Glossary of Stock Trading and Investment Terminology

Exchange Traded Funds (ETFs)


Exchange traded funds (ETF) are the ones that track an index but are traded like stocks on the Australian Securities Exchange (ASX). In case of ETF, the shares are bundled together in the index so that the traders can easily sell or buy them through a single transaction.

RSI


Relative Strength Index or RSI is a technical analysis indicator that determines the magnitude of gains against the magnitude of losses over a certain period of time. RSI is widely used to determine whether a market is overbought or oversold. The calculation involves doing analysis of the bullish ranges against the bearish ranges for a certain period of time which is usually 14 days.
The calculation of RSI is done in the following way:

RSI = 100 - (100 / 1 + RS)

Superannuation Work Test


In order to make personal superannuation contributions, those who are aged within the range of 65 and 74 are required to meet the work test. As far as the work test is taken under consideration, an individual is required to be employed for a minimum of 20 hours gainfully in a consecutive period of 30 days (during the financial year when the contributions are made). It is to be mentioned that self employment or employment in order to gain or reward in any sort of profession, occupation, business, trade, calling or employment is considered valid.

Blue Chip


Blue chip companies are nationally known companies whose dividends are deemed to be reliable. Blue chip companies issue blue chip stocks, generally high priced but with low yield. Although blue chips are considered to be stable, some companies still fall beyond expectations, like telecommunications companies crashing during the dot.com years. Blue chip stocks are listed in Standard & Poor's ASX 20 with prices usually following the S&P500.

Risk Free Rate


Risk free rate is the minimum rate you get from a zero risk investment. As there is no such thing as a risk-free investment, this rate is theoretical. In practice, short-dated Government bonds—which are regarded as stable—are often used as the risk free rate.

Agribusiness Investments


The term agribusiness investments refer to investments in various agricultural sectors including timber and wine. In the case of agribusiness investments, an investor grows crop and the cost involved with it (which includes the expense of establishment and ongoing expenses) is normally considered as business expenses which are tax-deductible against other earnings. The earnings that a crop grower generates through the sale of the crop are considered as assessable income.

Benefits of investing in Agribusiness

SPI


If you want to trade the overall stock market with a single trade, then Share Price Index Futures or SPI futures and options and the options contracts might be the right choice. Trading the SPI 200 is similar to trading a balanced share portfolio that tracks the S&P/ASX index. Share Price Index Futures tracks the S&P/ASX 200 index and considered most popular among the future contracts. It is to be mentioned that in case of the SPI, the transaction can be filled within seconds.

Relation between SPI 200 and S&P/ASX 200

EBITDA


EBITDA refers to the earnings before interest, taxes, depreciation and amortisation. This is a type of measurement process which allows an investor to have some idea about how much money a company is generating before the deduction of taxes, deprecation and amortisation. It is very much important for any investor to know how much money a particular business is making before deciding whether to invest money in that business and EBITDA is considered as one of those methods that can be used by the investor to find that. EBITDA is calculated through the following formula:

London Metal Exchange (LME)


The London Metal Exchange (in short LME) is known as the premier non-ferrous metals market of the world which offers options and future contracts for various types of metals including aluminium, copper, lead, tin and zinc. In addition to this, it offers two regional aluminium alloy contracts as well. The exchange has started trading plastic during 2005. It is to be mentioned that, iron and steel are not traded at LME since it is a non-ferrous exchange.

Investing at London Metal Exchange: Different Trading Methods

Bonus Issue


A bonus issue (also called capitalisation issue, bonus shares, scrip issue) is shares given to shareholders free. These are shares you do not have to pay for and a means for the company to distribute historic retained profits. No cash changes hands between investors, so this is an accounting transaction. Bonus issues can boost the marketability of stock.

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