Glossary
Plain-English, education-only definitions — each linked to the lessons and related terms that give it context.
0DTE
Zero days to expiration — an option traded on the day it expires. Daily index expirations have made 0DTE options a large share of index-option volume; they carry the most extreme time decay and gamma of any option.
4% Rule
A rule of thumb suggesting you can withdraw about 4% of your portfolio in year one of retirement, then adjust for inflation, with low risk of running out.
60/40 Portfolio
A classic balanced portfolio of 60% shares and 40% bonds, aiming to blend growth with stability.
Accumulating Fund
A fund that reinvests its income automatically, growing the unit price rather than paying cash out.
Active Management
Trying to beat the market through research and selection, charging higher fees for the attempt.
Alpha
Return above what a benchmark or the market would explain — the prize active managers seek.
Anchoring
Fixating on a reference point, such as a purchase price, that distorts judgement about what to do next.
Annuity
A product that converts a lump sum into a guaranteed income, often for life, in retirement.
Ask
The lowest price a seller is currently willing to accept for an asset. Also called the offer.
Asset
Anything of value an investor can own that may produce income or grow in worth — shares, bonds, property, cash or funds.
Asset Allocation
How a portfolio is divided across asset classes such as shares, bonds and cash — the biggest driver of long-term returns and risk.
Assignment
When an option seller is required to fulfil the contract — delivering or buying the underlying shares.
At the Money
An option whose strike price is roughly equal to the current price of the underlying.
ATR
Average True Range — a measure of how much an asset typically moves in a period, used to gauge volatility and size stops.
Backwardation
When futures prices are lower than the expected spot price, so longer-dated contracts are cheaper.
Balance Sheet
A snapshot of what a company owns (assets), owes (liabilities) and is worth (equity) at a point in time.
Base Rate
The interest rate set by the Bank of England (officially Bank Rate), the anchor from which mortgage, savings and loan rates across the UK are priced.
Basis Point
One hundredth of a percentage point (0.01%), the standard unit for quoting interest-rate and yield changes.
Bear Market
A prolonged period of falling prices and pessimism, conventionally a fall of 20% or more from recent highs.
Benchmark
A standard, usually an index, against which an investment's performance is measured.
Beta
A measure of how much an asset moves relative to the overall market; a beta above 1 means it swings more than the market.
Bid
The highest price a buyer is currently willing to pay for an asset.
Blue Chip
A large, well-established, financially sound company with a long record of reliable performance.
Bollinger Bands
Volatility bands plotted above and below a moving average that widen and narrow as volatility changes.
Bond
A loan to a government or company that pays regular interest and returns the principal at maturity — generally lower-risk and lower-return than shares.
Book Value
A company's net worth on its balance sheet — assets minus liabilities — often compared with its market value.
Breakout
When price pushes decisively through a support or resistance level, often signalling the start of a new move.
Broker
A regulated firm that gives investors access to financial markets, routing their orders to venues where they can be executed and holding their accounts.
Bull Market
A prolonged period of rising prices and optimism, conventionally a rise of 20% or more from recent lows.
Business Cycle
The recurring pattern of economic expansion, peak, contraction (recession) and trough through which economies move over time.
Buyback
When a company repurchases its own shares, reducing the share count and lifting earnings per share.
Buying Power
The total amount an investor can put toward buying securities — their available cash plus any margin (borrowing) the broker extends.
Call Option
A contract giving the right, not the obligation, to buy an asset at a set price before a deadline — a bet that the price will rise.
Candlestick
A chart bar showing the open, high, low and close for a period, whose shape hints at the balance of buyers and sellers.
Capital
The money available to invest, or that a business uses to operate and grow.
Capital Gain
The profit made when an investment is sold for more than it cost. It may be subject to capital gains tax.
Cash Account
A brokerage account where you can only invest money you actually have, with no borrowing — lower risk than a margin account.
