Terms Flashcards
1
Q
Stock Market
A
Exchanges and markets where people buy and sell shares.
2
Q
Ticker
A
Abbreviation of companies.
3
Q
Trading vs. Investing
A
Trading: Short-term buying and selling
Investing: Buying and holding for long period of time.
4
Q
How do options contracts work?
A
Gives the holder of the contract the right to buy or sell an options contract (but not the obligation) by a specified date.
5
Q
What is a bond?
A
A loan to a company or the government that you receive interest on.
(does not involve equity or shares)
6
Q
What is a Market Index?
A
Tracks performances of a specified group of stocks, bonds, or other investments.
7
Q
What are the 3 major market indexes?
A
- NASDAQ
- S&P 500
- DOW JONES
8
Q
NASDAQ measures ______________ consists of _______________.
A
- Large cap growth indexes.
- Heavy tech companies, and Top 100 of the largest domestic (based on market cap) and international non-financial companies (tech index).
9
Q
S&P 500 consists of _______________.
A
Top 500 companies in all sectors.
10
Q
DOW JONES consists of _______________.
A
- Blue Chip Stocks (Large, well-established, and financially sound companies that have dependable earnings. Usually gives dividends)
(BONUS: Also tracks 30 large publicly owned companies on NY stock exchange.)
11
Q
Market Cap is the total _________________.
A
total (dollar) market value for a companies outstanding shares.
12
Q
An ETF is an _________________ that allows you to _________________.
A
- Exchange Traded Fund
- Invest in a collection of stocks often within the same sector. (1 ETF can give you exposure to a bunch of companies)
13
Q
ETFs are beneficial because _________________.
A
- You don’t have a lot of money to invest in each individual stock for that sector.
- LONG TERM GROWTH: Good to use as a form of “second level” savings to grow your account in a healthy market.
14
Q
_________________ ETFs can 2x-3x your money if you understand which direction the market is going in.
A
Leveraged (ETFs)
15
Q
Dividend Stock
A
A reward paid to the shareholders for their investment in a company’s equity.
16
Q
This is the “Report Card” for a company.
A
Annual Report/Earnings (happens annually and quarterly to show a companies activities/earnings)
17
Q
IPO stands for _______________ and is _______________.
A
- Initial Public Offering
- the first time a privately-owned venture decides to list its shares on the market for sale to the general public. (NEVER invest in IPO)
18
Q
Catalyst
A
Event/News that causes the price of stock to move up or down.
(BONUS: earnings are a predicable catalyst)
19
Q
A __________________ is when a company issues more shares of stock without diluting the value of their shares. Why should you beware if a company does this often?
A
- Stock Split
- This could demonstrate financial issues with a company (so they do stock splits to make the company seem more appealing).
20
Q
Technical Analysis vs. Fundamental Analysis
A
- Technical Analysis: Studying charts to analyze price movements and predict future movements.
- Fundamental Analysis: Long-term approach – Looks at the stock’s intrinsic value as well as the financial and economic factors that influence the business.
21
Q
What is scalping?
A
Entering a trade to a few minutes to an hour.
22
Q
Day Trading
A
Trading for the day (tech. analysis is key).
23
Q
Swing Trading
A
Holding a position for minimum 1 day to a month.
24
Q
Long Term Trading
A
Holding a position for months to years.
25
Opportunity Trading
Using patterns and trade based on those patterns.
(When you think of opportunity trading, think CATALYST!)
26
What does an options contract consist?
1. Premium
2. Strike Price
3. Expiration Date
27
3 Important Factors for a Premium of an Options Contract
1. Underlying stock price in relative to strike price.
2. Expiration Date
3. Volatility Level
28
Buy at the ____, sell at the ____.
1. Ask (highest price seller wants)
2. Bid (lowest price buyers are willing to pay)
29
__________ measures present fluctuation of underlying stock price.
Current Volatility
30
Implied Volatility measures ___________________.
The likelihood that a stock price will change (helps to anticipate future moves.)
