Glossary of Stock Trading and Investment Terminology

Bid/Offer Spread


The bid/offer spread refers to the difference between the bid price and offer price. To be more specific, it is the difference between the highest amount that a buyer is willing to spend for an asset and the lowest price/amount in exchange of which the seller is willing to sell it. “Bid price” is the selling price while the “offer price” is the purchase price.

For instance, if the bid price is $25 and the offer price is $26, then the bid/offer spread is going to be $26 - $25 = $1.

Bid/offer Spread- from the Perspective of the Stock Market

Bottom Up Investing


When investing bottom up, individual shares and companies are researched and analysed. Investments are made based on future forecasts, rather than market cycles. Bottom up investing is recommended for investors who are familiar with the market. It is not a recommended strategy for those who make global-scale investments.

Ethical Investing


Ethical investing is a kind of investment policy that involves targeting those managed funds or stocks which follow a set of ethics when investing. Ethical investing is also known as "green investing" and "socially responsible investing". Investors involved in ethical investing do want to maximize their profit through their investments but at the same time wants to play a constructive role for the welfare of the society.

Hybrid Securities


Hybrid securities or 'hybrids' are a combination of two or more financial instruments. In general, hybrid securities combine the characteristics of both debt and equity. A common hybrid is a convertible bond. Convertible bonds feature the standard bond, but it is influenced by stock price movements into which it can be converted.

Derivatives


Derivatives are financial instruments whose value are dependent on or derived from the price of some other underlying asset (usually bond, currency, equity or commodity). Options, futures, forwards and swaps are some of the common form of derivatives. Most of the derivatives are characterised by greater leverage.