Cash Flow Statement
A financial statement tracking the actual cash moving in and out of a business, often more telling than reported profit.
Cash Settlement
Settling a futures contract at expiry by paying the monetary difference against a final settlement price, with no delivery of the underlying — used by index futures.
Cash-Secured Put
Selling a put while holding enough cash to buy the shares if assigned — a way to earn income or buy at a target price.
Cede & Co
The nominee of the Depository Trust Company (DTC) in the United States. It appears as the registered holder of most US shares, enabling efficient electronic settlement.
Central Bank
A national monetary authority, such as the Bank of England or Federal Reserve, that sets interest rates and manages the money supply.
Charm
A second-order option Greek, also called delta decay, measuring how an option's delta changes purely as time passes. It matters for keeping a hedged position neutral over days, weekends and into expiration.
Clearing House
An institution that sits between buyer and seller to guarantee a trade completes, managing counterparty risk.
Cognitive Bias
A systematic pattern of deviation from rational judgement, such as loss aversion or confirmation bias, that predictably distorts trading and investing decisions.
Color
A third-order option Greek, also called gamma decay, measuring how gamma changes as time passes. It is large for at-the-money options near expiration, warning that a gamma-hedge will destabilise as expiry approaches.
Commission
A fee a broker charges for executing a trade. Many brokers now offer commission-free trading on some products, earning instead from spreads, financing or payment for order flow.
Common Stock
The standard form of company ownership, carrying voting rights and a residual claim on profits via dividends and growth.
Compound Growth
The accelerating growth that comes from reinvesting returns so they earn returns of their own — most powerful over long periods.
Compound Interest
Earning returns on your past returns as well as your original stake, so growth accelerates over time — the engine of long-term investing.
Confirmation Bias
Seeking out information that supports what you already believe while ignoring evidence against it.
Contango
When futures prices are higher than the expected future spot price, so longer-dated contracts cost more — common in many commodity markets.
Contract Multiplier
The amount of the underlying that one futures contract represents (for example $50 per index point), converting each unit of price movement into a monetary value.
Core Inflation
Inflation excluding volatile food and energy prices, used to reveal the steadier underlying trend that policymakers focus on.
Core-Satellite
A strategy pairing a low-cost index 'core' with smaller active 'satellite' positions.
Correlation
How closely two assets move together; combining low-correlation assets reduces overall portfolio risk.
Cost to Borrow
The annualised fee a short seller pays to borrow shares, set by supply and demand in the securities-lending market. A high cost to borrow (CTB) signals the shares are scarce and hard to borrow.
Coupon
The fixed interest a bond pays, expressed as a percentage of its face value — for example a £1,000 bond with a 5% coupon pays £50 a year.
Covered Call
Selling a call option against shares you own to earn premium income, capping upside in exchange.
CPI
Consumer Price Index — a common measure of inflation tracking the price of a basket of household goods and services.
Credit Spread
An options strategy that collects a net premium up front, profiting if the underlying stays on the right side of the strikes.
Dark Pool
A private venue where large orders trade away from public exchanges to limit market impact.
Days to Cover
Short interest divided by average daily trading volume — roughly how many days of normal volume it would take short sellers to buy back all their positions. Also called the short-interest ratio.
DCF
Discounted cash flow — a valuation method estimating worth as the present value of a business's projected future cash flows.
Debit Spread
An options strategy combining a bought and a sold option for a net cost, with defined risk and reward.
Debt-to-Equity
A company's total debt divided by its equity, gauging how heavily it relies on borrowing.
Decumulation
The retirement phase of spending down your investments to fund living costs — the opposite of the accumulation phase.
Deflation
A sustained fall in general prices, which can be damaging as consumers and firms delay spending.
Delta
An option Greek measuring how much an option's price is expected to change for a one-unit move in the underlying asset's price. It also approximates the probability of finishing in the money.
Dilution
The reduction in existing shareholders' ownership and earnings per share when a company issues new shares.
