Trader Education:
Alpha: outperformance of a benchmark
Beta: volatility or standard deviation
Call: option contract = right to buy a stock at a certain price
Cash Secured Put = right to sell a stock at a certain price; either buy this right or sell this right for a premium.
Condor Spread: writing a bear call spread and and a bull put spread on the same stock or index fund…. XYZ is trading for $50 so you sell a $52.50 call and buy a $55 call and sell a $47.50 put and buy a $45 put option.
Calendar Spread: buy a long dated call and sell a front month call or buy a long dated put and sell a front month put option. The strategy relies on time decay.
Covered Call/Buywrite: Buy a stock and sell a call option against your stock position
Cramerica: the sheeplike herd of daytraders who watch Jim Cramer and do as he says (not as he does)
Deep Value: Buying stocks that are out of favor usually for less than their liquidation or breakup vaue.
Dip Buyer: Traders who rush in to buy on down days in the stock market
EMF: Electro Magnetic Field — as in Marcia Southick’s EMF Jewelry which protects people from harmfull cellphone radiation (see our store page for more info)
EV/EBITDA: valuation metric which measures a companies market cap plus debt and divides by the companies earnings before interest, taxes, depreciation, and amortization.
Enterprise Value: Market capitalization (shares outstanding times price per share) plus long term debt.
Fibonnaci Retracement: statistical measure used in technical analysis which looks at price movements on a percentage basis from prior highs and prior lows to predict future direction of a stock or index fund.
Hindenburg Omen: technical analysis condition that has historically arisen before large market declines, though it has not worked in the recent past (August 2010 for example)
Intrinsic Value: the actual value of a company if it were sold or were to be liquidated. Value investors try to buy stocks below this value and sell near this value.
Jeremy Grantham: Head of GMO Capital Markets, market prognosticator, savvy macro analyst, and value investor. Has called Graham and Dodd investors Naive.
John Hussman: head of Hussman Funds www.hussmanfunds.com with an outstanding long term track record. Prefers to hedge long positions in overvalued markets and to buy stocks only when valuations are favorable.
Jerome Kervial: trader who almost blew up Societe Generale
“Kids in the Market:” Phrase used to describe the youth in the business of stock trading and the immature and irrational nature of market prices.
Koolaid: betting naively on stocks because some guru or forecaster believes in a certain “can’t lose” investment thesis
Liquidity: amount of money or volume in a particular stock. How easy is it to get into or out of a given stock position.
Low Price to Book Value: a time tested methodology for investing in common stocks is to buy businesses when they are trading for less than their assets minus their liabilities.
Low Price to Cash Flows: buying businesses at low multiples to their cash earnings.
Market Maker: traders who are paid to buy and sell the same stock over and over again, often offering shares and bidding for shares of the same stock at the same time.
Market Neutral: Strategy that attempts to make money regardless of the overall direction of the stock market.
MACD: Technical analysis method for investing in the markets based on oversold and overbought levels and signals — traders want to buy when the MACD is low and sell when the MACD is high generally.