31
Institutional vs. Retail Traders
1. Traders that buy/sell for group/institution.
2. Traders that buy/sell for themselves using their own funds.
32
Name 4 main greeks we will be utilizing.
1. Gamma
2. Delta
3. Theta
4. Vega
33
What does Delta help identify for options contracts?
1. How much the premium will change if the underlying stock moves (up/down) by $1.00. (i.e.: 0.4 means premium will move up or down 40 cents when stock moves by $1.00)
2. Can be used to estimate an options probability of expiring in the money. (i.e.: 0.4 means the option has a 40% chance of expiring ITM)
34
Does Delta change at a constant rate?
No. It increases as it gets closer to being ITM and shrinks as it gets further OTM.
35
Does Delta change at a constant rate?
No. It increases as it gets closer to being ITM and shrinks as it gets further OTM.
36
List differences for how Delta effects calls and puts.
1. Calls have + Delta
2. Puts have -Delta
3. If underlying stock rises by $1.00, premium for a call will increase and premium for a put will decrease.
4. If underlying decreases rises by $1.00, premium for a call will decrease and premium for a put will increase.
37
Gamma measures _________________ and is important in helping to determine __________________.
1. Delta's rate of change
2. Delta after underlying stock changes by $1.00 (add or subtract gamma from current delta to help determine next premium price)
EXAMPLE:
If delta is originally at 0.4, and the underlying moves up by $1, you will add $0.40 to the premium. If the gamma for that option is 0.05 —-> you will add delta plus gamma to get the next expected premium price if the underlying stock moves up by $1 again.
Therefore after the first move it will go to $1.40, after the next move it will go to $1.85 (because you added delta and gamma together)
38
Delta changes as the stock price moves but gamma is __________.
unchanging
39
With a higher gamma, _____________________.
the premium will experience bigger changes as the underlying stock price changes.
40
Theta helps determine an options extrinsic value. What is this extrinsic value and why is it important?
1. Extrinsic value = time value
2. It is important because it helps determine how much value an option loses as time passes (decreases at it gets closer to exp. date. -- at exp. date, the option will only have intrinsic value)
41
An options theta is always _____________.
Negative (because it is always losing value as time passes)
42
Time decay works against _______ and for _________.
1. Buyer
2. Sellers
43
That is usually the highest with _______ stocks because _______.
1. ITM contracts
2. You’re already profitable
44
Vega Measures ____________.
Implied Volatility
45
What does FANGT stand for?
Facebook
Apple
Amazon
Netflix
Google
Tesla
46
Periodic fluctuations that recur over set intervals in a regular and predictable fashion every calendar year.
Seasonality
47
Best months to buy (low).
1. March
2. September
48
What do the blue and black highlighted areas on the options trading tab mean?
Blue - ITM
Black - OTM
49
Types of Indicators
1. MACD
2. RSI
3. Volume Indicators/Candle Sticks
4. Moving Average Lines
5. Support and Resistance Lines
50
MACD is a _____________ indicator and shows ______________.
1. Momentum Indicator (Tracks momentum getting into the stock.)
2. Who's in control of the market (buyers vs. sellers)
51
How do you know who's in control of the market when analyzing MACD chart?
1. Buyers market (bullish) when blue line is above yellow line.
2. Sellers (bearish) market when yellow line is above blue line.
52
What does it mean when MACD lines are stuck together and why is this a red flag?
1. Stock hasn't made a decision on who's in control of the market.
2. Red flag because we want the stock to make a decision so we don't waste time buying and holding onto stocks (think theta ---> time decay and loss of value of the stock overtime)
53
What is RSI a good indicator of?
Overbought vs. Oversold Stocks
Helps determine which direction the stock may go in if the RSI rises above 70 and below 30.
If it rises above 70, it's overbought/bullish and is likely going to turn in the opposite direction (bearish).
If it decreases below 30, it's oversold/bearish and is likely going to turn in the opposite direction (bullish).
54
What is the range for RSI?
30 to 70
If the stock goes outside of the RSI, it is likely to turn in the opposite direction.
55
What are the volume indicators?
