Finance Glossary

A limit order is an instruction issued by an investor to a broker to only buy or sell shares at a particular price threshold. For example, Joan might want to buy stock in Smith Computers, but only at $20 a share or cheaper. She can place a buy limit order with her broker to begin buying […]

Accrual accounting refers to the practice of recording financial transactions when they are incurred as opposed to when cash is actually transferred. This is in contrast to cash accounting, in which transactions are recorded only after money has changed hands. For instance, a bakery buys a new oven in May, but the payment is not due […]

Book value, or net book value is used to indicate how much a company would be worth if it discontinued operations immediately, sold off its assets and paid off all of its debts. It is calculated by subtracting liabilities from tangible assets. For instance, a printing company owns $150,000 in real estate, supplies, delivery trucks and printing […]

The Foreign Exchange Market, often shortened to Forex or FX, is the market in which the world’s currencies are traded. It is both the largest and most liquid market in the world; average traded values can be in the trillions of dollars per day. It does not have a central marketplace as trade is conducted over the […]

In financial analysis, year-to-date (YTD) refers to a financial results figure calculated using data from the first day of the year to the current date. This may refer to the calendar year, in which case the beginning date is January 1, or the fiscal year used by the company or entity, in which case the start date […]

An annuity is a product issued by a financial institution designed to pay out a steady, fixed stream of payments to an individual over an extended period of time. Annuities are most commonly used as part of a retirement plan to ensure a regular basic income. Both Social Security and defined benefit pensions are examples of […]

A binary option, also referred to as an asset-or-nothing option, is an all-or-nothing proposition in which the investor receives an established amount of compensation if the option expires in the money, or receives no compensation if the option expires out of the money. In other words, the investor is “betting” on whether something specific will or will […]

Capitulation occur when investors rapidly sell equities, getting out of the market as quickly as possible and giving up any previous gains in stock prices. The term comes from the military word for surrender, and is closely associated with panic selling. Capitulation is characterized by high trading volume and sharp declines in price, usually a […]

Buying the dips is investor slang for buying a stock that has dipped in price, in hopes that the decline will soon reverse. An investor that buys dips believes that the stock is temporarily undervalued and that they are getting valuable shares for s discounted price. For instance, after the announcement of Brexit in June […]

Circuit breakers, also known as collars, are measures approved by the SEC designed to temporarily halt trading during a massive sell-off period in order to discourage investor panic. the halt gives investors time to cool off and evaluate their options On the NYSE, circuit breakers were first put into place after the Black Monday crash […]