Finance Glossary
222+ investing, trading, and markets terms explained in plain English. Click any term for a deeper explanation with examples and related concepts.
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1
A
ABS (Asset-Backed Securities)
Bonds backed by pools of consumer or business loans (auto, credit card, student loans).
Acquisition
When one company purchases another, typically via stock or cash offer.
Alpha
Return earned in excess of a benchmark, after adjusting for risk.
AMM (Automated Market Maker)
A DEX mechanism that prices assets using mathematical formulas and liquidity pools, not order books.
Amortization
Like depreciation but for intangible assets (patents, software, acquired customer lists).
Analyst Rating
Buy/sell/hold recommendations from sell-side equity research analysts.
ARR (Annual Recurring Revenue)
Annualized run-rate of subscription or recurring contract revenue.
Asset Allocation
How a portfolio is split between asset classes (stocks, bonds, cash, alternatives).
B
Bear Market
A sustained decline of 20% or more from recent highs.
Beta
A measure of a stock's volatility relative to the broader market.
Bid-Ask Spread
The difference between the highest price buyers will pay (bid) and lowest sellers will accept (ask).
Blockchain
A distributed digital ledger that records transactions across many computers.
Bollinger Bands
Volatility bands plotted two standard deviations above and below a moving average.
Breakout
When price moves above resistance or below support with conviction.
BSE (Bombay Stock Exchange)
Asia's oldest stock exchange (founded 1875), home of the Sensex index.
BTST (Buy Today Sell Tomorrow)
Indian retail strategy of buying stock and selling next session before delivery settles.
Budget Deficit
When government spending exceeds revenue in a given period.
Bull Market
A sustained period of rising prices — conventionally a 20%+ rally from recent lows.
C
CAC (Customer Acquisition Cost)
Sales and marketing spend divided by new customers acquired.
Call Option
A contract giving the right to buy a stock at a specified strike price by an expiration date.
Callable Bond
A bond that the issuer can redeem before maturity, usually when rates fall.
Candlestick Chart
A price chart where each bar shows open, high, low, close — the most common chart format.
Capex (Capital Expenditures)
Spending on physical assets — property, equipment, infrastructure.
Capital Gains
Profit from selling a capital asset (stocks, bonds, real estate, crypto).
Churn
Rate at which customers cancel or stop using a product.
Circuit Breaker
Trading halt triggered when an index or stock moves beyond predefined thresholds.
Consensus Estimate
The average of analyst forecasts (typically EPS or revenue) for upcoming periods.
Consumer Confidence
Surveys measuring household optimism about the economy and personal finances.
Convertible Bond
A corporate bond that can be exchanged for a set number of company shares.
Copper
An industrial metal called "Dr. Copper" for its ability to predict economic cycles.
Core CPI
Consumer Price Index excluding food and energy — captures underlying inflation trend.
Corn
A staple crop and major US agricultural export — used for feed, ethanol, food, and exports.
Correction
A market decline of 10-20% — milder than a bear market.
Correlation
Statistical measure of how two assets move relative to each other (-1 to +1).
Coupon
The annual interest payment a bond pays to its holder.
Covered Call
Selling call options against shares you already own to generate income.
CPI (Consumer Price Index)
The most-watched measure of inflation — tracks changes in prices of a basket of consumer goods.
Credit Rating
An assessment of a borrower's creditworthiness by rating agencies.
Credit Spread
The yield difference between a corporate or sovereign bond and a comparable Treasury.
Crude Oil
Unrefined petroleum — the world's most traded commodity by value.
Current Account
A country's net flow of goods, services, income, and transfers with the rest of the world.
D
DAO (Decentralized Autonomous Organization)
An organization governed by smart contracts and token-holder voting, rather than traditional management.
DCF (Discounted Cash Flow)
A valuation method that discounts projected future cash flows back to present value.
Deferred Revenue
Cash received for goods or services not yet delivered — a liability until earned.
DeFi (Decentralized Finance)
Financial services (lending, trading, derivatives) built on public blockchains via smart contracts.
Deflation
A sustained fall in the general price level — the opposite of inflation.
Delta
Change in option price per $1 move in the underlying — ranges 0 to 1 for calls, -1 to 0 for puts.
Demat Account
Indian electronic securities account holding shares in dematerialized form.
Depreciation
Accounting allocation of an asset's cost over its useful life.
Derivatives
Financial instruments whose value derives from an underlying asset.
