Glossary
A reference of financial and trading terms used throughout Stratosfi.
A
Ask Price
The lowest price a seller is willing to accept for a security. Also called the "offer price." The difference between the bid and ask is the spread.
ATM (At The Money)
An option whose strike price is equal to (or very close to) the current market price of the underlying stock.
Average Volume
The average number of shares traded per day over a specified period, usually 30 days. Used to gauge liquidity — higher average volume means the stock is easier to trade.
B
Bear Market
A market condition where prices are falling or expected to fall, typically defined as a decline of 20% or more from recent highs.
Beta
A measure of a stock's volatility relative to the overall market. A beta of 1.0 means the stock moves with the market. Above 1.0 is more volatile; below 1.0 is less volatile.
Bid Price
The highest price a buyer is willing to pay for a security. When you sell, you typically sell at or near the bid price.
Bollinger Bands
A technical indicator consisting of a moving average with upper and lower bands set at 2 standard deviations. Used to identify volatility and potential overbought/oversold conditions. See Charts — Bollinger Bands.
Bull Market
A market condition where prices are rising or expected to rise, typically defined as a rise of 20% or more from recent lows.
C
Candlestick
A chart type that shows the open, high, low, and close prices for a given time period. The "body" shows open-to-close range; the "wicks" show high and low. See Charts.
Concentration
The degree to which a portfolio's value is concentrated in a few holdings. High concentration means a few positions dominate the portfolio, increasing risk. Measured by percentage of total value in top holdings or by the Herfindahl Index (HHI).
Correlation
A statistical measure of how two assets move relative to each other. Ranges from -1 (move in opposite directions) to +1 (move in the same direction). A correlation near 0 means no relationship.
D
Delta
An options Greek measuring how much an option's price changes for a $1 move in the underlying stock. See Options — Delta.
Dividend Yield
The annual dividend payment divided by the stock price, expressed as a percentage. A stock priced at $100 with a $3 annual dividend has a 3% yield.
Drawdown
The decline from a peak to a trough in portfolio value. A 20% drawdown means the portfolio dropped 20% from its highest point before recovering.
E
EMA (Exponential Moving Average)
A moving average that gives more weight to recent prices, making it more responsive to new information than a simple moving average. See Charts — EMA.
EPS (Earnings Per Share)
A company's net profit divided by its number of outstanding shares. Higher EPS generally indicates greater profitability. Can be trailing (past 12 months) or forward (estimated).
F
Free Float
The number of shares available for public trading, excluding locked-in shares held by insiders, promoters, or governments.
G
Gamma
An options Greek measuring the rate of change of delta. High gamma means delta is changing rapidly as the stock price moves. See Options — Gamma.
Golden Cross
A bullish technical signal that occurs when a shorter-term moving average (typically 50-day SMA) crosses above a longer-term moving average (typically 200-day SMA).
H
Hedge
An investment made to reduce the risk of adverse price movements. For example, buying puts on a stock you own protects against a price drop.
HHI (Herfindahl-Hirschman Index)
A measure of portfolio concentration calculated by summing the squares of each holding's portfolio weight. Ranges from 0 (perfectly diversified) to 10,000 (single holding). Below 1,500 is considered well-diversified.
I
Implied Volatility (IV)
The market's forecast of the likely magnitude of a stock's price movement, derived from option prices. Higher IV means options are more expensive because the market expects bigger moves.
ITM (In The Money)
A call option is ITM when the stock price is above the strike price. A put option is ITM when the stock price is below the strike price.
L
Limit Order
An order to buy or sell a stock at a specific price or better. A buy limit order executes at or below your specified price. A sell limit order executes at or above your specified price.
Liquidity
How easily a security can be bought or sold without significantly affecting its price. High-volume stocks are more liquid; low-volume stocks are less liquid.
M
MACD
Moving Average Convergence Divergence — a momentum indicator showing the relationship between two moving averages. See Charts — MACD.
Market Cap (Market Capitalization)
The total market value of a company's outstanding shares. Calculated as share price × number of shares. Used to classify companies as large-cap (>$10B), mid-cap ($2B-$10B), or small-cap (<$2B).
Market Order
An order to buy or sell immediately at the best available price. Market orders guarantee execution but not price.
O
Open Interest
The total number of outstanding options or futures contracts that have not been settled. Higher open interest indicates more active trading and better liquidity.
OTM (Out of The Money)
A call option is OTM when the stock price is below the strike price. A put option is OTM when the stock price is above the strike price. OTM options have no intrinsic value.
P
P/E Ratio (Price-to-Earnings)
The stock price divided by earnings per share. A P/E of 20 means investors are paying $20 for every $1 of earnings. High P/E can indicate growth expectations; low P/E can indicate value or low growth expectations.
Paper Trading
Simulated trading using virtual money against real market prices. A risk-free way to practice strategies and learn the platform. See Trading.
Portfolio
A collection of investments (stocks, bonds, options, crypto) held by an individual or institution.
Premium
The price paid to buy an options contract. The premium is determined by intrinsic value plus time value.
R
RSI (Relative Strength Index)
A momentum oscillator that measures the speed and magnitude of price changes on a scale of 0-100. Above 70 is overbought; below 30 is oversold. See Charts — RSI.
Resistance
A price level where selling pressure tends to prevent the stock from rising further. The opposite of support.
S
Sharpe Ratio
A measure of risk-adjusted return. Calculated as (portfolio return - risk-free rate) / portfolio standard deviation. A higher Sharpe ratio indicates better returns per unit of risk. Above 1.0 is generally considered good; above 2.0 is very good.
SMA (Simple Moving Average)
The average closing price over a specified number of periods, with equal weight given to each period. See Charts — SMA.
Spread
The difference between the bid and ask prices. A narrower spread indicates better liquidity.
Sortino Ratio
Similar to the Sharpe Ratio but only penalizes downside volatility. Calculated as (portfolio return - risk-free rate) / downside deviation. A better measure when returns are not symmetrically distributed, as it does not penalize upside volatility.
Strike Price
The price at which an option contract can be exercised. For a call, the price at which you can buy the stock. For a put, the price at which you can sell.
Support
A price level where buying pressure tends to prevent the stock from falling further. The opposite of resistance.
T
Theta
An options Greek measuring time decay — how much value an option loses per day as it approaches expiration. See Options — Theta.
V
VaR (Value at Risk)
A statistical measure of the maximum expected loss over a specified time period at a given confidence level. For example, a 1-day 95% VaR of $5,000 means there is a 95% chance the portfolio will not lose more than $5,000 in a single day.
Vega
An options Greek measuring how much an option's price changes for a 1% change in implied volatility. See Options — Vega.
Volatility
The degree of variation in a stock's price over time. High volatility means large price swings; low volatility means smaller, more predictable movements.
Volume
The number of shares or contracts traded during a given period. Higher volume confirms price movements — a breakout on high volume is more significant than one on low volume.
VWAP (Volume Weighted Average Price)
The average price of a stock weighted by volume throughout the trading day. Used as a benchmark by institutional traders. See Charts — VWAP.
Y
Yield Curve
A line plotting interest rates of bonds with equal credit quality but differing maturity dates. An inverted yield curve (short-term rates higher than long-term) has historically preceded recessions.