Basics of the Market Flashcards
What is a Stock?
Stock: A type of security that signifies ownership in a corporation and represents a
claim on part of the corporation’s assets and earnings.
What is the difference between a public company and a private company?
a private company is owned by a small number of shareholders and does not offer shares on the stock market
a public company’s ownership is dispersed among the general public and their stocks trade freely on the stock market
What is the Primary Market?
The primary market is where the first issuance of new securities happen.
In this market
companies raise funds by issuing new stocks through an initial public offering (IPO).
The underwriter (a company that helps other companies introduce new securities to
the market) will take care of selling those stocks to funds and banks.
What is the Secondary Market?
The secondary market/Aftermarket is the public market where previously issued financial instruments such as stocks, bonds and options are bought and sold.
After the initial issuance, investors can purchase from other investors in the secondary market.
What is an IPO?
an IPO is the first time that a stock of a private company
is offered to the public. It is very hard for regular investors to get shares at the IPO.
What is a Stock Exchange?
An exchange is the stock-market equivalent of a specific store, certain stocks can only be found in certain exchanges.
such as ARCA, NSE, NYSE, NASDAQ and so on.
What is a broker?
a Broker was originally an independent member of an exchange that did transactions on behalf of other members of that exchange.
Nowadays, a broker most commonly refers to organizations that platform trading and that serve as the middle-man between the buyers/sellers and the exchanges
What is the necessary information that must be conveyed by an Order?
- Order type
- Ticker
- Quantity
- Side: Buy/Sell
- Price
What is a Fill?
a Fill happens when you get executed on your order.
Getting filled means the order you sent has been satisfied and that you have successfully transacted.
What are the most common order types?
- Market order
- Limit order
- Stop order
- Stop limit order
What is a Market Order?
a Market Order is an order that needs to be executed immediately at any price available.
This order will always gets filled when the stock market is open and the stock in question is trading. Market Orders are used when your priority is getting your hands on the stock over getting a particular price.
What is a Limit Order?
a Limit order is an order to buy or sell a stock at a specific price or better. a buy-limit order can only be executed at the limit price or lower, a sell-limit order can only be executed at the limit price or higher.
a limit order is not a guaranteed-to-be executed order
What is a Ticker, a Bid, an Ask and a Spread?
Ask: (or ask price or offer) Is the lowest price that a seller is willing to receive for a
product.
Bid: (or bid price) Is the highest price that a buyer/bidder is willing to pay for a product.
Ticker: Combination of letters that represent a particular company that is listed on
an exchange.
Spread: Difference between the ask price to the bid price.
What is the Level1 and the Level2?
Level1: Displays the bid and ask prices as well as quantities. This also displays the last
trade executed.
Level2 / Order book: Electronic list of buy and sell orders for a stock. This list is
ordered by price and then by time. The order book lists the number of shares on the
bid and ask at every price point.
What is the NBBO?
NBBO (National Best Bid and Offer): This represents the highest bid and lowest
ask available on the market.
