing ETFs & funds: Owning a market or a market segment through an index-tracking fund instead of selecting individual securities. The aim is the market return minus a very small fee. Read the full guide →
Pattern day trader rule Trading & risk: A FINRA rule that applies once you make four or more day trades in five business days in a margin account. It requires you to keep at least $25,000 in equity or your day trading is restricted. Read the full guide →
Payment for order flow Markets & market structure: A payment a wholesale trading firm makes to a broker for the right to execute that broker's retail orders. It is why many US brokers can charge zero commission, and it is disclosed in quarterly reports brokers must file. Read the full guide →
Payout ratio Stocks & valuation: The share of earnings or free cash flow paid out as dividends. A ratio above 100% means the company is funding the dividend from cash reserves or borrowing. Read the full guide →
PCE price index Economy & the Fed: The personal consumption expenditures price index, the inflation measure the Fed actually targets. It updates its spending weights more often than CPI, so it usually runs a little lower. Read the full guide →
PEG ratio Stocks & valuation: The P/E ratio divided by the expected earnings growth rate, so a PEG of 1 means you pay one point of P/E per point of growth. The result is only as good as the growth estimate you feed it. Read the full guide →
Portfolio heat Trading & risk: The total amount at risk across all open positions if every stop is hit. Correlated positions mean your real heat is often higher than the sum suggests. Read the full guide →
Position sizing Trading & risk: Deciding how many shares to buy so that the distance to your stop equals the dollar risk you accept. Risking 1% of a $50,000 account with a $2 stop means 250 shares. Read the full guide →
Post-earnings announcement drift Trading & risk: The documented tendency for a stock to keep moving in the direction of an earnings surprise for weeks after the report. The effect is measured across large samples and is not reliable in any single name. Read the full guide →
Premium or discount to NAV ETFs & funds: The gap between an ETF's market price and the value of the securities it holds. It stays small for liquid funds and can open up when the underlying market is closed or stressed. Read the full guide →
Price discovery Markets & market structure: The process by which many orders competing in a market settle on a price that reflects what participants know. It works best where volume is high and information spreads quickly. Read the full guide →
Price-to-book ratio Stocks & valuation: Share price divided by book value per share. It suits banks and asset-heavy businesses and misleads for companies whose value sits in brands or software. Read the full guide →
Price-to-sales ratio Stocks & valuation: Market capitalization divided by annual revenue. It is used where profits are negative or distorted, and it ignores whether those sales can ever be profitable. Read the full guide →
Put option Options & derivatives: A contract giving the buyer the right to sell 100 shares at a set price until expiration. It gains value as the stock falls, which is why it is used as insurance. Read the full guide →
Put/call ratio Trading & risk: Put volume divided by call volume, used as a rough sentiment gauge. Extreme readings are read as contrarian, and the ratio mixes hedging with speculation so it is noisy. Read the full guide →

Q

Quantitative easing Economy & the Fed: The central bank buying long-dated bonds with newly created reserves to push down longer-term yields. It expands the Fed's balance sheet and pushes investors toward riskier assets. Read the full guide →
Quantitative tightening Economy & the Fed: The reverse of quantitative easing, in which the Fed lets maturing bonds roll off its balance sheet instead of reinvesting them. It drains reserves from the banking system gradually. Read the full guide →

