STOCK MARKET TERMINOLOGY A TO Z

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Earnings Per Share (EPS)
It is the most important measure of how well (or otherwise) the board of directors are doing for the shareholders. This measure expresses how much the company is earning for every share held. The calculation is 'pre-tax profit dividend by the number of shares in issue'. Earnings per share is more
important than the overall reported profit figure ! The reason is that EPS provides a more pure measure of profitability.

Eurobond
A Eurobond is a medium or long-term interest-bearing bond created in the international capital markets. A Eurobond is denominated in a currency other than that of the place where it is being issued. Eurobonds are only issued by major borrowers, such as governments, other public bodies or large multinational companies.

ESOP
Employee Stock Option Plan is a trust established by a company to allot some of its paid-up equity capital to its employees over a period of time. They are used to reward employees.

Exercise price
The pre-determined price at which the underlying future or options contract may be bought or sold.

Exercising the option
The act of buying or selling the underlying asset via the option contract.

Efficient capital market :-
A market in which all the players have all the material information at their disposal at the same time.

Flotation
The first occasion on which a public company’s shares are offered widely to investors on the market. Flotations are often referred to as new issues although it is possible for companies already in the stockmarket to issue new shares

Futures
A contract for the purchase and sale of a commodity, financial instrument or index at a fixed price at a fixed date in the future. Futures contracts were originally invented to allow those who regularly buy and sell goods to protect themselves against future changes in the price of those goods. In other words, the futures markets evolved to allow producers or consumers to hedge their risk.

Forward trading
Forward trading refers to trading where contracts traded today are settled at some future date at prices decided today. Thus a contract to buy dollars at Rs.42 per dollar after 3 months is a forward contract. The price is fixed today but the settlement will be after 3 months.

Floating Stock

The fraction of the paid-up equity capital of a company which normally participates in day to day trading.

Foreign Institutional Investor (FII)
An overseas institutional investor permitted under Securities and Exchange Board of India (SEBI) guidelines to trade in Indian bourses.

Good Till Cancelled (GTC) orders
A Good Till Cancelled (GTC) order remains in the system until it is cancelled by the user. It will therefore be able to span trading days if it does not get matched. The Exchange may however set an upper limit to the number of working days an order can stay in the trading system. At the end of this period, GTC orders are cancelled automatically from the system.

Gap
When the market opens above or below the previous day's close the price on a bar chart will show a "gap". This may then be "closed" if the market trades at prices between the opening level and the previous day's close.

Gilts
Gilts, sometimes referred to as Government bonds are those used by the Government to raise money from large financial institutions like pension funds and from private investors. Money is needed by the Government because the Treasury so often finds that its expenses exceed its income. Gilts are sometimes referred to as 'gilt edged securities' or 'bonds' or 'fixed interest securities'. In any event, gilts are issued by the Treasury and in nearly all cases, the investor hands over his cash and then receives a fixed rate
of interest for the life of the gilt. When the gilt matures, its capital value is repaid at par value.
Gilts are bought at their par value or at face value.

Global Depositary Receipt (GDR)
These are negotiable certificates which prove ownership of a company's shares.They are marketed internationally, mainly to financial institutions. GDRs allow purchasers to gain exposure to companies which are listed on foreign markets without having to purchase the shares directly in the market
in which they are listed.

Grey market
Trading in shares outside a recognized market.This has come to mean trading in shares ahead of their issue on the stock market. This market plays very important role in the listing day's price of an IPO.

Growth Fund

A mutual funds which invests only in equity shares which offer chances of good capital growth, rather than current income.

Hedging

Offsetting or guarding against investment risk. A perfect hedge is a no-risk-no gain precaution.A conservative strategy for reduction of risk through futures, options or some other derivative, by opening an opposite position to that already held in the underlying market. Taking positions in securities so that each offsets the other.

Holding Period Return (HPR)

The rate of return for the period of holding of an investment.

Holder

The buyer of an option.

Initiator

The Initiator is the trading member who starts the auction. The Initiator can be a buyer or a seller.

Insider trading

Trading on information which is not really available to the general public. Trading in a Company's shares by a connected person having non-public, price sensitive information, such as expansion plans, financial results, takeover bids, etc., by virtue of his association with that Company, is called insider trading.

Illiquid

An investment is said to be illiquid if it cannot easily be turned back into cash quickly and at a low cost. Shares in smaller companies are more likely to be illiquid than those in larger companies; they will be less easy to sell and you are likely to find that the spread or difference between the buying and selling price is much wider.So, in other words blue chip shares are more liquid than unquoted companies.

Issued Share Capital
This is the total number of shares a company has made publicly available multiplied by the total nominal value of the shares.

Immediate or Cancel (IOC)

An Immediate or Cancel (IOC) order allows a user to buy or sell a security as soon as the order is released into the market, failing which the order is removed from the market. There could be a partial match for such an order resulting in one or more trades, in which case the balance order will be removed from the market.

Inactive Shares

Shares which are seldom bought and sold in the stock exchange, although they are listed. A share which is transacted less than four times a year may be called inactive or dead. It is quite difficult to find a buyer or a seller for such shares. The Spread between buying and selling prices can be large.