Discipline
Sticking to a defined plan and rules regardless of emotion — widely seen as the trait that most separates winners from losers.
Disposition Effect
The tendency, driven by loss aversion, to sell winning positions too early while holding losing ones too long — the opposite of sound risk management.
Distributing Fund
A fund that pays its income out to holders as cash rather than reinvesting it.
Divergence
When price and an indicator move in opposite directions, often warning that a trend is weakening.
Diversification
Spreading money across many investments so no single one can sink the whole portfolio — the closest thing investing has to a free lunch.
Dividend
A distribution of a company's profits to its shareholders, usually paid in cash per share. Dividends are discretionary — never guaranteed — and can be cut or suspended at any time.
Dividend Yield
A company's annual dividend per share divided by its share price, showing the income return as a percentage.
Doji
A candlestick with almost no body, where open and close are nearly equal, signalling indecision.
Dollar-Cost Averaging
Investing fixed amounts at regular intervals to reduce the impact of timing and volatility. (Pound-cost averaging in the UK.)
Dovish
A central-bank stance leaning toward lower interest rates (or looser policy) to support growth and employment, tolerating a little more inflation. The opposite of hawkish.
Drawdown
The fall from a portfolio's peak value to a subsequent trough, a key measure of pain and risk.
DRS
Direct Registration System — a way of holding shares registered directly in the investor's own name on the company's books, rather than in a broker's name.
DTCC
Depository Trust & Clearing Corporation — the US institution that clears and settles the vast majority of securities trades.
Duration
A measure of how sensitive a bond's price is to interest-rate changes; a duration of 8 implies roughly an 8% price fall if rates rise one percentage point.
EBITDA
Earnings before interest, tax, depreciation and amortisation — a rough proxy for operating profitability.
Economic Moat
A durable competitive advantage that protects a company's profits from rivals, such as a strong brand or network effect.
Efficient Frontier
The set of portfolios offering the highest expected return for each level of risk, central to modern portfolio theory.
Emotional Control
The ability to recognise and manage feelings — chiefly fear and greed — so decisions stay grounded in a plan rather than driven by emotion.
Employer Match
Money an employer adds to your pension to match your own contributions — effectively free money.
EPS
Earnings per share — a company's profit divided by its outstanding share count. It expresses profitability per share, so a rising share count (dilution) lowers EPS even when total profit is unchanged.
Equity
Ownership value: a company's assets minus its liabilities, or the value of an investor's stake after any borrowing is repaid.
ETF
Exchange-traded fund — a fund holding a basket of assets that trades on an exchange like a single share, offering instant diversification, usually at low cost.
Ex-Dividend Date
The cut-off date: buy a share on or after it and you won't receive the next dividend.
Exchange
A regulated marketplace, such as the LSE or NYSE, where securities are listed and traded.
Expense Ratio
The annual fee a fund charges, expressed as a percentage of the amount invested. Lower expense ratios leave more of the return with the investor — a key reason low-cost index funds are popular.
Expiration
The date an option contract expires, after which it is either exercised or worthless.
Factor Investing
Tilting a portfolio toward characteristics — value, size, momentum, quality, low volatility — that research links to higher long-run returns; accessed via 'smart beta' funds.
Fails to Deliver
When a seller does not deliver shares to the buyer by the settlement date. Fails (FTDs) can stem from naked short selling but also from ordinary operational or long-sale delays; the SEC publishes the data.
Fear and Greed
The two dominant emotions of the markets: fear drives panic-selling and hesitation, greed drives chasing and oversizing. Most emotional trading mistakes trace back to one of them.
Fibonacci Retracement
Horizontal levels based on Fibonacci ratios used to anticipate where a pullback might pause or reverse.
Financial Independence
Having enough invested that the returns can cover your living costs indefinitely, making paid work optional — the goal of the FIRE movement.