R

R multiple Trading & risk: A trade's result expressed in units of the amount you risked. Making $600 on a trade where you risked $200 is a 3R win, which lets you compare trades of any size. Read the full guide →
Real GDP Economy & the Fed: Gross domestic product adjusted for inflation, so it measures output rather than prices. It is the number that defines whether the economy grew. Read the full guide →
Real return Portfolio & investing: Your return after subtracting inflation, which is what actually changes your purchasing power. A 6% return with 3% inflation leaves roughly 3% of real gain. Read the full guide →
Real yield Bonds & rates: A bond yield after subtracting expected inflation. A 5% nominal yield with 3% inflation leaves about 2% of real purchasing power gained. Read the full guide →
Rebalancing Portfolio & investing: Selling what has grown beyond its target weight and buying what has fallen below it. It keeps risk near the level you chose and forces you to trade against recent performance. Read the full guide →
Recession Economy & the Fed: A broad, sustained decline in economic activity across output, income, employment and sales. In the US the National Bureau of Economic Research dates recessions, often long after they begin. Read the full guide →
Reg NMS Markets & market structure: The set of SEC rules that ties US equity venues together, including the order protection rule that stops a venue trading through a better price shown elsewhere. It is the legal backbone of the national best bid and offer. Read the full guide →
Relative strength Trading & risk: How a stock has performed against an index or its peer group over a lookback period. It is a ranking measure and is separate from the Relative Strength Index. Read the full guide →
Relative Strength Index Technical analysis: A momentum oscillator comparing the size of recent gains to recent losses on a 0 to 100 scale. Readings above 70 and below 30 mark extremes, and strong trends can hold there for weeks. Read the full guide →
Relative volume Technical analysis: Today's volume compared with the average volume at the same point in the session over recent weeks. A reading of 3 means three times the normal participation. Read the full guide →
Resistance Technical analysis: A price area where selling has repeatedly stopped advances. Old highs and round numbers tend to attract it. Read the full guide →
Restatement Stocks & valuation: A formal correction of financial statements a company has already published. It signals that the earlier numbers were wrong and raises questions about the controls that let them through. Read the full guide →
Revenge trading Trading & risk: Taking a new position mainly to win back what you just lost. Size usually goes up and the setup quality goes down, which is how a bad day becomes a bad month. Read the full guide →
Revenue Stocks & valuation: The total value of goods and services a company sold in a period, before any costs. It is the top line of the income statement. Read the full guide →
Revenue bond Bonds & rates: A municipal bond repaid only from the income of a specific project, such as a toll road or an airport. If the project underperforms, there is no wider tax base behind you. Read the full guide →
Rho Options & derivatives: How much an option's price changes when interest rates move by one percentage point. It matters mostly for long-dated contracts and is the Greek traders watch least. Read the full guide →
Roth IRA Portfolio & investing: An individual retirement account funded with after-tax money, where qualified withdrawals in retirement are tax free. Income limits restrict who can contribute directly. Read the full guide →
Rule of 72 Portfolio & investing: A shortcut for how long money takes to double: divide 72 by the annual percentage return. At 8% a year that is about nine years. Read the full guide →

