Glossary of Stock Trading and Investment Terminology

Agribusiness Investments


The term agribusiness investments refer to investments in various agricultural sectors including timber and wine. In the case of agribusiness investments, an investor grows crop and the cost involved with it (which includes the expense of establishment and ongoing expenses) is normally considered as business expenses which are tax-deductible against other earnings. The earnings that a crop grower generates through the sale of the crop are considered as assessable income.

Benefits of investing in Agribusiness

Greeks


Various factors that influence option price are termed as “Greeks”. The Greeks helps a trader to understand how much an option is exposed to implied volatility, time-value decay and changes in the underlying price of the asset, usually stocks, shares and other market listed securities. Investors can estimate the level of risk in trading options by using these risk measures. There are mainly four types of Greeks that are usually used to measure risk:

  • Delta
  • Vega
  • Theta
  • Gamma

Delta

Self Managed Super Fund


Self managed super fund (in short SMSF) is preferred by those people who are interested to manage their own super instead of investment through public offer fund or industry fund. If you are the owner of an SMSF, then you are going to be the trustee for the fund. It is to be mentioned that it is mandatory for an SMSF to keep the number of members lower than five.

What should be the Purpose of your SMSF?

Direct Market Access (DMA)


In case of Direct Market Access (DMA), both the CFD prices and liquidity remains equal to the underlying market. This is why traders or investors can enter positions at the identical market price when it comes to direct market access. Investors who follow this particular model are termed as the DMA CFD traders.

Value Funds


Funds that try to make profit by investing on under priced stocks are known as value funds. A value fund looks for cheap stocks that it considers being under valued by the market and invests on such shares with expectations of making profit in future when these shares will rebound with increased demand.

Value Funds: Determining Stocks to Invest

Bid/Offer Spread


The bid/offer spread refers to the difference between the bid price and offer price. To be more specific, it is the difference between the highest amount that a buyer is willing to spend for an asset and the lowest price/amount in exchange of which the seller is willing to sell it. “Bid price” is the selling price while the “offer price” is the purchase price.

For instance, if the bid price is $25 and the offer price is $26, then the bid/offer spread is going to be $26 - $25 = $1.

Bid/offer Spread- from the Perspective of the Stock Market

Contingent Order


Contingent order (also called a net order or a "not held" order) is the placement of two share orders; one order cannot be initiated without the other. For example, customer A places a buy order and a sell limit order in the market. The buy cannot proceed unless the sell limit order is also executed. An example of a contingent order is a buy-write. When two separate transactions must occur at the same time, contingent orders are usually placed.

Currency Correlation


In the currency market sometimes it is found that one currency pair is following the movements of another pair. In forex trading this phenomenon is called the currency correlation- something that many forex traders use to make profit in the currency market. The correlation among two currency pairs will be either positive or negative. Now regardless of what type of currency correlation it is, it will always remain within the range of +1 and -1.

Hedging


Hedging is a process through which an investor can offset his exposure to price risk in a market by going for an equal yet opposite position in some other market. Hedging is considered as a very sophisticated trading strategy that is more often implied by the hedge fund operators and professional traders. However, these days hedging is available for ordinary traders as well since many people considers CFDs as one of the most effective hedging tools. The whole idea of hedging is more like a trader trading against himself.

Dividends


A portion of the annual earnings of a public company are called dividends, which are distributed to its shareholders. Dividends are generally sourced from profits, but some companies may carry out a loan to payout dividends. Dividends are usually paid quarterly.

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