An asset represents value of possession that can be converted into cash. May be a stock, currency, commodity or index.
Trading on an asset using Call/Put method with the belief that the value of the asset will be higher that the rate
A price reported in “real time” without delay
The value of an asset before the time of expiry
The expiry rate is the value of the traded asset at the expiry time, this rate determines whether the trade ended in the money or out of the money.
The time and date when an trade expires
Fundamental analysis uses past and present data, with the goal of making financial forecasts.
A trade in which the traders predicts that the chosen asset will expire at a price that is higher than the rate price.
In the Money
An asset in which moves in the direction predicted by trader during a specific trade.
Also known as “the stake”, this is the sum of money invested in on a trade
The maximum loss possibility that equals to the premium cost
Low A trade in which the trader predicts that the underlying asset will expire at a price that is lower than the rate price.
A price that represents the current value of an underlying asset
The return is the amount of the original investment that the trader will receive if the investment is profitable.
Out of the Money
A term used to describe trades that had an unprofitable result
Payouts funds that are received when the trade was profitable, the payouts is a predetermined amount or percentage on the trade
Trading an asset using the CALL OR PUT method with the belief that its value on the expiry will be lower than that the rate placed
Signals are trading recommendations provided to customers with a certain initial investment amount placed unto their account
A partial ownership of a company or enterprise
Uses past data in order to predict future trends in the price of an asset, technical analysis considers all aspects of an asset price are built into its market price. As a result, certain trends can be assumed in order to determine which direction an asset will take.
Time of Expiration (Expiry)
The time and date when an trade concludes
Allows traders to trade with a variety of assets such as currencies, indices, stocks, and commodities.
Small Cap Stocks
Small capitalisation stocks are relatively small stocks with market capitalization of below $100 million. The definition can vary between brokerages and can change from time to time. It is in the field of Small Cap Stocks where large growth potential can often be found, as institutional investors often do not research them and mutual funds often have restrictions prohibiting them from establishing meaningful positions in Small Caps.
Private equities are equity securities of companies that have not “gone public” (in other words, companies that have not listed their stock on a public exchange). Private Equity can also be private placements of listed companies.
Listed companies often gain access to the private equity market in order to raise assets for the development of new products or technologies, to increase their working capital, engage in acquisitions or maximize their capital structure.
Private Equity investments can offer potentially higher returns than the normal stock or bond investments. They provide the experienced investor with the possibility of diversification because they have a relatively weak comparison to the traditional markets and are therefore not dependent on market trends. However, the capital invested should normally be viewed on a long term basis, usually 1-5 years or beyond.
Micro Cap Stocks
Micro cap refers to a stock with a market capitalization of below $50 million, although definitions vary. This sector represents very high risk as the stocks are usually in the earliest stages of development but as a result may offer tremendous long term potential through participating in these types of fledgling investments.
Mid Cap Stocks
Mid caps are normally stocks with market capitulations of between $2 billion to $10 billion, although definitions may vary.
Large Cap Stocks
Large caps are stocks with market capitalization of between $10 billion and $200 billion, although definitions vary. These are amongst the largest of stocks trading on the markets and can offer excellent dividend income. However, when considering growth on capital, as these are the behemoths of the stock markets it is worth remembering the maxim that “elephants don’t gallop”.
Usually a source of money for start up companies. This is typically raised by venture capital firms who invest in private companies that need capital to develop and market their products. A venture capital funding arrangement will often entail relinquishing some level of ownership and control of the business by the current owners. So normally, investors look for more than a mere capital investment.
Middle-Market Private Firms
This type of Private Equity financing provides growth capital for medium-sized companies. These companies usually have an established market position, a good market capitalization and usually generate sales of several million US Dollars. They are profitable or about to be profitable. Here, Private Equity capital is used to finance either additional expansion or acquisitions, or to allow an adjustment in ownership structure. This is one of CHASE & SAUNDERS’s main operational activities and a vital market for CHASE & SAUNDERS’s clients.
This provides the investor with a stake in a company that is experiencing financial difficulties, in return for a capital injection. The objective is a planned turnaround or the liquidation of undervalued parts of the assets. Investors usually follow a take-over strategy and seek some kind of control. They might have an entrepreneurial interest or just the intention to liquidate parts of the company. This type of investment is normally only undertaken by the more experienced investor.
The total value of a company’s issued shares, excluding any that have been repurchased by the company. Simply put, this is a comparative measure of the company’s size obtained by multiplying the share price by the number of shares in issue.
Volatility describes the scale of movement in the price of a stock. The greater the volatility
(fluctuation), the more risky the investment. Normally, volatility depends on the size of the stock:
The smaller the company’s capitalization, the easier the price of the stock can be influenced, i.e. the bigger is the volatility. Small Caps, in other words, are usually considered more volatile investments
than large caps.
