GLOSSARY

 

A

ASSET CLASS

Asset classes are different classes of financial investments that can be divided and distinguished into categories by their characteristics or properties. Here are some examples:
Liquidity and similar instruments: deposits or current accounts
Bonds: Investment Grade, High Yield, Government or Corporate Bonds. Bonds based on the short, medium, long term; Foreign or emerging market bonds, Stocks: a first division can be value or growth stocks; or large cap (large cap) or small cap (small cap); domestic, foreign, emerging markets, financial, health, energy, Real estate..., Foreign currencies..., Natural resources (oil, gas, coal, cocoa, wheat, cotton and other raw materials), Precious metals (gold, silver ...), Luxury goods (luxury collectables): works of art, collections, cars, jewelry, etc.

AFTER-HOURS

The interval before the opening of the continuous trading of the financial markets is called pre-market, the interval after the continuous trading is called AFTER-HOURS. In these two intervals it is still possible to make trades.

The biggest advantage in operating outside the day market is that very often companies and companies disclose their economic data, before or after the close of day trading, so as to take the opportunity to intervene immediately on the price movement determined by the news.

Another advantage is found by observing the movements of a stock during the pre-market and then operating at the opening of trading, when volumes increase rapidly.

However, there are risks: The first risk is the lack of liquidity in fact, in these two market sessions, the trading volumes are much lower, and this leads to greater difficulty in operations.

Another disadvantage is a higher spread since the scarcity of volumes can determine a wider difference between the bid and offer and finally the volatility in these two sessions is often greater.

ASK

The ask price, on the other hand, is the one at which the "dealer" wants to sell a financial instrument. The bid price is the price at which the "dealer" is willing to initiate the purchase of a financial instrument.
The ask price is higher than the bid price. The so-called best ask is therefore the lowest ask price on the market for this financial instrument. Thus you can find the bid-ask spread, which corresponds to the profit margin of the dealer.

 

B

BEAR MARKET

The "bear market" is defined as that period of progressive decrease in market prices that can deal with a single asset, an index or many parts of the market. Both bearish signals from bearish market charts and investors who profit from a falling market are generally called "bearish."

BENCHMARK

The term benchmark indicates a reference parameter used by investors if we refer to the financial sector. In fact, in the field of investment, it is used as a reference "objective" index to compare the performance of the portfolio or of selected securities with respect to the performance of the reference market.
The benchmark is in fact useful for assessing the typical risk of the market in which the portfolio invests.

BID

The bid price is the price at which the "dealer" is willing to initiate the purchase of a financial instrument. The ask price, on the other hand, is the one at which the "dealer" wants to sell a financial instrument. The bid price is lower than the ask price. The so-called best bid is therefore the highest bid price on the market for this financial instrument. Thus you can find the bid-ask spread, which corresponds to the profit margin of the dealer.

BLOCKCHAIN

The blockchain has created a shared and non-modifiable accounting register that makes the transaction registration process and the traceability of assets easier thanks to a commercial network. An affected asset can be tangible like money or something even more material, or intangible like intellectual property or copyright. So anything with its own value can be tracked and traded on a blockchain network, which reduces risks and costs for sellers and buyers. This network therefore allows you to do it at the expense of central bodies, such as banks or institutions and for this reason it is linked to cryptocurrencies since they are traceable only on a blockchain network and are not entrusted to banks or institutions.

BLUE CHIP

Blue Chip is a common term in finance and is used to indicate highly capitalized companies, which are part of one of the major indices such as the SPX500 or the EURO STOXX50. The most common example of Blue Chip is Apple.

BOND

A bond is a system of indebtedness through which states, banks and corporations fund themselves on the financial market, providing bondholders with interests usually payable at fixed intervals (semiannual, annual, sometimes monthly). There are different types of bonds: treasury bonds (issued by national governments), corporate bonds (by banks and corporations) and supranational bonds (issued by an international organization such as the World Bank or the ECB). 
The mayor difference between a bond and a stock is that a stockholder has an equity stake in a company (he is an owner of the company), when a bondholder is a creditor of the company; another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks typically remain outstanding indefinitely.

BOOKE VALUE

The Book Value is the value of the net assets reported on the financial statements. How is it calculated? Taking the total value of the assets and subtracting all liabilities. It is important to consider that the assets are the result between the price paid and the depreciation or devaluation. It is most often used to understand what the total value of assets is if a company is in liquidation.

BROKER

In the financial sector, broker is the business intermediary who executes orders for the purchase and sale of securities or in other fields such as insurance is the mediator between the insurance company and the customers. In general, the broker puts in contact and performs the functions between the institution, such as the stock exchange, and the public, such as investors, keeping commissions for themselves.

BULL MARKET

The "bull market" is defined as that period of progressive increase in market prices that can deal with a single asset, an index or several parts of the market. The bull therefore represents itself the market in a rising phase with the same bronze bull placed near the Wall Street stock exchange.