S

S&P 500 Markets & market structure: An index of 500 large US companies weighted by the market value of their freely traded shares. A committee selects members against published criteria, so it is not a simple list of the 500 biggest firms. Read the full guide →
Sahm rule Economy & the Fed: An indicator that flags a recession when the three-month average unemployment rate rises half a percentage point above its low of the previous year. It was designed to trigger fiscal support quickly rather than to time markets. Read the full guide →
SEC yield ETFs & funds: A standardized 30-day yield calculation that lets you compare bond funds on the same basis, net of expenses. It reflects recent holdings rather than what you will necessarily earn. Read the full guide →
Secondary market Markets & market structure: The market where investors trade existing securities with each other. The company gets no money from these trades, though its share price is set in them. Read the full guide →
Sector ETF ETFs & funds: A fund holding only companies from one of the market sectors, such as energy or health care. It concentrates your exposure to one set of drivers, which cuts both ways. Read the full guide →
Sector rotation ETFs & funds: Money moving from one part of the market to another as the outlook for growth, rates or inflation changes. A heatmap of daily sector returns is the quickest way to see it. Read the full guide →
Share buyback Stocks & valuation: A company using cash to purchase its own shares in the market and retire them. The remaining shares each own a larger slice of the business, which lifts earnings per share even if profit is flat. Read the full guide →
Shares outstanding Stocks & valuation: The number of a company's shares currently held by all investors, including insiders. Buybacks reduce the count and stock issuance raises it. Read the full guide →
Sharpe ratio Portfolio & investing: Return above the risk-free rate divided by volatility, a measure of return per unit of risk. A portfolio returning 10% with 15% volatility while cash pays 4% has a Sharpe ratio of 0.4. Read the full guide →
Short interest Trading & risk: The number of shares sold short and not yet covered, usually quoted as a percentage of float. US exchanges publish it twice a month, so it is always somewhat stale. Read the full guide →
Short selling Trading & risk: Borrowing shares, selling them, and buying them back later to return them. You profit if the price falls, and because a stock can rise without limit the loss has no natural ceiling. Read the full guide →
Short squeeze Trading & risk: A rapid price rise driven by short sellers buying to close positions, which pushes the price higher and forces more of them out. Rising borrow fees and recalled shares make it worse. Read the full guide →
Simple moving average Technical analysis: The average closing price over a set number of periods, recalculated each bar. It smooths the price series and lags it by roughly half the lookback. Read the full guide →
Slippage Markets & market structure: The difference between the price you expected and the price you actually got. It grows with order size, thin books and volatile moments such as the first minutes after the open. Read the full guide →
Soft landing Economy & the Fed: An outcome in which a central bank slows inflation without pushing the economy into recession. It is achievable and historically uncommon. Read the full guide →
Sortino ratio Portfolio & investing: A version of the Sharpe ratio that counts only downside volatility in the denominator. It rewards strategies whose swings are mostly to the upside. Read the full guide →
SPAC Markets & market structure: A special purpose acquisition company, a shell that raises cash in an IPO and then looks for a private business to merge with. Investors can redeem their shares for the trust value before the deal closes. Read the full guide →
Stochastic oscillator Technical analysis: An indicator showing where the close sits within the high-low range of recent periods. It reacts faster than RSI and produces more signals, most of which need filtering. Read the full guide →
Stock split Stocks & valuation: A company dividing each existing share into several, so the price per share falls in proportion. The value of your holding does not change and neither does the value of the company. Read the full guide →
Stop loss Trading & risk: A predefined exit that caps the loss on a trade. Placing it where the idea is wrong rather than where the loss feels tolerable is what makes it useful. Read the full guide →
Stop order Markets & market structure: A resting instruction that turns into a market order once the stock trades at your trigger price. In a fast gap it can fill far below the trigger. Read the full guide →
Straddle Options & derivatives: Buying or selling a call and a put at the same strike and expiration. The buyer needs a large move in either direction, and the seller needs the stock to sit still. Read the full guide →
Strangle Options & derivatives: A call and a put at different out-of-the-money strikes in the same expiration. It costs less than a straddle and needs a bigger move to pay off. Read the full guide →
Strike price Options & derivatives: The price at which an option lets you buy or sell the underlying shares. It is fixed for the life of the contract. Read the full guide →
Support Technical analysis: A price area where buying has repeatedly been strong enough to stop declines. It holds until it does not, and the break itself is information. Read the full guide →
Swing trading Trading & risk: Holding positions for days to weeks to capture one leg of a move. It fits around a job and it exposes you to overnight news. Read the full guide →
Systematic risk Portfolio & investing: Risk that affects the whole market, such as a recession or a rate shock. Diversifying across stocks does not remove it. Read the full guide →

T

T+1 settlement Markets & market structure: The rule that a US stock trade legally settles one business day after it is executed. Cash and shares actually change hands on that date, not at the moment your order fills. Read the full guide →
Target-date fund Portfolio & investing: A single fund that holds a diversified mix and shifts it toward bonds automatically as a chosen retirement year approaches. It is one decision that covers allocation and rebalancing. Read the full guide →
Tax-equivalent yield Bonds & rates: The taxable yield you would need to match a tax-free municipal yield at your tax rate. A 3% muni yield equals about 4.6% taxable for someone in the 35% federal bracket. Read the full guide →
Tax-loss harvesting Portfolio & investing: Selling a losing position to book the loss against gains, then reinvesting in something similar. The loss reduces this year's tax bill and lowers your cost basis for later. Read the full guide →
Technical analysis Technical analysis: The study of price and volume history to judge the balance of supply and demand. It describes what has already happened and assigns probabilities, and it does not tell you what a business is worth. Read the full guide →
Theta Options & derivatives: The amount of value an option loses each day from the passage of time, all else equal. It is the seller's income and the buyer's rent, and it accelerates in the final weeks. Read the full guide →
Time in force Markets & market structure: The instruction that says how long an order stays live, such as day, good till canceled, immediate or cancel, or fill or kill. Choosing the wrong one leaves stale orders working days after the setup is gone. Read the full guide →
TIPS Bonds & rates: Treasury Inflation-Protected Securities, whose principal is adjusted with the Consumer Price Index so the coupon and repayment keep pace with inflation. You are buying a real yield rather than a nominal one. Read the full guide →
Total return ETFs & funds: The full return from an investment including price change and reinvested income. Price charts alone understate the long-run return of dividend-paying stocks and funds. Read the full guide →
Tracking error ETFs & funds: How far a fund's return drifts from the return of the index it follows. Fees, cash balances, sampling and taxes on foreign dividends all contribute. Read the full guide →
Traditional IRA Portfolio & investing: An individual retirement account where contributions may be deductible now and withdrawals in retirement are taxed as income. Annual contribution limits are set by the IRS. Read the full guide →
Trailing stop Markets & market structure: A stop that follows the price by a fixed amount or percentage as the position moves in your favor, and stays put when the price turns back. It locks in some gain without your having to move the order by hand. Read the full guide →
Treasury bill Bonds & rates: A US government debt security maturing in one year or less, sold at a discount and repaying face value. It pays no coupon and the return is the difference between the two prices. Read the full guide →
Treasury bond Bonds & rates: A US government debt security with a maturity of twenty or thirty years paying a semiannual coupon. Its long duration makes it the most rate-sensitive Treasury you can buy. Read the full guide →
Treasury note Bonds & rates: A US government debt security with a maturity from two to ten years that pays a coupon twice a year. The 10-year note is the reference rate for much of the financial system. Read the full guide →
Triangle pattern Technical analysis: A consolidation where highs and lows converge, forming an ascending, descending or symmetrical shape. The range contracts until one side gives way. Read the full guide →

