Arbitrage basically involves spotting price differentials for the same asset at different places/markets at a given time and simultaneously buying at a place where it is cheap and selling where it is costlier.
At a Discount
A share is said to be trading at a discount when its market price is less than its par value. It also indicates that a stock is trading below a specified price / value.
At a Premium
A share is said to be trading at a premium when its market price exceeds its par value. A share is said to be issued at a premium when its issue price exceeds its face value.
At Best
At Best refers to the instruction given by a client to his broker authorising him to use his discretion to execute an order at the best possible rate.
Auction
If members fail to deliver/short deliver securities during pay-in, an auction is conducted for those securities. Short deliveries, un-rectified bad deliveries, and un-rectified company objections give rise to auctions.
Basket Trading
Basket Trading is a facility by which investors are able to buy/sell all 30 scrips of the Sensex or the 50 shares of the Nifty in the proportion of their current weight in the indices in one go. The shares are assigned based on the sum allocated and the weightage of each share in the index.
Bear
Bear is a person who sells securities expecting the price of the security will fall. When the stock prices have a downward orientation over a period of time, the market is said to have a bearish trend ("Mandi").
Bonus issue
Bonus Issue involves issue of new shares at zero cost to the existing shareholders. This is carried out by creating fresh equity by capitalizing the reserves that a company has built through its operations. This only alters the capital structure without affecting the net-worth of the company.
Book value
Book Value is the ratio of the net worth of a company to the outstanding equity share capital. It represents the net worth available for each outstanding share of a company. Book value stands for the money that the owner of a single share would realize. If the company’s share is trading at lower than the book value, it is considered undervalued.
Book Closure
Only members listed in the company's registration at the cutoff date would be entitled to receive the corporate benefits. However, because shares continuously change hands during transactions, identifying the owner of certain shares becomes complicated. If a company announces book closure today, the company will not entertain any requests for transfer of shares from current owner to a new owner. This is done in order to finalize the list of shareholders to transmit/issue the benefits of ownership like dividends, bonus shares etc.
Bull
Bull is a person who buys securities expecting that the price of these securities will go up. When the stock prices show an upward movement over a period of time, the market is said to have a bullish trend ("Teji")
Buy back
Buy back is a method by which a company uses surplus cash to cancel its own shares. This process also enables promoters to increase their stake in the company. This is typically done when the company feels that its stock is under priced and its business prospects are bright. Generally MNC companies increasingly buy back shares. A company may buy-back its shares either from existing shareholders on a proportionate basis through a tender offer or from the open market through book-building process or from the Stock Exchange or from odd lot holders.
Capital gain
Capital gain is the return from a stock, emanating from two sources: dividend (a tax-free and risk-free source) and the share price appreciation. The gain that accrues to a shareholder due to the appreciation in price is called capital gain.
Clearing house
The clearing house of the stock exchange is the agency for effecting delivery and settlement of contracts between members.
Correction
Correction is a temporary reversal of trend in share price movement. It may be reaction (a decline during an uptrend) or a rally (a rise during downtrend)
Cum dividend
Cum dividend means "before dividends". A stock traded cum-dividend allows its purchaser/transferor the right to receive dividend. The cum-dividend date is set by the stock exchanges.
Dividend
Dividend is the distribution of corporate profits in cash or stock to shareholders. It is calculated as a percentage of par value or face value of the share.
Dividend yield
Dividend yield is the annual dividend paid on a share of a company divided by the current share price of that company. Dividend yield stocks are for the safe investors who look at pure returns from stocks and not capital appreciation.
Dividend reinvestment
Dividend reinvestment is an authorized arrangement in which cash dividends are automatically reinvested in additional shares of stock, usually without a fee and sometimes at a discount, increasing the amount of stock in the account. Those dividends are still subject to income tax.
Earnings per share (EPS)
Earnings per share (EPS) of a company is the amount of reported income on a per-share basis, calculated by dividing net profit by the number of outstanding shares.
Earnings Yield
Earnings Yield is the reciprocal of the PE. Mathematically; this is the ratio of earnings per share to price per share.
Ex dividend
A stock is Ex dividend when it is quoting after the announcement of dividends. An ex-dividend stock does not allow its purchaser/transferor the right to receive the last dividend declared. The ex-dividend date is set by the stock exchanges.