FIRE
Financial Independence, Retire Early — a movement focused on saving aggressively to reach financial freedom sooner.
Fiscal Policy
A government's use of spending and taxation to influence the economy.
Float
Free float — the portion of a company's outstanding shares freely available to trade, excluding closely-held and locked-up stakes. A smaller float means thinner liquidity and sharper price swings.
FOMO
Fear of missing out — the urge to chase a rising asset, often leading to buying at the top.
Fractional Shares
Buying a portion of a single share, letting investors with small sums own expensive stocks and diversify.
Free Cash Flow
The cash a business generates after funding its operations and capital spending — the cash truly available to owners.
Futures Contract
A standardised agreement to buy or sell an asset at a set price on a future date, traded on an exchange.
Gamma
An option Greek measuring the rate of change of delta as the underlying asset moves. High gamma means delta can shift quickly.
Gap
A jump between one period's close and the next period's open, leaving an empty space on the chart.
GDP
Gross domestic product — the total value of goods and services an economy produces, the headline gauge of its size and growth.
Gilt
A bond issued by the UK government, considered one of the safest investments and the UK benchmark for the risk-free interest rate.
Goodwill
The premium a company paid over the fair value of assets in an acquisition, recorded as an intangible asset.
Gross Margin
Revenue minus the direct cost of goods sold, as a percentage of revenue — a measure of basic product profitability.
Growth Stock
A share of a company expected to grow earnings rapidly, usually trading at a high valuation and paying little or no dividend.
Hawkish
A central-bank stance leaning toward higher interest rates (or tighter policy) to fight inflation, even at the cost of slower growth. The opposite of dovish.
Head and Shoulders
A chart pattern of three peaks — a higher middle one — often read as a topping, trend-reversal signal.
Hedge
An offsetting position taken to reduce the risk of loss in another holding.
Hedging
Taking an offsetting position to reduce the risk of adverse price moves in an asset you hold or will need.
Herd Mentality
Following the crowd into or out of investments rather than relying on independent analysis.
High-Frequency Trading
Automated trading using powerful computers to execute huge numbers of orders in fractions of a second.
Implied Volatility
The market's expectation of future volatility, baked into an option's price. Higher implied volatility means pricier options.
In the Money
An option with intrinsic value — a call whose strike is below the current price, or a put whose strike is above it.
Income Statement
A financial statement showing a company's revenue, costs and profit over a period.
Index
A measure tracking the performance of a group of assets, such as the FTSE 100 or S&P 500, used as a market benchmark.
Index Fund
A fund that aims to match a market index by holding its constituents, offering broad, low-cost, passive exposure.
Inflation
The rate at which prices rise and money loses purchasing power over time, eroding the real value of cash and fixed returns.
Initial Margin
The deposit required to open a leveraged futures position, a fraction of the contract's full value.
Interest Rate
The cost of borrowing or the reward for saving, set in large part by central banks and a key driver of asset prices.
Intrinsic Value
What an asset is genuinely worth based on fundamentals — often the present value of its future cash flows — versus its market price.
IPO
Initial public offering — the first sale of a private company's shares to the public, listing it on an exchange.
Iron Condor
A defined-risk options strategy that profits when the underlying stays within a range, selling a call spread and a put spread.
ISA
Individual Savings Account — a UK tax wrapper letting you invest up to an annual limit with no tax on gains, income or dividends.
LEAPS
Long-dated options with expirations a year or more away, used for longer-term directional bets.
Leverage
Using borrowed money to increase the size of an investment, amplifying both gains and losses.
Liability
Something you owe — a debt or financial obligation. A company's liabilities are subtracted from its assets to find its equity.
Limit Order
An order to buy or sell only at a specified price or better, giving you price control but no guarantee of execution.
Liquidity
How easily an asset can be bought or sold without significantly affecting its price. Highly liquid markets have many buyers and sellers and tight spreads.
Long Position
Owning an asset, or a contract to buy it, in the expectation that its price will rise.