DEX (Decentralized Exchange)
A cryptocurrency exchange that runs on a blockchain via smart contracts, with no central operator.
DII (Domestic Institutional Investor)
Indian institutional investors — mutual funds, insurance companies, pension funds.
Dilution
Reduction in existing shareholders' ownership percentage due to new share issuance.
Diversification
Spreading investments across many assets to reduce risk.
Dividend
A cash payment from a company to its shareholders, typically paid quarterly.
Dividend Yield
Annual dividend per share divided by current stock price.
Dollar-Cost Averaging (DCA)
Investing a fixed dollar amount at regular intervals regardless of price.
Durable Goods Orders
Monthly measure of new orders for goods expected to last 3+ years (autos, machinery, appliances).
Duration
A measure of a bond's price sensitivity to interest rate changes.
DXY (US Dollar Index)
A measure of the US dollar's value against a basket of six major currencies.
E
EBITDA
Earnings before interest, taxes, depreciation, and amortization.
ECB (European Central Bank)
Central bank of the eurozone (20 EU countries using the euro).
Enterprise Value (EV)
Market cap plus debt minus cash — the theoretical takeover price.
EPS (Earnings Per Share)
A company's net income divided by its outstanding shares.
ETF (Exchange-Traded Fund)
A fund that trades on stock exchanges like a single stock.
EV/EBITDA
Enterprise value divided by EBITDA — a capital-structure-neutral valuation metric.
Ex-Dividend Date
The cutoff date — buy before this date to receive the next dividend.
Expense Ratio
Annual cost of owning a fund, expressed as a percentage of assets.
F
F&O (Futures and Options)
Indian shorthand for the equity derivatives segment.
Factor Investing
Investing based on persistent characteristics that drive returns: value, momentum, quality, size, low-volatility.
Federal Funds Rate
The US benchmark interest rate set by the Federal Reserve.
Fibonacci Retracement
Horizontal levels (23.6%, 38.2%, 50%, 61.8%, 78.6%) used to identify potential support/resistance.
FII (Foreign Institutional Investor)
Foreign funds that invest in another country's equity and debt markets.
Fiscal Policy
Government taxation and spending decisions used to influence the economy.
Flash Crash
A rapid market plunge and recovery within minutes, usually driven by algorithmic trading.
Float
Number of shares actually available for public trading.
FOMC
Federal Open Market Committee — the Fed body that sets US monetary policy.
Forex (Foreign Exchange)
The global market for trading currencies — the largest financial market by volume.
Forward P/E
P/E ratio using estimated future earnings instead of trailing actuals.
FPI (Foreign Portfolio Investor)
A regulatory category in India for foreign investors, similar to FII.
Free Cash Flow (FCF)
Cash from operations minus capital expenditures.
Futures
Standardized contracts to buy or sell an asset at a future date and price.
G
G-Secs (Government Securities)
Indian government bonds issued by RBI on behalf of the Government of India.
Gamma
Rate of change of delta — measures how delta itself changes as the underlying moves.
Gamma Squeeze
Self-reinforcing rally driven by dealers buying stock to hedge short call positions.
Gap
A price discontinuity where opening price differs significantly from prior close.
Gas Fee
Transaction fee paid to validators for processing on-chain operations.
GDP (Gross Domestic Product)
The total value of goods and services produced in an economy over a period.
Gilts
UK government bonds — equivalent of US Treasuries.
Glide Path
A pre-set asset allocation schedule that becomes more conservative as a target date approaches.
Gold
A precious metal that has historically served as a store of value and inflation hedge.
Goodwill
Intangible asset representing premium paid in acquisitions over fair value of net assets.
Gross Margin
Revenue minus cost of goods sold, expressed as a percentage of revenue.
Growth Investing
Buying companies with above-average earnings or revenue growth, even at premium valuations.
GST (Goods and Services Tax)
India's unified indirect tax replacing multiple federal and state levies since 2017.
Guidance
Management's forward-looking projections for revenue, earnings, or other metrics.
H
I
IMF (International Monetary Fund)
International organization providing financial assistance and policy advice to member countries.
Implied Volatility (IV)
The expected future volatility of a security, derived from current option prices.
Index Fund
A passive fund designed to replicate a market index's performance.
Industrial Production
Monthly measure of output from manufacturing, mining, and utilities sectors.
Inflation
The rate at which prices rise across the economy over time.
Insider Trading
Trading by company executives, directors, or large shareholders — disclosed publicly within days.