Ex-dividend date
The date on or after which a security begins trading without the dividend (cash or stock) included in the contract price is called the Ex- Dividend Date
Ex – Date
The first day of the no-delivery period is the Ex- date. If there is any corporate benefits such as rights, bonus, dividend announced for which book closure/record date is fixed, the buyer of the shares on or after the ex -date will not be eligible for the benefits.
Face Value
Face Value is the nominal value that is assigned to a share at the time of issue. It can be calculated by dividing the equity capital by the number of shares. This has lost its relevance in the modern day and has no link with the market price.
Insider trading
Insider trading is the situation where a person (called an insider) having confidential information about the company takes advantage of this information and buys/sells shares to make a gain. Usually, an insider is a person who has access to strategic/ level information of the company.
Interim Dividend
Interim Dividend is declared and distributed before the company's annual earnings have been calculated.
IPO
Initial Public Offer or IPO refers to the first time a company offers its shares to the public.
Long
Going long signifies the net ownership or buy position in a particular security.
Market capitalization
Market Capitalization is the market value of the equity of a company or . Simply put, it is the number of outstanding shares multiplied by the market price of the company.
Margin account
Margin Account is a brokerage account that lets you borrow funds to purchase securities, using your own marginable securities as collateral.
No – Delivery Period
When a company announces a book closure or record date, the Exchange sets up a no-delivery (ND) period for that security. During this period only trading is permitted in the security. However, these trades are settled only after the no-delivery period is over. This is done to ensure that investor's entitlement for the corporate benefit is clearly determined.
Odd lot
Shares can be traded only in marketable lots. When the number of shares traded is different from the market lot, it constitutes an odd lot. Odd lots trade at a discount to market price. The concept of odd lot holds good only for scrips traded in physical form. In demat even a single share can be traded.
Open Interest
Open Interest is the cumulative number of either long or short contracts which have been initiated on an exchange, and have not been offset.
Open positions
Open positions refers to long or short positions in the index future which have been initiated and are not yet offset by subsequent opposite positions.
Pay-in
Pay-in is the day when securities and funds are given by brokers to the Clearing House.
Pay-out
Pay-out is the day when the Clearing House gives securities and funds to the brokers.
Preference Share
Preference Share is a share that pays dividends but does not confer voting rights unlike a common share. A preference shareholder receives dividend even when the common equity holder does not. A preference shareholder enjoys priority in repayment in case of liquidation. Preference shareholders, however, do not have ownership rights in the company.
Price Earnings Ratio (P/E)
Price earnings ratio is the ratio of price per share to the earnings per share of the issuing firm. The P/E is used to compare stocks selling at different price levels.
Record Date
The date established by an issuer of a security for the purpose of determining the holders who are entitled to receive a dividend or distribution is called Record Date. Essentially, a date of record ensures the dividend checks get sent to the right people. Unlike in book closure, in case of a record date, the company does not close its register of security holders.
Rights issue
Rights Issue refers to issue of additional equity to existing shareholders of a company. The existing shareholders have the right to exercise this option to subscribe to these shares. Only the portion that is left after the subscription of the existing shareholders is offered to the general public.
Rupee Cost Averaging
Rupee cost averaging is a system of purchasing securities at regular intervals, usually each month, with a fixed rupee amount. This results in the purchase of more shares when prices are low and purchase of fewer shares when prices are high. Eventually, the average cost per share of the security will become smaller and smaller. Rupee cost averaging lessens the risk of investing a large amount in a single investment at the wrong time.
Share split
Share split takes place when a share of a certain face value is subdivided into further shares of correspondingly lower face value.
Share swap
Share swap is an arrangement by which shares of one company are swapped for another in a specified ratio.
Short
Going Short is a net investment position in a security in which the security has been borrowed and sold but not yet replaced.
Short delivery
Short delivery is the situation where the seller is unable to deliver the shares either fully or partially, during a particular settlement cycle.
Stag
Stag is a person, who invests in the primary market, i.e. buys shares only in a public issue and does not buy shares in the secondary market. A stag also sells immediately on allotment.
Stock option
Stock option is an option given to a person to buy stock at a predetermined price at a future date.
Stock split
Stock split is the reduction in the face value of a share. There is a corresponding increase in the number of shares issued without affecting the paid-up capital.