Loss Aversion
The tendency to feel losses more painfully than equivalent gains, which can drive poor decisions like holding losers too long.
MACD
Moving Average Convergence Divergence — a momentum indicator built from the gap between two moving averages and a signal line.
Maintenance Margin
The minimum equity that must be kept in a futures account; falling below it triggers a margin call.
Margin
Money borrowed from a broker to trade a larger position than your own cash allows. Margin amplifies both gains and losses and carries the risk of a margin call if the position moves against you.
Margin Call
A broker's demand to add cash or close positions when a margin account's value falls too low.
Mark to Market
Revaluing a position at current market prices, with futures gains and losses settled daily.
Market Cap
Market capitalisation — a company's total market value, calculated as its share price multiplied by the number of outstanding shares. The share price alone says nothing about size without the share count.
Market Maker
A firm that continuously quotes prices to buy and sell an asset, providing liquidity so that other participants can trade quickly. It profits primarily from the spread.
Market Order
An order to buy or sell immediately at the best available price, prioritising speed of execution over price certainty.
Maximum Drawdown
The largest peak-to-trough fall a portfolio suffered over a period — a visceral measure of the worst loss an investor had to endure.
Modern Portfolio Theory
A framework for combining assets to maximise expected return for a given level of risk through diversification.
Momentum
The tendency of price to keep moving in its current direction, and the indicators that measure its strength.
Monetary Policy
A central bank's actions on interest rates and money supply to manage inflation and growth.
Moving Average
The average price over a recent window, smoothing out noise to reveal the underlying trend.
Mutual Fund
A pooled fund that invests in many assets on behalf of its holders, priced once a day at its net asset value.
Naked Short Selling
Selling shares short without having borrowed or arranged to borrow them. It is tightly regulated in the US under Regulation SHO; abusive naked shorting (defective locates, unresolved fails or deception) can violate the rules, and it is one source of failures to deliver.
NAV
Net asset value — the per-share value of a fund's underlying holdings (total assets minus liabilities, divided by the number of shares). A fund's market price can trade slightly above or below its NAV.
NBBO
National Best Bid and Offer — the best available bid and ask across US exchanges that brokers must honour.
Net Income
A company's profit after all costs, interest and tax — the 'bottom line'.
Net Worth
The total value of everything you own minus everything you owe.
Nominee Account
An account where a broker holds your shares in its own name on your behalf — the standard way most retail shares are held.
Notional Value
The total value of the underlying a futures contract controls — the price times the multiplier — which is far larger than the margin posted to trade it.
Open Interest
The total number of an option or futures contract currently outstanding, a gauge of activity and liquidity.
Order Book
The live list of all outstanding buy and sell orders for an asset at each price level.
OTC
Over-the-counter — trading done directly between two parties rather than on a central exchange.
Out of the Money
An option with no intrinsic value — only time value — that would not be worth exercising right now.
Outstanding Shares
The total number of a company's shares currently held by all investors, used to calculate market cap and EPS.
Overtrading
Trading too frequently, often driven by emotion or boredom, racking up costs and mistakes.
P/E Ratio
Price-to-earnings ratio — a share price divided by earnings per share, a quick gauge of how richly a stock is valued.
Passive Investing
Aiming to match the market by tracking an index rather than trying to beat it through selection — usually cheaper, and historically hard to outperform.
Payment for Order Flow
Payment a broker receives for routing customer orders to a particular market maker — a common revenue source behind 'commission-free' trading.
Payout Ratio
The share of a company's earnings paid out as dividends. A very high ratio may be hard to sustain.
PEG Ratio
The P/E ratio divided by the earnings growth rate, putting a valuation in the context of how fast a company is growing.
Penny Stock
A very low-priced, often small and speculative share, typically volatile and thinly traded.
Pension
A long-term savings vehicle for retirement, often with tax advantages and sometimes employer contributions.