Supply and demand determines the liquidity of the stock. In the Small Caps limited market, one can be much larger than the other resulting in fast rising or falling prices or even the impossibility to sell the stock. Liquidity in simple words refers to how easily a share can be bought and sold on the market in relation to the influence on its price. A share is liquid when there are enough shares in circulation to allow large transactions to be made without a substantial change in the price (see volatility). The shares of a Small Cap company might not be liquid or freely tradable, there may be a limited market in the company’s shares on a daily basis, there may be no shares available to buy and sometimes shares cannot be sold because a buyer cannot be found. In addition, there may sometimes be a restriction in selling (see Restriction) or an obligation to hold on to the stock for a predefined period of time. Information on the stock, may also be limited, which is where Chase-Sander’s expertise is instrumental in providing the much needed information.
Long only refers to an investment strategy which concentrates only on buying assets and holding them to make profits. A long only fund therefore does not use any derivatives, gearing or short selling tactics in an effort to enhance gains. Leverage generally refers to increases in market exposure achieved by direct or indirect borrowing. It therefore increases performance risk and volatility. CHASE & SAUNDERS exclusively recommends a long only strategy and strongly advises against any increases of risks for small cap investments.
The extent to which an investor or a company is using borrowed money. For companies, leverage is measured by the debt-to-equity ratio, which is calculated by dividing the long-term debt by shareholders’ equity. The more long-term debt there is, the greater the financial leverage and the greater the risk of the company failing. For investors, the term means the practice of investing with borrowed money to increase potential profit.
The most common usage relates to the use of predefined contracts relating to the right to buy or sell an underlying security rather than to the security itself i.e. they are “derived” from the security rather than being the security itself.
The sale of a stock which the seller does not own. This is a speculative practice done in the belief that the price of a stock is going to fall and the seller will then be able to cover the sale by buying the stock back at a lower price. Any profit would be the difference between the initial selling price and the subsequent purchase price. It is illegal for a seller not to declare a short sale at the time of
placing the order.
A standard against which a specific strategy is measured.
Example: A long only blue chip investor can compare his performance with the Dow Jones index and see whether his choice was better than the performance of the 30 biggest US stocks.
Evaluating the performance history of stock is often problematic owing to the difficulty in setting an
appropriate benchmark. This is important for risk appraisal when evaluating the assessment of manager / advisor skill.
The London Stock Exchange is a public limited company and is the primary stock exchange in the U.K. and the largest in Europe. The LSE is the most international of all stock exchanges with companies from more than 50 countries being listed. Through its two primary markets – the Main Market and AIM (see AIM) – the LSE gives companies access to one of the world’s deepest and most liquid pools of investment capital.
The Alternative Investment Market (AIM)
Formed in 1995 the Alternative Investment Market is a trading platform for small, young and growing companies from all over the world operated by the London Stock Exchange as a regulated market of a Recognized Investment Exchange. It replaced the Unlisted Securities Market (USM). The market provides an opportunity for companies to raise capital for expansion, a trading facility and a way of establishing a market value for their shares. AIM now lists over 1,000 companies. AIM companies tend to trade on wider spreads than companies on the main market and therefore tend to be less liquid. Companies listed on the UK’s AIM market normally have a market capitalization of under £100 million. AIM is a market designed primarily for emerging or smaller companies. The
rules of this market are less demanding than those of the official list of the London Stock Exchange
and therefore carry a greater risk than a company with a full LSE listing. One of the advantages of investing in AIM companies for UK tax payers is that for tax purposes any shares bought after 6
April 2000 are treated as ‘unquoted investments’ (even though they are quoted). The significance of
this is that for every year that you hold AIM shares, you get 5% ‘taper relief’ on any gains you subsequently make. So if you are a higher rate taxpayer who would normally pay 40% Capital Gains Tax (CGT) and you hold shares for one year then sell them, you only pay 35% CGT. If you
hold shares for four years or more, the tax rate falls to 10%. Of course, this system encourages long term investment and support for smaller companies and should be a key consideration for all would-
The National Association of Securities Dealers is the organisation which owns and operates the US NASDAQ exchange (National Association of Securities Dealers Automated Quotation System). When measured by Market Capitalization, the NASDAQ is the second largest stock exchange in the world after the New York Stock Exchange (NYSE). However the NASDAQ now lists more companies than the NYSE and the volume of shares traded also exceeds that of the NYSE. The exchange is a computerized system and provides quotes for most U.S. and Canadian Stocks. It is also authorized by the Securities and Investment Board in the U.S. as a “Recognized Investment Exchange” and is the fastest growing major stock market in the world being home to over half of the companies traded on the primary U.S. markets.
Bid Price / Sell Price
The selling price potentially available to the seller, or the price at which an institution may buy back the shares. The bid price is lower than the Offer Price (see Offer Price).
The spread is the difference between the bid and the offer price. The bid price has to exceed the offer price in order for the investment to be in profit. Therefore, as this incurs in a time factor, it is one of the reasons why stocks should not be viewed as short-term investments.