These terms provide quick references for concepts discussed throughout the site.
- Bear Market
- A prolonged decline of about 20% or more from recent highs, reflecting widespread pessimism.
- Bull Market
- A sustained period of rising stock prices driven by economic growth and investor optimism.
- Cost Basis
- The original purchase price of an asset, including commissions or fees, used to calculate gains and losses.
- Debt-to-Equity Ratio Definition
- Compares what you owe (liabilities) to what you own (equity). A low debt-to-equity ratio means you own more than you owe—a sign of Solvency. A high ratio suggests liabilities exceed assets, a path toward Insolvency. Many investors keep this ratio near 30% or less so borrowed money enhances returns without overwhelming their balance sheet. For step-by-step examples, see Debt-to-equity Ratio Explained.
- Option Delta (Price Sensitivity)
Delta shows how an option’s price moves with the stock, revealing direction. See Option Gamma for how delta shifts.
See Option Greeks and Option Delta.- Disposal Method
- Rules that determine which tax lots are sold when liquidating a position.
- Dividend Yield
- Annual cash dividends per share divided by the stock’s price, comparable to the interest rate a bank pays on a savings account. Know the Ex-Dividend Date before buying to capture a payout (see Understanding Dividend Payouts).
- Exchange-Traded Fund (ETF)
- A basket of assets that trades on an exchange like a stock, giving investors instant diversification and, when it pays distributions, a dividend yield.
- Ex-Dividend Date
- The ex-dividend date is the cutoff for qualifying for a declared dividend. Shareholders who own the stock before this date will receive the payout. Purchases on or after the ex-dividend date miss the dividend, so watch it when evaluating income strategies (see Understanding Dividend Payouts and Dividend Yield).
- Option Gamma (Rate of Delta Change)
Gamma shows how delta shifts as the stock moves, warning when hedges need adjustment. See Option Delta for price sensitivity.
See Option Greeks and Option Gamma.- Insolvency
- A condition where liabilities exceed assets, indicating difficulty meeting long-term obligations and potential bankruptcy.
- Institutional Ownership
- The proportion of a company’s shares held by institutions such as mutual funds or banks, akin to a neighborhood where most properties are owned by landlords rather than residents (see Analyzing Institutional Ownership).
- Long Position Definition
- Buying and holding an asset to benefit from price increases, risking only the amount paid.
- Marginal Tax Rate
- The tax rate applied to the last dollar of taxable income, used to evaluate the impact of additional earnings.
- Understanding Micro-Cap Stocks
- A public company with a market value of roughly $50–300 million, similar in size to a single large shopping center and often overlooked by big investors (see Analyzing Institutional Ownership).
- QBI Deduction
- A provision allowing deduction of up to 20% of qualified REIT dividends or business income under Section 199A.
- Realized Gain
- Profit recognized when an asset is sold for more than its purchase price, creating a taxable event.
- Realized Loss
- A loss incurred when an asset is sold for less than its purchase price, often usable as a tax deduction.
- Real Estate Investment Trust (REIT)
- A corporation that owns or finances income-producing real estate and must distribute most of its taxable income to shareholders, much like a mutual fund for rental properties (see Understanding REITs, Marginal Tax Rates, and the QBI Deduction).
- Rho (Interest Rate Sensitivity)
- Measures how sensitive an option’s price is to changes in interest rates. See Option Greeks.
- Short Position Definition
- Selling a borrowed asset to profit from falling prices, with losses potentially unlimited.
- Solvency and Financial Health
- A financial condition in which assets exceed liabilities, signaling long-term financial health.
- Tax Lot Identification Methods
- A record of a specific purchase of a security, including quantity, date, and cost basis.
- Theta (Time Decay)
- Estimates how much an option’s value erodes each day due to time decay. See Option Greeks.
- Unrealized Gain
- An increase in value of a held asset that has not yet been sold and therefore is not taxed.
- Unrealized Loss
- A decline in value of a held asset that has not been sold and thus has no immediate tax effect.
- Vega (Volatility Sensitivity)
- Measures how much an option’s price changes when implied volatility shifts. See Option Greeks.