Physical Settlement
Settling a futures contract at expiry by delivering the actual underlying asset, such as barrels of oil or ounces of gold, rather than cash.
Portfolio
The full collection of investments an individual or institution holds.
Position Sizing
Deciding how much to invest in a single trade so that one loss can't do disproportionate damage.
Pound-Cost Averaging
Investing a fixed sum at regular intervals regardless of price, so you buy more when cheap and less when dear — smoothing out timing risk. (Dollar-cost averaging in the US.)
PPI
Producer Price Index — a measure of inflation at the factory gate, tracking the prices producers pay for inputs and receive for outputs, often leading consumer prices (CPI).
Preferred Stock
A class of shares paying a fixed dividend with priority over common shares, but usually without voting rights.
Price-to-Book
A share price divided by book value per share, comparing market value with accounting net worth.
Principal
The original sum invested or borrowed, before any interest or returns.
Prospect Theory
The Nobel-winning theory of Kahneman and Tversky describing how people value gains and losses asymmetrically — the foundation of loss aversion.
Put Option
A contract giving the right, not the obligation, to sell an asset at a set price before a deadline — a bet on a fall, or insurance for a holding.
Quantitative Easing
A central bank creating money to buy assets, aiming to lower borrowing costs and stimulate the economy.
Quantitative Tightening
The reverse of quantitative easing: a central bank shrinking its balance sheet by letting bonds mature without replacing them (or selling them), which drains money from the system and tends to push borrowing costs up.
R-Multiple
A trade's outcome expressed in multiples of the amount risked, so a +2R win is twice the planned risk.
Real Interest Rate
An interest rate after subtracting inflation (real ≈ nominal − inflation) — the true change in purchasing power a saver or borrower experiences.
Rebalancing
Periodically adjusting a portfolio back to its target mix as some holdings grow faster than others.
Recency Bias
Over-weighting recent events when judging the future, such as assuming a rising market will keep rising.
Recession
A significant, sustained decline in economic activity, often defined as two consecutive quarters of falling GDP.
Regulation SHO
The SEC rule set governing short sales (2005). It requires a 'locate' before shorting, forces close-out of persistent fails to deliver, and includes the alternative uptick rule that restricts shorting a stock after it falls 10% in a day.
Rehypothecation
A broker or prime broker reusing assets a client pledged as collateral — for example, lending out shares held in margin accounts. It is how many of the shares available for short selling are sourced.
Resistance
A price level where selling tends to halt a rise, as supply repeatedly steps in.
Retained Earnings
Profits a company keeps and reinvests rather than paying out as dividends.
Return
The gain or loss on an investment over a period, usually expressed as a percentage of the amount invested.
Revenge Trading
Trying to win back losses with impulsive, oversized trades — a fast route to bigger losses.
Revenue
The total money a company brings in from sales before any costs — the 'top line'.
Reversal
A change in the prevailing direction of price, from up to down or vice versa.
Rho
An option Greek measuring sensitivity to interest rates — how much an option's price changes for a one-percentage-point change in the risk-free rate. Calls have positive rho and puts negative; it matters most for long-dated options.
Rights Issue
An offer letting existing shareholders buy new shares, usually at a discount, to raise capital — diluting those who don't take part.
Risk Parity
An approach that allocates by risk contribution rather than capital, so no single asset dominates portfolio risk.
Risk Tolerance
How much volatility and potential loss an investor is willing and able to bear, shaping how their portfolio should be built.
Risk-Reward Ratio
The potential loss compared with the potential gain on a trade, used to judge whether it's worth taking.
ROE
Return on equity — profit as a percentage of shareholders' equity, measuring how efficiently a company turns capital into profit.
ROIC
Return on invested capital — how much profit a company generates per pound of capital it employs, a key quality measure.
Rollover
Closing an expiring futures contract and opening a later-dated one to maintain exposure.
