Investment Terms

Vega is the measurement of an option's price sensitivity to changes in the volatility of the underlying asset. Vega represents the amount that an option contract's price changes in reaction to a 1% change in the implied volatility of the underlying asset. Volatility measures the amount and speed at which price moves up and down, and can be based on recent changes in price, historical price changes...

The term personal consumption expenditures refer to a measure of imputed household expenditures defined for a period of time. Personal income and the PCE Price Index reading are released monthly in the Bureau of Economic Analysis, Personal Income and Outlays report. Personal consumption expenditures support the reporting of the PCE Price Index, which measures price changes in consumer goods and se...

The global strategic petroleum reserves are stockpiles of crude oil maintained by nations and by private industries as a hedge against potential future energy crises. The U.S. government has tapped its own Strategic petroleum reserve after a number of disasters that threatened to disrupt the flow of oil to industry and consumers. Global strategic petroleum reserves are maintained as a defense agai...

In the U.S, the No Surprises Act provides patients with protection from surprise medical bills under certain circumstances. It also mandates transparency regarding healthcare costs and holds patients liable for in-network cost-sharing amounts only. The U.S legislation allows healthcare providers and insurers to negotiate reimbursement separately while insulating the patient from that process. It a...

Short selling is an investment or trading strategy that speculates on the decline in a stock or other security's price. It is an advanced strategy that should only be undertaken by experienced traders and investors. Traders may use short selling as speculation, and investors or portfolio managers may use it as a hedge against the downside risk of a long position in the same security or a related o...

In the trading world, Limit up is the maximum amount a price is permitted to increase during one trading day. The term is often used in relation to the commodities futures markets, where regulators seek to prevent volatility from reaching extreme levels. Limit down, by contrast, refers to the maximum permitted decline in one trading day. Both limit up and limit down prices are examples of circuit...

A dividend aristocrat is a company in the S&P 500 index that not only consistently pays a dividend to shareholders but annually increases the size of its payout. A company will be considered a dividend aristocrat if it raises its dividends consistently for at least the past 25 years. Some aficionados of dividend aristocrats rank them according to additional factors such as company size and liquidi...

A blue-chip stock is a huge company with an excellent reputation. These are typically large, well-established, and financially sound companies that have operated for many years and that have dependable earnings, often paying dividends to investors. A blue-chip stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector,...

FTX Exchange is a leading centralized cryptocurrency exchange specializing in derivatives and leveraged products. It was founded in 2018 by MIT graduate and former Jane Street Capital international exchange-traded funds trader Sam Bankman-Fried. FTX offers a range of trading products, including derivatives, options, volatility products, and leveraged tokens. It also provides spot markets in over 1...

Software-as-a-Service (SaaS) is a software licensing model in which access to the software is provided on a subscription basis, with the software being located on external servers rather than on servers located in-house. Software-as-a-Service is typically accessed through a web browser, with users logging into the system using a username and password. The user is able to access the program via the...

A bellwether is a leading indicator of an economic trend. To investors, a bellwether is usually a company that is worth watching closely because its earnings logically suggest a larger economic trend. A company's stock may also be a bellwether if it is viewed as pointing towards an upward or downward trend in a sector. FedEx is an example of a bellwether company. If FedEx announces a substantial i...

In the U.S, Estimated tax is a quarterly payment of taxes for the year based on the filer’s reported income for the period. Most of those required to pay taxes quarterly are small business owners, freelancers, and independent contractors. They do not have taxes automatically withheld from their paychecks, as regular employees do. Estimated taxes may be made for any type of taxable income that is n...

The Beige Book is a report produced and published by the U.S. Federal Reserve. The report, referred to formally as the Summary of Commentary on Current Economic Conditions, is a qualitative review of economic conditions. The Beige Book is published eight times each year before meetings held by the Federal Open Market Committee and is considered one of the most valuable tools at the committee’s dis...

Although the term racial wealth gap technically refers to the difference in assets owned by different racial or ethnic groups, this gap results from a range of economic factors that affect the overall economic well-being of these different groups. The term reflects disparities in access to opportunities, means of support, and resources. Federal surveys reveal that a large disparity exists among th...

A credit bureau, also known in the U.S. as a credit reporting agency, is an organization that collects and researches individual credit information and sells it to creditors for a fee, so they can make decisions about extending credit or granting loans. Credit bureaus partner with all types of lending institutions and credit issuers to help them make loan decisions. Their primary purpose is to ens...

A business valuation is a general process of determining the economic value of a whole business or company unit. Business valuation can be used to determine the fair value of a business for a variety of reasons, including sale value, establishing partner ownership, taxation, and even divorce proceedings. Owners will often turn to professional business evaluators for an objective estimate of the va...

Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party. Securities dealers and brokers became responsible for fully disclosing material information about the instruments they were sellin...

A credit default swap is a financial derivative that allows an investor to swap or offset his or her credit risk with that of another investor. For example, if a lender is worried that a borrower is going to default on a loan, the lender could use a CDS to offset or swap that risk. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse the lender in the ca...

The coefficient of variation is a statistical measure of the dispersion of data points in a data series around the mean. The coefficient of variation represents the ratio of the standard deviation to the mean, and it is a useful statistic for comparing the degree of variation from one data series to another, even if the means are drastically different from one another. The coefficient of variation...

The average true range Is a technical analysis indicator, introduced by market technician J. Welles Wilder Jr. in his book New Concepts in Technical Trading Systems, that measures market volatility by decomposing the entire range of an asset price for that period.1 The true range indicator is taken as the greatest of the following: current high less the current low; the absolute value of the c...

The applicable federal rate is the minimum interest rate that the Internal Revenue Service (IRS) allows for private loans. Each month the IRS publishes a set of interest rates that the agency considers the minimum market rate for loans. Any interest rate that is less than the AFR would have tax implications. The IRS publishes these rates in accordance with Section 1274(d) of the Internal Revenue C...

Demonetization is the act of stripping a currency unit of its status as legal tender. It occurs whenever there is a change in national currency. The current form or forms of money is pulled from circulation and retired, often to be replaced with new notes or coins. Sometimes, a country completely replaces the old currency with a new currency. Removing the legal tender status of a unit of currency...

The Klinger Oscillator was developed by Stephen Klinger to determine the long-term trend of money flow while remaining sensitive enough to detect short-term fluctuations. The indicator compares the volume flowing through securities with the security's price movements and then converts the result into an oscillator. The Klinger oscillator shows the difference between two moving averages which...

The correlation coefficient is a statistical measure of the strength of the relationship between the relative movements of two variables. The values range between -1.0 and 1.0. A calculated number is greater than 1.0 or less than -1.0 means that there was an error in the correlation measurement. A correlation of -1.0 shows a perfect negative correlation, while a correlation of 1.0 shows a perfect...

Bitcoin mining is the process by which new bitcoins are entered into circulation; it is also the way that new transactions are confirmed by the network and a critical component of the maintenance and development of the blockchain ledger. Mining is performed using sophisticated hardware that solves an extremely complex computational math problem. The first computer to find the solution to the probl...