Bear Market
When stocks trend downward for a long period, it's a ""bear"" market. Conversely, when stock prices have risen steadily over several months, experts call it a ""bull"" market. These terms were selected based on the way the two animals attack. When a bull rushes forward, he holds his head low and then gores upward with his horns. A bear, on the other hand, strikes downward with his paws.

Bull Market
When stock prices have risen steadily over several months, experts call it a ""bull"" market. When stocks trend downward for a long period, it's a ""bear"" market. These terms were selected based on the way the two animals attack. When a bull rushes forward, he holds his head low and then gores upward with his horns. A bear, on the other hand, strikes downward with his paws.

Closed-end fund:
An investment company that sells shares like any other corporation and usually does not redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or below its net asset value.

Futures price:
The price at which parties to a futures contract agree to transact upon the settlement date.

Hedge:
A transaction that reduces the risk of an investment.

Initial public offering (IPO):
A company’s first sale of stock to the public. Securities offered in an IPO are often, but not always, those of young, small companies seeking outside equity capital and a public market for their stock. Investors purchasing stock in IPOs generally must be prepared to accept considerable risks for the possibility of large gains.

Market capitalization:
The total dollar value of all outstanding shares. Computed as shares times current market price. Capitalization is a measure of corporate size.

Market order:
Order to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is represented in the trading crowd. You cannot specify special restrictions such as all or none (AON) or good till cancelled order (GTC) on market orders.

Net asset value (NAV):
The value of a fund’s investments. For a mutual fund, the net asset value per share usually represents the fund’s market price, subject to a possible sales or redemption charge. For a closed-end fund, the market price may vary significantly from the net asset value.

Option:
Gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a given date. Investors, not companies, issue options. Buyers of call options bet that a stock will be worth more than the price set by the option (the strike price), plus the price they pay for the option itself. Buyers of put options bet that the stock’s price will drop below the price set by the option. An option is part of a class of securities called derivatives, which means these securities derive their value from the worth of an underlying investment.

Put:
An option granting the right to sell the underlying futures contract. Opposite of a call.

Risk:
Often defined as the standard deviation of the return on total investment. The degree of uncertainty of return on an asset.

Spot price:
The current market price of the actual physical commodity. Also called cash price. Current delivery price of a commodity traded in the spot market, in which goods are sold for cash and delivered immediately.

Treasury bills:
Debt obligations of the U.S. Treasury that have maturities of one year or less. Maturities for T-bills are usually 91 days, 182 days, or 52 weeks.

Bond
Basically, a bond is an IOU from a company, governmental entity or other issuer promising to repay a given amount by a given date. Usually, interest is paid. Bonds represent debt, as opposed to stocks, which represent an ownership stake. Bonds usually can be bought and sold, just as stocks can be, and their prices fluctuate based on interest rates and the creditworthiness of the issuer, among other factors.

Capitol gain:
When a stock is sold for a profit, the capital gain is the difference between the net sales price of the securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss.

Day trading
Establishing and liquidating the same position or positions within one day’s trading.

Diversification:
Dividing investment funds among a variety of securities with different risk, reward and correlation statistics so as to minimize risk.

Dividend:
A portion of a company’s profit paid to common and preferred shareholders. A stock selling for $20 a share with an annual dividend of $1 a share yields the investor 5 percent.

Limit order:
An order to buy a stock at or below a specified price, or to sell a stock at or above a specified price. For instance, you could tell a broker “buy me 100 shares of XYZ Corp. at $8 or less” or “sell 100 shares of XYZ at $10 or better.” Margin: Allows investors to buy securities by borrowing money from a broker. The margin is the difference between the market value of a stock and the loan a broker makes.

Mutual fund:
Pools of money managed by an investment company and regulated by the Investment Company Act of 1940. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds seek to generate income on a regular basis. Others seek to preserve an investor’s money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. No-load funds impose no sales charge.

Open-end fund:
Mutual fund that continually creates new shares on demand. Mutual fund shareholders buy the funds at net asset value and may redeem them at any time at the prevailing market prices. Antithesis of closed-end fund.

Price/earnings ratio:
Shows the multiple of earnings at which a stock sells. Determined by dividing current stock price by current earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio are determined by dividing earnings for past 12 months by the number of common shares outstanding. A higher multiple means
investors have higher expectations for future growth, and have bid up the stock’s price.

Sales charge:
The fee charged by a mutual fund at purchase of shares, usually payable as a commission to a marketing agent, such as a financial adviser, who is thus compensated for assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value.

Stock:
Ownership of a corporation indicated by shares, which represent a piece of the corporation’s assets and earnings.

Stop-loss order:
An order to sell a stock when the price falls to a specified level.

Source: Campbell R. Harvey (Fuqua School of Business, Duke University) / Bloomberg Financial Glossary