Common terms you'll encounter while investing.
A
Ask Price: The lowest price a seller is willing to accept for a security.
At the Money (ATM): An option with a strike price equal to the current stock price.
B
Bid Price: The highest price a buyer is willing to pay for a security.
Bid-Ask Spread: The difference between the bid and ask prices.
Buying Power: The amount of money available to purchase securities.
C
Call Option: A contract giving the right to buy a stock at a specific price.
Cost Basis: The original value of an investment for tax purposes.
D
Day Trade: Buying and selling the same security on the same day.
Dividend: A payment made by a company to its shareholders from profits.
DRIP: Dividend Reinvestment Plan—automatically reinvesting dividends into more shares.
E
ETF: Exchange-Traded Fund—a basket of securities that trades like a stock.
Ex-Dividend Date: The cutoff date to own a stock and receive the upcoming dividend.
F
Fill: When an order executes and the trade is completed.
Fractional Share: A portion of a full share, allowing investment of any dollar amount.
G
Good for Day (GFD): An order that expires at end of trading day if not filled.
Good til Canceled (GTC): An order that remains active until filled or canceled.
I
In the Money (ITM): An option that would be profitable if exercised.
Instant Deposit: Access to deposited funds before the bank transfer completes.
L
Limit Order: An order to buy or sell at a specific price or better.
Liquidity: How easily a security can be bought or sold without affecting price.
M
Margin: Borrowing money from a broker to buy securities.
Market Order: An order to buy or sell immediately at the current price.
O
Option: A contract giving the right to buy or sell a stock at a specific price.
Out of the Money (OTM): An option that would not be profitable if exercised.
P
Premium: The price paid to buy an option contract.
Put Option: A contract giving the right to sell a stock at a specific price.
S
Settlement: The process of transferring securities and funds after a trade.
Stop Order: An order that triggers a market order when a price is reached.
Strike Price: The price at which an option can be exercised.
T
T+1: Trade date plus one business day—the standard settlement period.
V
Volatility: The degree of price variation in a security over time.
Volume: The number of shares traded during a specific period.