IPO (Initial Public Offering)
When a private company first sells shares to the public on a stock exchange.
Iron Condor
A neutral options strategy combining a bear call spread and bull put spread.
ISM
Institute for Supply Management — publishes US manufacturing and services PMI surveys.
J
L
Layer 2 (L2)
Secondary blockchain networks built on top of base layers (L1) to improve speed and reduce costs.
Leverage
Use of borrowed capital to amplify potential returns and risks.
Limit Order
An order to buy or sell only at a specified price or better.
Liquidity
How easily an asset can be bought or sold without affecting its price.
Liquidity Pool
A smart contract holding token reserves used by AMMs to enable trading.
Lithium
A key battery metal critical for EV batteries and grid storage.
Lockup Period
Restriction preventing insiders from selling shares for a period after IPO.
LTV (Lifetime Value)
Total profit a customer generates over their relationship with a company.
M
MACD
Moving Average Convergence Divergence — a trend-following momentum indicator.
Margin
Borrowed money used to amplify investment positions.
Margin Call
A broker demand for additional collateral when account equity falls too low.
Market Capitalization
Total value of a company's outstanding shares — share price × share count.
Market Order
An order to buy or sell immediately at the best available current price.
MBS (Mortgage-Backed Securities)
Bonds backed by pools of residential mortgages.
Merger
Combination of two companies into one entity.
Mining (Crypto)
The process of validating blockchain transactions by solving computational puzzles, earning crypto rewards.
Momentum
The rate of acceleration in a security's price or volume.
Monetary Policy
A central bank's actions to manage money supply and interest rates.
Moving Average
Average price over a recent period, recalculated as new prices come in.
Mutual Fund
A pooled investment vehicle managed by a professional fund manager.
N
Natural Gas
Methane-dominant gaseous fuel used for heating, electricity, and industry.
NAV (Net Asset Value)
A fund's per-share value, calculated as (assets − liabilities) ÷ shares outstanding.
NFT (Non-Fungible Token)
A unique digital asset recorded on a blockchain — each one different and individually identifiable.
Nifty 50
India's benchmark equity index of 50 large-cap stocks listed on NSE.
Non-Farm Payrolls (NFP)
Monthly US report of jobs added or lost outside agriculture — among the most market-moving releases.
NSE (National Stock Exchange)
India's largest stock exchange by volume — home of Nifty 50 and bulk of F&O activity.
O
OPEC
Organization of Petroleum Exporting Countries — a cartel coordinating oil production.
Operating Margin
Operating profit (EBIT) divided by revenue — measures operational efficiency.
Options
Contracts giving the right (not obligation) to buy or sell an asset at a set price by a set date.
Options Greeks
Mathematical measures of how option prices respond to various factors.
Oracle (Crypto)
A service that feeds real-world data (prices, weather, sports results) into smart contracts.
P
P/E Ratio (Price-to-Earnings)
A stock's price divided by its earnings per share — the most common valuation metric.
Payout Ratio
Percentage of earnings paid out as dividends.
PCE (Personal Consumption Expenditures)
The Fed's preferred inflation gauge — covers a broader basket than CPI with different weights.
PDT Rule
US "Pattern Day Trader" rule requiring $25,000 minimum equity for frequent day trading.
PEG Ratio
P/E ratio divided by earnings growth rate — adjusts P/E for growth.
PIPE
Private Investment in Public Equity — institutions buy newly-issued shares in a public company at a discount.
Platinum
A precious metal with major industrial uses, especially in autocatalysts.
PMI (Purchasing Managers' Index)
A monthly survey of purchasing managers' sentiment — leading indicator of economic activity.
PPI (Producer Price Index)
Measures price changes received by domestic producers — a leading indicator of CPI.
Price Target
An analyst's 12-month price projection for a stock.
Price-to-Book (P/B)
Stock price divided by book value per share.
Private Equity
Investment in private (non-publicly-traded) companies, often via leveraged buyouts.
Private Key
A cryptographic secret that proves ownership and authorizes transactions on a blockchain.
Put Option
A contract giving the right to sell a stock at a specified strike price by an expiration date.
Q
R
Rally
A sustained upward movement in price after a decline or consolidation.
RBI (Reserve Bank of India)
India's central bank — sets monetary policy and regulates banks.
Real Yield
Bond yield after subtracting expected inflation — the "true" return.
Rebalancing
Periodically adjusting portfolio weights back to target allocation.
