| Are you looking to start investing stocks but don't | | | | Typically the market maker or specialist pockets this |
| quite know how to get started? Here is some of the | | | | difference buy buying shares from one individual at |
| lingo and common terms used when investing in | | | | the bid price and selling them to another individual at |
| stocks to help you communicate with your broker, | | | | the ask price. Not too long ago, stocks were listed in |
| read financial papers and websites, and talk with | | | | fractions, so the spread was typically no less than 1 |
| other investors:shares of stock- Shares of stock are | | | | 8 or 12.5 cents per share ($12.50 for 100 shares). |
| fractional ownership rights in a company. Companies | | | | More recently stocks began trading in decimals such |
| issue shares to gain money (called "capital") to buy | | | | that the smallest theoretical spread is 1 penny per |
| equipment, make capital improvements, and generally | | | | share or $1 for 100 shares.going long- Taking a |
| grow their business. Once the shares are issued to | | | | position in a stock (or other equity or product) such |
| the public, they are traded between individuals.market | | | | that money is made if the price of the stock goes |
| cap- The number of shares of stock outstanding | | | | up. For example, buying shares of stock.going short- |
| times the price per share. This gives the relative | | | | The opposite of going long. Taking a position such |
| value of a company.stock exchange- A stock | | | | that money will be made if the price of the stock |
| exchange is a place where people gather to trade | | | | goes down.short sale- A trade in which an individual |
| shares of stock. This is done by individuals who have | | | | borrows shares of stock and sells them, thus getting |
| acquired the right to do so (through the purchase of | | | | the proceeds from the sale. The position is closed by |
| a seat on the exchange) and their employees. These | | | | later buying back the shares, hopefully at a lower |
| "individuals" are brokerage firms, venture capital firms, | | | | price. Note that the brokerage firm normally takes |
| and others. The brokerage firms are largely (but not | | | | care of finding the shares to borrow.stop loss- An |
| always) trading shares for their clients. Most trades | | | | order to sell shares of stock if the price drops below |
| are now done using computers that automatically | | | | a certain price, thereby preventing further |
| match buyers and sellers. | | | | losses.market order- An order to buy/sell shares at |
| NYSE- The New York Stock Exchange, one of the | | | | whatever the current ask/bid price is when there is a |
| oldest and largest exchanges. Larger stocks typically | | | | seller/buyer on the other side of the trade (or a |
| trade on the NYSE, which is also known as the "big | | | | market maker willing to take the opposite side of the |
| board." | | | | trade).limit order- An order in which the stock will be |
| The Curb- The American Stock Exchange, a smaller | | | | bought/sold when the ask/bid is at or below/above a |
| exchange than the NYSE that started when a group | | | | certain price. For example, an order to "buy 100 |
| of traders started trading outside of the NYSE on | | | | shares of XYZ corp at a limit of $20 or better" would |
| "the curb." The American Stock Exchange in the | | | | be filled when the ask price was $20 per share or |
| most common place where "exchange traded | | | | lower, such that the buyer would never pay more |
| portfolios" trade. | | | | than $20 per share.dividend- Money paid by a |
| NASDAQ- A newer exchange made up of a network | | | | company to share holders who own stock on a |
| of computers. Smaller stocks tend to trade on the | | | | certain date (called the "ex-dividend date"). The |
| NASDAQ, as do many technology companies.specialist | | | | amount paid is based on the number of shares held |
| and market maker- These are individuals involved in | | | | (for example, 2 cents per share or $2.00 for 100 |
| actually making the stock trades happen by taking | | | | shares).capital gain- Money made on a stock by |
| the other side of the trade (for example, buying the | | | | buying shares at a lower price and selling them at a |
| shares from the person who would like to sell). The | | | | higher price.split- An event where a company issues |
| specialist makes money by buying the shares at the | | | | shares in order to reduce the price per share. For |
| bid price and selling them at the ask price. The | | | | example, in a 2 for 1 split a share holder who owned |
| difference between a specialist and a market maker | | | | 100 shares worth $20 per share would end up with |
| is an advanced topic not needed here.the bid price- | | | | 200 shares worth $10 per share. There is no net |
| The current price that someone is willing to pay for a | | | | difference in the value of the holding. |
| stock.the ask price- The current price for which | | | | Hopefully this will give you a start in learning the |
| someone is willing to sell some shares.spread- This is | | | | commonly used terms. |
| the difference between the bid and the ask price. | | | | |