US Capital Markets

Practical Terms in stock market

  • A company whose stock is traded in the market is called a Publicly Traded Corporation.

  • A company’s capital assets are called its Equity Capital.  Therefore, investing in stocks is called Equity Investment.  Because of this, stocks are also called Equities.

  • The terms Bull and Bear refer to an optimistic and a pessimistic investor respectively.  The bulls believe that a stock’s price will go up, while the bears believe it will fall.  Accordingly, a period of rising stock prices is called a Bull Market, and a period of falling prices is called a Bear Market.

  • The Bid price of a stock is the price someone is willing to buy it at.  The Ask price is the one that people are willing to sell it at.  The difference between these two prices is called the Spread.

  • A stock’s Quote is its price at any given moment.

  • Blue Chips are stocks from leading, well-established companies.

  • A company’s market price is called its Market Capitalization (Market Cap).  Firms are divided into three categories according to market cap.
    • Large Cap – more than 20 billion dollars.
    • Mid Cap – between 5 and 20 billion dollars.
    • Small Cap – less than 5 billion dollars.

  • A share’s price, divided by the company’s earnings per share is called the Price to Earning Ratio (P/E Ratio).

  • Buying stocks on credit is called Buying on Margin.  If stock prices fall, and and the buyer’s guarantees are not enough, the creditor needs extra security.  Asking for that security is called a Margin Call.

  • Selling stocks that you don’t yet own is called Short Selling.  The shares that are borrowed by a company in order to sell short, are called the firms Short Interest.

  • Most transactions occur in lots of 100 shares.  These lots are called Round Lots.  An order for a different number of shares is for an Odd Lot.
Practical Terms in stock market 570  Practical Terms in stock market