Finance Glossary
Plain-English definitions for investing and market terms.
The total market value of a company's outstanding shares. Classified as micro-cap (<$300M), small-cap ($300M–$2B), mid-cap ($2B–$10B), large-cap ($10B–$200B), or mega-cap (>$200B).
Price-to-Earnings ratio. Measures how much investors pay per dollar of earnings. A high P/E suggests growth expectations; a low P/E may indicate undervaluation or slow growth.
The difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask). Wider spreads indicate lower liquidity.
The total number of shares traded during a given period. Unusually high volume often signals heightened interest or a major event. Average daily volume (ADV) is the 30-day baseline.
How easily an asset can be bought or sold without significantly moving its price. High-volume, large-cap stocks are typically highly liquid; thinly traded micro-caps are not.
The number of shares sold short but not yet covered. Expressed as a percentage of float. High short interest (>20%) can lead to a short squeeze if the stock rises sharply.
The number of shares available for public trading — total shares outstanding minus locked-up shares (insider holdings, restricted stock). Smaller float = more volatile price moves.
An order to buy or sell immediately at the best available current price. Guarantees execution but not price — can result in slippage in illiquid markets.
An order to buy or sell at a specific price or better. Guarantees price but not execution — the order may not fill if the market never reaches your price.
A contract giving the buyer the right (not obligation) to purchase 100 shares of a stock at the strike price before expiration. Profitable when the stock rises above the strike plus premium paid.
A contract giving the buyer the right (not obligation) to sell 100 shares at the strike price before expiration. Used as a hedge or to profit from a declining stock.
The fixed price at which an option contract can be exercised. Also called the exercise price.
The price paid to buy an option contract. Determined by intrinsic value (how far ITM it is) and time value (time until expiration and implied volatility).
The market's forecast of a stock's future price movement, derived from option prices. High IV = expensive options; low IV = cheap options. IV spikes before earnings.
In-the-Money (ITM): the option has intrinsic value (call: stock > strike; put: stock < strike). At-the-Money (ATM): stock price ≈ strike. Out-of-the-Money (OTM): no intrinsic value yet.
How much the option price moves per $1 move in the underlying stock. Ranges 0–1 for calls, −1–0 for puts. A delta of 0.5 means the option gains $0.50 for every $1 the stock rises.
Time decay — the rate at which an option loses value as expiration approaches, all else equal. Works against buyers and in favor of sellers. Accelerates in the final 30 days.
The rate of change of delta per $1 move in the stock. High gamma means delta changes quickly — options near expiration and ATM have the highest gamma.
The change in an option's price per 1% change in implied volatility. Long options benefit from rising IV; short options benefit from falling IV.
The total number of outstanding option contracts that have not been settled. Rising OI with rising price confirms a trend; divergence can signal a reversal.
A measure of an investment's return above what would be predicted by its beta (market exposure). Positive alpha means the investment outperformed on a risk-adjusted basis.
A measure of a stock's volatility relative to the market (S&P 500 = 1.0). Beta > 1 means more volatile; beta < 1 means less volatile; negative beta moves inversely to the market.
Risk-adjusted return — how much excess return you earn per unit of volatility taken. Higher is better. A ratio above 1.0 is generally considered good.
A statistical measure of how spread out returns are from the average. Higher standard deviation = more volatile investment. Used as a proxy for risk in many models.
How closely two assets move together. Ranges from −1 (perfectly inverse) to +1 (perfectly in sync). Adding low-correlation assets to a portfolio reduces overall risk.
Spreading investments across different assets, sectors, or geographies to reduce unsystematic (company-specific) risk. Does not protect against systematic (market-wide) risk.
The peak-to-trough decline of an investment or portfolio over a specific period. Max drawdown is the largest historical drop from a peak before a new peak is reached.
The degree of variation in a trading price over time. Annualized volatility is standard deviation of daily returns scaled by √252 (trading days in a year).
An SEC filing required within two business days whenever a corporate insider (officer, director, or 10%+ shareholder) buys or sells company stock. The primary data source for insider trading signals.
A quarterly SEC filing required of institutional investment managers with >$100M in assets. Discloses their equity holdings as of the end of each quarter — published 45 days after quarter end.
13D: Filed when any investor acquires >5% of a company's shares with intent to influence management (activist). 13G: Same threshold, but passive investor. 13D is the more aggressive signal.