U

Unemployment rate Economy & the Fed: The share of the labor force without a job and actively looking for one. It comes from the household survey, which is why it can move in a different direction from the payroll count. Read the full guide →

V

Value factor Portfolio & investing: The tilt toward stocks that are cheap on measures such as price to book or price to earnings. It spent much of the 2010s lagging growth, which is a reminder of how long a factor drought can run. Read the full guide →
Value stock Stocks & valuation: A company trading on a low multiple of earnings, book value or cash flow relative to the market. Some are cheap because the business is shrinking, which is the risk the label hides. Read the full guide →
Variance risk premium Trading & risk: The tendency for implied volatility to price above the volatility that is later realized. It is the reason systematic option selling makes money most of the time and loses a great deal occasionally. Read the full guide →
Vega Options & derivatives: How much an option's price changes for a one point move in implied volatility. Longer-dated options carry more vega than near-dated ones. Read the full guide →
Vertical spread Options & derivatives: Buying one option and selling another of the same type and expiration at a different strike. It caps both the profit and the loss, and it costs less than the single long option. Read the full guide →
VIX Trading & risk: An index of the volatility implied by S&P 500 options over the next 30 days, quoted as an annualized percentage. It rises when investors bid up protection, which is why it is called the fear gauge. Read the full guide →
Volatility Portfolio & investing: How much returns vary around their average, usually quoted as annualized standard deviation. It treats upside and downside swings the same way, which is one of its limits as a risk measure. Read the full guide →
Volatility crush Options & derivatives: The sharp drop in implied volatility right after a scheduled event such as earnings. Buyers of options into the event can lose money even when the stock moves their way. Read the full guide →
Volatility decay ETFs & funds: The drag that daily rebalancing imposes on leveraged and inverse funds when the underlying index swings up and down. An index that falls 10% and then rises 11.1% is flat, while a daily 2x fund on it ends below where it started. Read the full guide →
Volume Technical analysis: The number of shares traded in a period. It shows how much conviction sits behind a price move and whether institutions are involved. Read the full guide →
VWAP Technical analysis: The volume-weighted average price, the average price paid across the session weighted by size. Institutions measure their executions against it, which is why price often gravitates toward it intraday. Read the full guide →

W

Wash sale rule Portfolio & investing: A US tax rule that disallows a loss if you buy the same or a substantially identical security within 30 days before or after the sale. The disallowed loss is added to the cost basis of the new position. Read the full guide →

Y

Yield curve Bonds & rates: A plot of Treasury yields from the shortest maturity to the longest at one point in time. Its shape summarizes what the market expects for growth, inflation and Federal Reserve policy. Read the full guide →
Yield to call Bonds & rates: The return you would earn if the issuer repaid a callable bond at its earliest call date rather than at maturity. For a bond trading above par, this is usually the number that matters. Read the full guide →
Yield to maturity Bonds & rates: The single annual return you earn if you buy a bond at today's price, hold it to maturity and reinvest the coupons at that same rate. It is the standard way to compare bonds with different prices and coupons. Read the full guide →
Yield trap Stocks & valuation: A stock whose dividend yield looks generous because the market has already marked the price down in anticipation of a cut. Check the payout ratio and the cash flow before treating the yield as income. Read the full guide →