BUY-BACK

Buy back means the purchase of own shares by a joint stock company. The Buy back (or purchase of own shares) should not be confused with Internal dealing which is a purchase or sale of shares, carried out by management with its own means. The Buy Back is performed directly by the company with the company's liquidity.
A company may decide to make a Buy back for various reasons, such as:
Support the share price on the stock market in cases of its suffering;
To create (distribute) value to shareholders, who will see the value of their investment increase;
To invest excess profits where there are no better investment opportunities.

 

C

CFD

CFD stands for contract for difference this is a popular form of derivatives trading.

CFD trading allows you to speculate on rising or falling prices in rapidly changing global financial markets, such as forex, indices, commodities, stocks and own stocks.

 

D

DEFI

DeFi, or decentralized finance, is a way to provide financial instruments to users via smart contracts and each of these will be registered via blockchain (they can be different) thus offering a cheaper and more impartial instrument than the usual finance, that of banks and institutions but also brokers. Currently 90% of DeFi products leverage the Ethereum blockchain network, a solid cryptocurrency second only to Bitcoin.

DEFLATION

This term indicates the general decrease of prices, and thus an increase of the value of the currency and the purchasing power. It’s usually linked to a situation of low demand for goods and services

DIVIDEND

A dividend is an amount distributed by the company to shareholders as a return on the capital invested in it. The distribution of dividends to shareholders takes place after the approval of the financial statements by the ordinary meeting of the company (which in many cases represents the majority of shareholders) and the resolution to distribute the profits. How is it calculated?

Example: A company with a share capital of € 100,000 divided into 10,000 shares with a par value of € 10. In the accounting year, a profit of € 2500 is realized and the company decides to distribute half of it to the shareholders. The unit dividend is equal to: € 1,250 / 10,000 shares = € 0.125 / share.

 

E

ETF

ETFs, or Exchange Traded Funds, are financial instruments that replicate the performance of a basket of assets. They are passive instruments with the aim of replicating the benchmark they refer to. Their strengths are certainly the simplicity of negotiation given that they are purchasable and salable like shares, they do not have a maturity, they have a lower risk ratio thanks to the wide diversification and their downsizing implemented by the issuing companies allows you to enter low risk in the growing stock market without missing out on opportunities.

 

F

FUTURES

The future is a forward and standardized contract with which two distinct parties undertake to exchange a specific asset at a predetermined price and with a deferred settlement at a future date, a term from which it takes its name.

But what contract? Which instrument can be the underlying of a futures contract?
We can mainly mention: a financial instrument so for example an index and of the most famous we can mention the future on the S&P500 or the NASDAQ, or a commodity such as the future on gold or gas

 

G

GROWTH STOCKS

.Growth stocks are those shares issued by companies that even producing profits, do not distribute them to shareholders but reinvest them fully in the research and development of their business. In this category we find various stocks of companies operating in "innovative" economic sectors, such as biotechnologies, nanotechnologies, semiconductors, software and hardware, hydrogen, renewable energy ... There are exceptions, however, even more traditional stocks, such as "Starbuck" they belong to this category despite considerable profits. Amazon has also been part of this equity category for many years. The peculiarity at the listing level is the high volatility of these securities: they can have high returns but with greater risk.

 

I

INDEX

An equity INDEX is a summary of the value of the basket of stocks it represents. There are different methods of calculating the indices, different for the weight of the securities or for their type for the sector represented. The most popular and reference indices are indices with a basket calculation defined as "value weighted": this is the weight of the stock in the basket based on market capitalization and often rebalanced based on the allocation of dividends, coupon payments, splits ... In fact, as an example we can take the Nasdaq, where the main stocks with the greatest weight are Apple, Microsoft, Alphabet ... company with the largest capitalization in the world.

INFLATION

It’s a key term in economics and indicates the general increase of prices for consuming goods and services. In parallel, the value of the currency decreases, along with its purchasing power. It is considered ideal for a healthy economy to have a low and steady inflation index (that is the annual percentage change in a price index), as opposed to a negative index (deflation) or a high inflation index (hyperinflation).

 

L

LEVERAGE

Financial leverage can be better defined as "Debt Ratio". This term refers to its use in terms of investments to improve profit or net profitability. In fact, in terms of investments or trading this tool can be dangerous: investing 100 with a leverage x5 you will get a profit 5 times bigger or a loss 5 times bigger. In fact this is the use of a debt.

 

M

MARKET CAP

Market capitalization, with reference to a company listed on the stock exchange, represents the product of the number of shares in circulation and their unit price, on the other hand, in market terms, it represents the total value of all listed securities at market prices. It is also a financial tool, an indicator to be able to define a "blue chip" company for example, and therefore to define the size, solidity and risk involved. The largest capitalization companies have a podium in the technology and information sector, starting with Apple, the first company over 3 trillion dollars, followed by Microsoft and Amazon even if Aramco, a Saudi hydrocarbon company, is among them. Curiosity: more than 5 US companies have been consistently in the top 10 for many years.

MARKET ORDER

Market order is a trading method used by traders to execute trades at the best available price or at the best price based on strategies. This can be differentiated in order to buy a stock or in order to sell using tools such as "stop loss" or "take profit".

