Financial terms, clearly defined

Broker

A regulated firm that gives investors access to financial markets, routing their orders to venues where they can be executed and holding their accounts.

Buying Power

The total amount an investor can put toward buying securities — their available cash plus any margin (borrowing) the broker extends.

Cede & Co

The nominee of the Depository Trust Company (DTC) in the United States. It appears as the registered holder of most US shares, enabling efficient electronic settlement.

Commission

A fee a broker charges for executing a trade. Many brokers now offer commission-free trading on some products, earning instead from spreads, financing or payment for order flow.

Delta

An option Greek measuring how much an option's price is expected to change for a one-unit move in the underlying asset's price. It also approximates the probability of finishing in the money.

Dividend

A distribution of a company's profits to its shareholders, usually paid in cash per share. Dividends are discretionary — never guaranteed — and can be cut or suspended at any time.

DRS

Direct Registration System — a way of holding shares registered directly in the investor's own name on the company's books, rather than in a broker's name.

EPS

Earnings per share — a company's profit divided by its outstanding share count. It expresses profitability per share, so a rising share count (dilution) lowers EPS even when total profit is unchanged.

ETF

Exchange-traded fund — a fund holding a basket of assets that trades on an exchange like a single share, offering instant diversification, usually at low cost.

Expense Ratio

The annual fee a fund charges, expressed as a percentage of the amount invested. Lower expense ratios leave more of the return with the investor — a key reason low-cost index funds are popular.

Float

Free float — the portion of a company's outstanding shares freely available to trade, excluding closely-held and locked-up stakes. A smaller float means thinner liquidity and sharper price swings.

Gamma

An option Greek measuring the rate of change of delta as the underlying asset moves. High gamma means delta can shift quickly.

Liquidity

How easily an asset can be bought or sold without significantly affecting its price. Highly liquid markets have many buyers and sellers and tight spreads.

Margin

Money borrowed from a broker to trade a larger position than your own cash allows. Margin amplifies both gains and losses and carries the risk of a margin call if the position moves against you.

Market Cap

Market capitalisation — a company's total market value, calculated as its share price multiplied by the number of outstanding shares. The share price alone says nothing about size without the share count.

Market Maker

A firm that continuously quotes prices to buy and sell an asset, providing liquidity so that other participants can trade quickly. It profits primarily from the spread.

NAV

Net asset value — the per-share value of a fund's underlying holdings (total assets minus liabilities, divided by the number of shares). A fund's market price can trade slightly above or below its NAV.

Shareholder

An owner of one or more shares in a company. Shareholders have a residual claim on its profits and assets and, for common shares, usually the right to vote on company matters.

Spread

The difference between the highest price buyers will pay (the bid) and the lowest price sellers will accept (the ask). A narrower spread generally means lower trading cost.

Stock

A unit of ownership in a company. Holding a stock (or share) makes you a part-owner, with a claim on a portion of the company's assets and profits.

Theta

An option Greek measuring time decay — how much value an option loses each day, all else being equal, as it approaches expiration.

Tracking Error

How closely an index fund or ETF follows the index it aims to replicate. A small tracking error means the fund mirrors its benchmark well; a larger one means it drifts from it.

Volatility

A measure of how much the price of an asset fluctuates over time. Higher volatility means larger price swings and is associated with greater uncertainty and risk.