Candles Sticks (Green bars are for bullish and red bars are for bearish)
56
What do we consider when looking at volume indicators?
1. Abnormalities (i.e. when there’s huge amounts of volume that comes into the stock)
2. Consistency (how consistent is it when it comes to bullish/bearish candle sticks)
Another indicator that helps determine WHO'S IN CONTROL.
57
What do daily moving average indicators demonstrate?
Average price of a stock over a set period of time.
58
What are the daily moving average indicators for MBG?
1. 9 Days - Yellow
2. 13 Day - Blue
3. 50 Days - Pink
4. 200 Days - Teal/Green
59
What does it mean when trades are occurring above moving averages?
If a candlestick/bar is above a moving average indicator line, this means it is bullish for that time period.
60
What does it mean when trades are occurring below moving averages?
If a candlestick/bar is below a moving average indicator line, this means it is bearish for that time period.
61
Where the candle sticks/bars lie relative to the moving average lines can help you predict _____________________.
Which direction to go and when to buy/sell.
62
What don't we want when trading?
Indecision/Stagnancy (chart is moving sideways)
We don’t want our moving average lines to be crossing/intertwined with our cancels (this shows stagnancy/indecision).
63
The moving average lines that are The Godfathers are _____________. Why are they considered the Godfather's
1. 50 (pink) and 200 (green/teal)
2. They are important because they are measuring longer periods of time. (data is more consistent/accurate because of this).
64
When are decisions are usually made when it comes to the moving average lines?
When the candlesticks and 9/13 moving averages are approaching the 50/200 day moving averages.
65
What does it mean when the 50/200 moving averages are further away from the candle sticks?
the stronger the trend (bullish vs. bearish)
66
Explain the anatomy of a candle. (bearish vs. bullish)
1. 4 Components: Open Price, Close Price, High of the Session, Low of the Session
Green Candle: We closed higher at the end of the hour than when we opened.
Bottom to Top (b/c stock is going up)
Green is for Bullish —> Up Candles
High and Lows are indicated by straight lines above and below the rectangle.
Close is going to be indicated at the top of the rectangle, and open is going to be indicated at the bottom of the rectangle because the stock closed at a higher price than when it opened.
Red Candle: We closed lower at the end of the hour than when we opened.
Top to the bottom (b/c stock is coming down)
Red is for Bearish —-> Down Candles
High and Lows are indicated by straight lines above and below the rectangle.
Close is indicated at the bottom of the rectangle and open is indicated at the top of the rectangle because stock closed at a price lower than when it open.
67
Explain the anatomy of a candle. (bearish vs. bullish)
1. 4 Components: Open Price, Close Price, High of the Session, Low of the Session
Green Candle: We closed higher at the end of the hour than when we opened.
Bottom to Top (b/c stock is going up)
Green is for Bullish —> Up Candles
High and Lows are indicated by straight lines above and below the rectangle.
Close is going to be indicated at the top of the rectangle, and open is going to be indicated at the bottom of the rectangle because the stock closed at a higher price than when it opened.
Red Candle: We closed lower at the end of the hour than when we opened.
Top to the bottom (b/c stock is coming down)
Red is for Bearish —-> Down Candles
High and Lows are indicated by straight lines above and below the rectangle.
Close is indicated at the bottom of the rectangle and open is indicated at the top of the rectangle because stock closed at a price lower than when it open.
68
Support vs. Resistance
1. Support: Represents the lowest points on the chart.
2. Resistance: Represents the highest points on the chart.
69
What do support and resistance lines help indicate?
1.Measures the highs and lows within respective timeframes.
2. Helps identify pivot points.
3. Helps identify the range we have on how much we could potentially make from a stock.
70
What do support and resistance lines help indicate?
1.Measures the highs and lows within respective timeframes.
2. Helps identify pivot points.
3. Helps identify the range we have on how much we could potentially make from a stock.
71
____________ is when a stock tries to break against a resistant level (price) but it cannot/does not.
Rejection (“Ahhhh this stock got rejected at the $417 mark” → stock faced resistance going about that price point)