Recession
A significant, broad-based decline in economic activity lasting more than a few months.
REITs (Real Estate Investment Trusts)
Companies that own income-producing real estate, traded like stocks.
Resistance
A price level where selling pressure has historically capped advances.
Retail Sales
Monthly measure of total receipts at retail stores — a key consumer spending indicator.
Revenue
Top-line sales — total amount earned from delivering goods or services.
Risk Tolerance
How much volatility and potential loss an investor can stomach without panic-selling.
ROA (Return on Assets)
Net income divided by total assets.
ROE (Return on Equity)
Net income divided by shareholders' equity — measures profitability relative to invested capital.
ROIC (Return on Invested Capital)
Operating profit divided by invested capital (debt + equity).
Rollup
A Layer-2 scaling technique that bundles transactions and posts compressed data to L1.
RSI (Relative Strength Index)
A momentum indicator measuring speed and magnitude of price changes, scaled 0-100.
S
SEBI (Securities and Exchange Board of India)
India's capital markets regulator — counterpart to the US SEC.
SEC (Securities and Exchange Commission)
US federal regulator of securities markets, brokers, and public companies.
Sensex
BSE's benchmark index of 30 large-cap Indian stocks.
Sharpe Ratio
Excess return per unit of risk — return above risk-free rate divided by volatility.
Short Interest
Number of shares sold short and not yet covered, often expressed as % of float.
Short Selling
Selling borrowed shares to profit from a price decline.
Short Squeeze
A rapid price rise that forces short sellers to cover, accelerating the rally.
Silver
A precious and industrial metal — more volatile than gold, with broader industrial uses.
SIP (Systematic Investment Plan)
Investing fixed amounts at regular intervals — known as dollar-cost averaging in the US.
Slashing
Penalty mechanism in proof-of-stake networks that confiscates staked tokens for validator misbehavior.
Slippage
The difference between expected and actual trade execution price.
Smart Contract
Self-executing code on a blockchain that runs when conditions are met.
Sovereign Debt
Debt issued by a national government, typically in its own currency or hard currency (USD, EUR).
Soybeans
A major oilseed crop crushed for soybean meal (animal feed) and soybean oil.
SPAC (Special Purpose Acquisition Company)
A "blank check" shell company that raises money via IPO to later acquire a private company.
Spinoff
When a company separates a division into a new independent publicly-traded company.
Spot ETF (Crypto)
An exchange-traded fund holding actual cryptocurrency (rather than futures contracts).
Stablecoins
Cryptocurrencies designed to maintain a stable value, usually pegged to USD.
Stagflation
High inflation combined with stagnant economic growth and rising unemployment.
Staking
Locking up cryptocurrency to help secure a proof-of-stake network in exchange for rewards.
Stock Split
Increasing share count proportionally to lower per-share price.
Stock-Based Compensation (SBC)
Non-cash compensation paid to employees in equity (stock, options, RSUs).
Stop-Loss Order
An order that becomes a market order when the stock hits a trigger price — used to limit losses.
Straddle
Buying both a call and put at the same strike and expiration — a volatility trade.
Strike Price
The pre-agreed price at which an option can be exercised.
Support
A price level where buying interest has historically been strong enough to halt declines.
T
Tax-Loss Harvesting
Selling losing investments to offset capital gains and reduce tax bill.
The Fed (Federal Reserve)
The central bank of the United States.
Theta
Time decay — how much an option loses in value per day, holding all else equal.
Time Horizon
How long an investor expects to hold investments before needing the money.
TIPS (Treasury Inflation-Protected Securities)
US Treasury bonds whose principal adjusts with inflation (CPI).
Trade Deficit
When a country imports more than it exports.
Trend
The general direction of a market or security — uptrend, downtrend, or sideways.
V
Value Investing
Buying securities trading below estimated intrinsic value.
Vega
Sensitivity of option price to a 1% change in implied volatility.
Venture Capital (VC)
Investment in early-stage, high-growth private companies.
Volatility
The degree of variation in an asset's price over time.
Volume
Number of shares traded in a given period.
Volume Profile
A chart showing trading volume at each price level over a period.
W
WACC (Weighted Average Cost of Capital)
A company's blended cost of debt and equity financing.
Wallet (Crypto)
Software or hardware that stores private keys allowing access to cryptocurrency.
Wash Sale
US tax rule disallowing loss deduction if same security is repurchased within 30 days.
Working Capital
Current assets minus current liabilities — short-term liquidity buffer.