InsiderPulse's proprietary metric. Measures how much faster insiders are buying a stock recently versus their own historical baseline — weighted by the number of unique insiders buying.
A person or entity that has economic benefit of a security even if held in another name. Reportable once a threshold (5% or 10%) is crossed.
The SEC's Electronic Data Gathering, Analysis, and Retrieval system. The public database where all required SEC filings (Form 4, 13F, S-1, 10-K, etc.) are submitted and searchable.
A window of time — typically around earnings releases — during which insiders are prohibited from trading company stock. Trades outside blackout windows carry more signal value.
A graph of interest rates (yields) on bonds of equal credit quality but different maturities (1-month to 30-year). A normal curve slopes upward; an inverted curve historically signals recession.
When short-term yields exceed long-term yields. Historically, inversions of the 2-year and 10-year Treasury spread have preceded every US recession since the 1970s.
A unit equal to 1/100th of a percentage point. Used to describe small changes in interest rates or yields. 25 bps = 0.25%; 100 bps = 1%.
The interest rate at which US banks lend reserve balances to each other overnight. Set by the Federal Reserve's FOMC. Changes ripple through all other interest rates in the economy.
A measure of the average change over time in prices paid by consumers for a basket of goods and services. The primary inflation gauge watched by the Federal Reserve.
A measure of a bond's sensitivity to interest rate changes. A duration of 5 means the bond's price falls ~5% for every 1% rise in yields. Longer-dated bonds have higher duration.
The yield difference between two bonds, usually vs. a Treasury benchmark. Credit spreads widen when investors demand more compensation for default risk — a sign of market stress.
The total monetary value of all goods and services produced in a country over a period. Two consecutive quarters of negative GDP growth is the classic definition of a recession.
A monetary policy tool where a central bank purchases government bonds or other assets to inject money into the economy, lower long-term yields, and stimulate borrowing.
A company's net profit divided by the number of outstanding shares. The most common measure of profitability. Earnings beats (actual > estimate) typically push stock prices higher.
Total income generated from sales of goods or services before any costs are deducted. Also called the "top line." Growth in revenue signals expanding business; shrinkage is a red flag.
Earnings Before Interest, Taxes, Depreciation, and Amortization. A proxy for operating cash flow used to compare companies across different capital structures and tax jurisdictions.
Forward-looking estimates provided by company management about expected future revenues, earnings, or margins. Downward guidance revisions often hit stock prices harder than a missed quarter.
Price-to-Sales ratio. Useful for valuing pre-profit companies where P/E is meaningless. Common in high-growth tech sectors.
Price-to-Book ratio. Compares market value to net asset value (assets minus liabilities). A P/B below 1 may signal undervaluation or distress.
A valuation method that estimates a company's value based on its projected future cash flows, discounted back to present value using a rate that reflects risk.
Trailing P/E uses the last 12 months of actual earnings. Forward P/E uses analyst estimates for the next 12 months. Forward P/E is more predictive but depends on estimate accuracy.
The difference between reported EPS and the analyst consensus estimate. A positive surprise (beat) often drives the stock up; a miss drives it down — even when earnings are still positive.
The first time a private company sells shares to the public on a stock exchange. Raises capital for the company; early investors and employees gain liquidity.
A contractual period (typically 90–180 days post-IPO) during which insiders and early investors cannot sell their shares. Lock-up expiration often causes temporary selling pressure.
The formal SEC filing a company submits before an IPO. Contains financial statements, risk factors, business description, and use of proceeds. The primary document for IPO due diligence.
The reduction in existing shareholders' ownership percentage caused by the issuance of new shares (via IPO, secondary offering, stock options, or convertible debt).
A corporate action that increases the number of shares while proportionally reducing the share price. A 2-for-1 split doubles the shares and halves the price. Market cap is unchanged.
When a company repurchases its own shares from the market using cash. Reduces shares outstanding, boosting EPS and often the stock price. A signal of management confidence.
An alternative to an IPO where a company lists existing shares directly on an exchange without issuing new shares or using underwriters. No lock-up period, no underwriting fees.
Special Purpose Acquisition Company — a "blank check" shell company that raises money through an IPO for the sole purpose of merging with a private company to take it public.
About these definitions: All terms are written and maintained by InsiderPulse. Definitions are for educational purposes only and do not constitute financial advice.