RSI
Relative Strength Index — a momentum oscillator from 0 to 100 flagging potentially overbought (high) or oversold (low) conditions.
Securities Lending
Lending out shares, often to short sellers, for a fee — a way funds and brokers earn extra income.
Security
A tradable financial asset such as a share, bond or fund unit.
Sequence Risk
The danger that poor returns early in retirement — while you're withdrawing — permanently damage a pot, even if long-term average returns are fine.
Settlement
The process of finalising a trade — exchanging cash for the security — which completes a day or two after the trade (e.g. T+2).
Shareholder
An owner of one or more shares in a company. Shareholders have a residual claim on its profits and assets and, for common shares, usually the right to vote on company matters.
Sharpe Ratio
A measure of return earned per unit of risk taken, used to compare investments on a risk-adjusted basis.
Short Interest
The total number of a company's shares sold short, a gauge of bearish sentiment.
Short Position
A position that profits when an asset's price falls, typically by selling borrowed or future-dated assets.
Short Selling
Selling a borrowed asset hoping to buy it back cheaper later, profiting if the price falls — with theoretically unlimited risk if it rises.
Short Squeeze
A sharp price rise that forces short sellers to buy back (cover) to cap their losses, and that buying pushes the price higher still — a self-reinforcing spike.
Short Volume
The portion of a day's trading volume recorded as short sales. Often misread as short interest — it is not: much of it is market makers marking hedging trades short, so high short volume does not mean a large net short position.
SIPP
Self-Invested Personal Pension — a UK pension that lets you choose your own investments, with tax relief on contributions.
Slippage
The difference between the price you expected and the price you actually got, common in fast-moving or illiquid markets.
Soft Landing
When a central bank raises interest rates enough to bring inflation down without tipping the economy into recession — a slowdown rather than a crash. The difficult, sought-after outcome of a tightening cycle.
Speed
A third-order option Greek measuring the rate of change of gamma as the underlying price moves — how unstable an option's gamma is. It is used mainly in large-book risk management near expiration.
Spread
The difference between the highest price buyers will pay (the bid) and the lowest price sellers will accept (the ask). A narrower spread generally means lower trading cost.
Stagflation
The uncomfortable combination of stagnant growth (or recession) and high inflation at once. It is hard for a central bank to fix, because raising rates to curb inflation can deepen the slump.
Stock
A unit of ownership in a company. Holding a stock (or share) makes you a part-owner, with a claim on a portion of the company's assets and profits.
Stock Split
Dividing existing shares into more, lower-priced shares. A split changes the share count and price but not the company's total value.
Stop Order
An order that becomes a market order once the price reaches a set 'stop' level — often used to limit losses or protect profits.
Stop-Limit Order
A stop order that becomes a limit order when triggered, adding price control at the risk of non-execution.
Stop-Loss
A preset price at which a position is automatically closed to cap a loss.
Straddle
Buying a call and a put at the same strike, profiting from a large move in either direction.
Strangle
Buying a call and a put at different out-of-the-money strikes, a cheaper bet on a big move either way.
Strike Price
The fixed price at which an option lets you buy or sell the underlying asset.
Support
A price level where buying tends to halt a fall, as demand repeatedly steps in.
Systematic Risk
Market-wide risk (recessions, rate shocks) that affects nearly all assets at once and cannot be diversified away.
Tail Risk
The risk of rare but severe events far out in the distribution of outcomes, which standard models tend to underestimate.
Take Profit
An order that automatically closes a position once it reaches a chosen profit target, banking the gain without needing to watch the market. The mirror image of a stop-loss.
Tapering
The gradual slowing of a central bank's asset purchases — buying less each month rather than stopping abruptly or reversing. Usually the first step on the path from easing toward tightening.
Target-Date Fund
An all-in-one fund that automatically shifts from growth toward stability as a chosen retirement year approaches, rebalancing itself throughout.
Tax Relief
Government top-ups or tax reductions on pension contributions that boost the amount actually invested.
