Glossary
Terms, defined plainly
- Covered callOptions
- Owning shares and selling a call against them: premium income, capped upside, stock downside remains.
- Lesson: Covered calls and protective puts
- DividendMarkets
- Cash a company distributes to shareholders out of its profits.
- Lesson: What a share actually is
- EPSFundamentals
- Earnings per share: net income divided by shares outstanding. Can rise from buybacks alone.
- Lesson: Revenue, earnings, and what sits between
- Market capitalisationMarkets
- Share price times shares outstanding: the market's price for the entire company.
- Lesson: What a share actually is
- Option premiumOptions
- The price of an option, quoted per share; one standard contract usually covers 100 shares.
- Lesson: Calls and puts: rights and obligations
- P/E ratioFundamentals
- Price per share divided by earnings per share; what investors pay for each unit of current earnings.
- Lesson: Valuation multiples and their traps
- Position sizingRisk
- Choosing share count from portfolio risk budget divided by the per-share distance to invalidation.
- Lesson: Risk management and position sizing
- Protective putOptions
- Owning shares and buying a put to set a floor, at the cost of the premium.
- Lesson: Covered calls and protective puts
- VolumeTechnicals
- Shares traded in a period; a measure of participation, with no direction of its own.
- Lesson: Trend structure and volume confirmation