Trading Glossary
Learn the language of the markets with our comprehensive glossary.
A
- Ask
- The lowest price a seller is willing to accept for a security.
- At-the-Money (ATM)
- An option with a strike price equal to or near the current market price of the underlying asset.
B
- Bear Market
- A market condition where prices are falling or expected to fall, typically 20% or more from recent highs.
- Bid
- The highest price a buyer is willing to pay for a security.
- Bull Market
- A market condition where prices are rising or expected to rise.
C
- Call Option
- A contract giving the holder the right to buy an asset at a specified price within a specific time period.
D
- Delta
- Measures how much an option price changes for every $1 move in the underlying asset.
- Dividend
- A payment made by a company to its shareholders, usually from profits.
E
- ETF
- Exchange-Traded Fund - a basket of securities that trades on an exchange like a stock.
- Expiration Date
- The date on which an options contract becomes void and the right to exercise no longer exists.
G
- Gamma
- Measures the rate of change in delta for every $1 move in the underlying asset.
- Greeks
- Metrics (Delta, Gamma, Theta, Vega) that measure different risk factors in options trading.
I
- In-the-Money (ITM)
- An option that has intrinsic value. Calls are ITM when stock price > strike; puts when stock price < strike.
L
- Leverage
- Using borrowed capital or financial instruments to amplify potential returns.
- Limit Order
- An order to buy or sell at a specific price or better.
- Liquidity
- How easily an asset can be bought or sold without affecting its price.
- Long Position
- Owning a security or being a buyer of a contract, betting on price increase.
M
- Market Order
- An order to buy or sell immediately at the best available price.
O
- Out-of-the-Money (OTM)
- An option with no intrinsic value. Calls are OTM when stock price < strike; puts when stock price > strike.
P
- Premium
- The price paid to purchase an options contract.
- Put Option
- A contract giving the holder the right to sell an asset at a specified price within a specific time period.
R
- Resistance
- A price level where selling pressure is strong enough to prevent further price increase.
S
- Short Position
- Selling a security you dont own (borrowing it), betting on price decrease.
- Spread
- The difference between bid and ask prices, or an options strategy using multiple contracts.
- Stop Loss
- An order to sell a security when it reaches a certain price to limit losses.
- Strike Price
- The price at which an option holder can buy (call) or sell (put) the underlying asset.
- Support
- A price level where buying pressure is strong enough to prevent further price decline.
T
- Theta
- Measures time decay - how much an options value decreases as expiration approaches.
V
- Vega
- Measures sensitivity to volatility - how much an options price changes with implied volatility.
- Volatility
- A measure of how much a securitys price fluctuates over time.
- Volume
- The number of shares or contracts traded in a given period.