 

N

NASDAQ

Nasdaq stands for National of Securities Dealers Automated Quotation. This market was established on February 8, 1971 and was the world's first purely electronic stock exchange. The index that summarizes the performance of this stock exchange is the Nasdaq Composite, that is a basket of over 3000 stocks, however the other important reference index is the Nasdaq 100, one of the most important in the world which includes 100 among the main American and foreign NON-FINANCIAL companies quatate al Nasdaq.

NET WORTH

In a corporate balance sheet, equity is more precisely defined Balance sheet represents the book value at a certain time.Instead in the field of personal finance, equity is nothing more than the magnitude that indicates how much the sum of our possessions is included. house, luxury goods, funds ... It is calculated with the difference between ASSETS and LIABILITIES: asset is the liquidated money, invested money, real estate and property while the liability is as examples the remaining mortgage to be paid for the house, loans, credit cards ....

 

P

PORTFOLIO

A financial sphere, a portfolio is the set of different assets, different stocks and sectors held by an investor. The proportion of the value of each asset to the total value of the portfolio is called the "portfolio weight". The sum of the weights of all assets in the portfolio must be equal to one. A balanced portfolio is often associated with a lower risk brought about by "diversification": holding only two stocks, for example, can be risky. While holding multiple stocks, from different sectors, with different instruments can generate a less risky and more balanced portfolio. The balance of the portfolio is at the discretion of the investor who chooses where or how to invest the main portions of a portfolio.

PRE-MARKET

The interval before the opening of the continuous trading of the financial markets is called PRE-MARKET, the interval after the continuous trading is called after-hours. In these two intervals it is still possible to make trades.


The biggest advantage in operating outside the day market is that very often companies and companies disclose their economic data, before or after the close of day trading, so as to take the opportunity to intervene immediately on the price movement determined by the news.

Another advantage is found by observing the movements of a stock during the pre-market and then operating at the opening of trading, when volumes increase rapidly.


However, there are risks: The first risk is the lack of liquidity in fact, in these two market sessions, the trading volumes are much lower, and this leads to greater difficulty in operations.

Another disadvantage is a higher spread since the scarcity of volumes can determine a wider difference between the bid and offer and finally the volatility in these two sessions is often greater.

 
 

R

REAL ESTATE

It’s the act of buying and selling land and houses, but it also indicates the building itself. In legal jargon, the word “estate” means a large area of land, while the adjective “real” comes from the Latin word “res”, i.e. “thing”

  

ROI

Return On Investment; it’s an index that shows the efficiency of the capital invested in a business, or, in one word, the profitability of an investment. It’s calculated as the ratio between the net income and the investment

S

SHARE

With the term share, in economic and financial language, with a generic meaning, we mean the part or share of any type of indivisible common property and very often it indicates the part of the financial capital of a corporation.

SPREAD

His term generally indicates a difference in performance between two stocks, bonds, currencies, or anything else really. It’s generally used with the meaning of bid-ask spread, that is the difference between the bid and the ask, as the name suggests, or, also, with the meaning of credit spread, the difference between the interest rate of a bond and that of another, taken as a comparison.

STOP LOSS

Stop loss is a targeted strategy as well as a tool available to the investor. This strategy serves to safeguard the capital invested in a financial asset, such as investing in a share, in the event that the market trend goes in the opposite direction to initial expectations. The purpose of this operation, therefore, is simply to put an end to a position that tends to lose value.

The stop loss is therefore one of the tools of money management, like the "take profit". It is the only measure that allows to minimize the losses deriving from the investment in financial assets with the assumption of risk in this considered share.

For example, if I have $ 1000 in a stop loss stock with a loss of 25%, this allows me to lose no more than $ 250 (25% of $ 1000) even if the stock collapses more than 50%.

 

T

TAKE PROFIT

The take profit is a market order that allows you to automatically close the open operation once it has reached a predetermined level by the investor, recording the desired profit.

Its function is opposite to that of the stop loss but it is the same type of instrument. The stop loss limits the lòe while the take profit narrows the gains, but both serve to decrease the risk in favor of the profits.

 
 

V

VOLATILITY

Volatility is an important factor to consider in finance.The volatility of a price of a financial instrument such as a stock, bond or even a certain market, if these have a large price change, up or down compared to average values. It can refer to different periods of time, such as half-yearly or even daily.

Volatility is mathematically calculated as a percentage distance from its average price values even if it is more often noted with the difference between highs and lows.

For example, if a security has recorded a volatility of 10% in a given period it means that, in this period, the value of the security has deviated on average by 10% from its average price.

 

Y

YELD

The term Yeld indicates the income from an investment, often in the form of an interest or the payment of a dividend of the company / stock in which it is invested.
The method of calculation depends on the different type of yield in fact generally the income (deriving from dividends or interest payments) is divided by the value of the investment, multiplied by 100 if we want to obtain the given percentage. Therefore, the return is one of the ways in which an investment generates a profit.

 

Z

ZERO COUPON BOND

It’s a type of bond that doesn’t make periodic interest payments (or coupons, hence the name), but rather repays its face value at the time of maturity. Its profitability is calculated as the sum that the investor gets at the maturity of the bond minus what he deposited in the first place.