Tax Wrapper
An account such as an ISA or pension that shelters the investments held inside it from some or all tax on growth, income and gains.
TER
Total expense ratio — the all-in annual cost of holding a fund, expressed as a percentage of the amount invested.
Theta
An option Greek measuring time decay — how much value an option loses each day, all else being equal, as it approaches expiration.
Tick Value
The monetary worth of one tick (the smallest price increment) on a futures contract — the tick size multiplied by the contract multiplier, and the building block of profit and loss.
Ticker
The short symbol identifying a listed security on an exchange, such as AAPL for Apple.
Tilt
An emotionally compromised state, often after a loss, in which judgement collapses and decisions become impulsive and irrational — the state behind revenge trading.
Time Horizon
How long until an investor needs their money. A longer horizon allows more risk, since there is time to recover from downturns.
Time Value
The part of an option's premium beyond its intrinsic value, reflecting the chance it gains value before expiry. It decays over time.
Total Return
An investment's full return including both price change and income (dividends or interest) reinvested.
Tracking Error
How closely an index fund or ETF follows the index it aims to replicate. A small tracking error means the fund mirrors its benchmark well; a larger one means it drifts from it.
Trading Plan
A written set of rules defining what you trade, your entries and exits, and your risk limits — decided in advance so execution isn't left to in-the-moment emotion.
Trailing Stop
A stop-loss that follows the price at a set distance as it moves in your favour — locking in gains — and only triggers if the price reverses by that amount. It never moves against you.
Trendline
A straight line drawn along a series of highs or lows to visualise the direction of a trend.
Ultima
A third-order option Greek measuring how vomma changes as implied volatility changes — the deepest commonly-named volatility Greek, used only in large or complex volatility books.
Unsystematic Risk
Risk specific to an individual asset or company that can be diversified away by holding many uncorrelated holdings.
Value at Risk
An estimate of the maximum loss a portfolio is likely to suffer over a period at a given confidence level.
Value Stock
A share that appears cheap relative to its fundamentals, often out of favour, bought in the hope the market re-rates it.
Vanna
A second-order option Greek measuring how delta changes as implied volatility changes — equivalently, how vega changes as the underlying moves. It links an option's directional and volatility exposures and drives dealer hedging flows.
Vega
An option Greek measuring sensitivity to changes in implied volatility — how much the price moves as expected volatility shifts.
Vesting
The process by which you gain full ownership of employer contributions or share awards over time.
Veta
A second-order option Greek measuring how vega changes as time passes — the decay of an option's volatility sensitivity, and a reason long-dated options are the natural home for volatility bets.
Volatility
A measure of how much the price of an asset fluctuates over time. Higher volatility means larger price swings and is associated with greater uncertainty and risk.
Volume
The number of shares or contracts traded in a period, used to gauge the conviction behind a move.
Vomma
A second-order option Greek (also called volga) measuring how vega changes as implied volatility changes — the convexity of vega. It is largest for out-of-the-money options and is used to trade the volatility of volatility.
Voting Rights
The right of common shareholders to vote on company matters such as electing directors, usually one vote per share.
VWAP
Volume-Weighted Average Price — the average price over a day weighted by volume, a benchmark for fair intraday value.
Withdrawal Rate
The percentage of a retirement pot drawn each year; a sustainable rate is key to not running out of money.
Working Capital
The difference between a company's short-term assets and short-term liabilities, funding day-to-day operations.
WTI
West Texas Intermediate — a benchmark grade of US light, sweet crude oil, and the underlying of the CL futures contract.
Yield
The income an investment pays, expressed as a percentage of its price — for example a dividend yield or a bond's interest yield.
Yield Curve
A graph of interest rates across maturities; its shape, especially when inverted, is watched as a recession signal.
Yield to Maturity
The total annualised return earned by buying a bond at its current price and holding it to maturity, counting all coupons plus any gain or loss versus the face value.