Navigating the complexities of the stock market may appear daunting, given its intricate terms and concepts that can be perplexing. However, gaining familiarity with these terms is essential and can significantly contribute to your comprehension of the market. Let’s delve into the terminologies that we will explore.

Annual Report An annual report is a yearly report that every company prepares to impress the shareholders of their company. The annual report consists of lots of information about a company, from cash flow to management strategy. Several people read the annual report to look at the company’s solvency and judge their financial position.

Arbitrage Arbitrage refers to purchasing an asset from one market and selling it to another market where the selling price is higher than what you paid for it, resulting in profit. 

Ask An ask is the selling price that a trader offers for their shares. 

Asset Allocation Asset allocation is an investment strategy that aims to balance risk and reward by dividing a certain percentage of investments—like stocks, bonds, real estate, cash, etc.—across different assets in an investment portfolio. 

Asset Classes Asset classes are categories of assets, such as stocks, bonds, real estate, or cash. 

Averaging Down Averaging down is an investing strategy that involves buying additional shares of an asset or stock after its price has fallen, resulting in a lower average purchase price. 

At the money Under this scenario, the strike price of an option is equal to the market price of the underlying asset which it represents.

Agent An agent is a stock brokerage firm which does the buying/selling of shares on behalf of the investor in the stock market. 

Bear Market It is a market where investors talk about the stock market performing in a downward trend, or it is a certain period where the prices of multiple stocks are falling. 

Beta Beta is the measure of an asset’s risk in relation to the market. A stock with a beta of 1.5 means that the stock typically moves 50% more than the market in the same direction. Generally, a higher beta indicates a riskier investment—if the market rises 10%, the stock will rise by 15%, but if the market falls by 10%, the stock will fall by 15%. 

Bid A bid refers to the highest amount of money that a potential buyer for a stock is willing to pay for a share of that stock. If there are multiple buyers for a stock, a bid taken between buyers ends when one buyer places a bid that the other buyers cannot or do not wish to match. 

Bid-Ask Spread There is always a difference between the price that a seller asks for an object and the price the buyer is willing to pay for it. In the stock market, there is a difference between the bid and ask price, with the bid generally being lower than the ask price. This difference is known as the ask-bid spread or spread which is primarily determined by the demand and supply.