A
- Allotment: the shares a person actually receives in an IPO or other issue, decided after bidding closes.
- Anchor investor: a large institution allotted IPO shares one working day before the issue opens to the public.
- ASBA: Application Supported by Blocked Amount. The money for an IPO bid stays in the bank account, blocked, until allotment.
- At the money (ATM): the option strike closest to the current price of the underlying.
B
- Basis: the difference between a futures price and the spot price of the same index or share.
- Bonus issue: free extra shares given to existing shareholders in a fixed ratio. The share price adjusts so the total value is unchanged.
- Book building: the way most IPO prices are set, by collecting bids within a price band.
- Buyback: a company buying its own shares back from shareholders and cancelling them.
C
- Call option: the right to buy at a fixed strike price on expiry.
- Corporate action: an event decided by a company that affects its shares, such as a dividend, split, bonus or rights issue.
- Cut-off price: an IPO bid option that accepts whatever final price is set within the price band.
D
- Demat account: an account that holds shares and other securities in electronic form.
- Derivative: a contract whose value comes from something else, such as an index or a share. Futures and options are derivatives.
- Dividend: cash a company pays to shareholders out of its profits.
- DRHP: draft red herring prospectus, the first offer document a company files with SEBI before an IPO.
E
- Entitlement: the number of shares a shareholder may apply for in a rights issue or tender in a buyback.
- Ex-date: the first day a share trades without the right to an announced dividend, bonus or rights offer.
- Expiry: the last day of a futures or options contract.
F
- Face value: the nominal value of a share written in the company’s records, often ₹1, ₹2 or ₹10. It is not the market price.
- F&O: futures and options, the main equity derivatives traded in India.
- Floor price: the lowest price at which bids are accepted in an offer for sale through the exchange.
- Futures: a contract to buy or sell at a fixed price on a set future date.
G
- Grey market premium (GMP): an unofficial, unregulated figure for how much above or below the issue price IPO shares are being traded informally before listing.
- Greeks: measures of how an option’s price is expected to change with price, time, volatility and interest rates.
I
- Implied volatility (IV): the level of future price swings implied by an option’s current price.
- In the money (ITM): an option that would have value if it expired now.
- India VIX: NSE’s index of expected Nifty volatility over the next 30 days, worked out from option prices.
- IPO: initial public offering, a company’s first sale of shares to the public.
L
- Listing: the start of trading of a security on a stock exchange.
- Lot size: the smallest number of shares or units that can be bid for or traded in a contract.
M
- Margin: money kept with a broker to cover possible losses on a position.
- Mark-to-market (MTM): settling the day’s gains and losses on futures positions each day.
- Market capitalisation: the share price multiplied by the number of shares in issue.
- Max pain: the option strike at which the total value of in-the-money options at expiry would be lowest.
N
- NII: non-institutional investor, someone applying for more than ₹2 lakh in an IPO who is not a QIB.
- Nifty 50: NSE’s index of 50 large companies listed on the exchange.
O
- Offer for sale (OFS): existing shareholders selling shares to the public, either within an IPO or through a special window on the exchange.
- Open interest (OI): the number of futures or options contracts open and not yet closed or expired.
- Out of the money (OTM): an option that would expire worthless if prices did not move.
- Oversubscription: bids for more shares than are on offer.
P
- Premium: the price of an option.
- Price band: the range within which investors bid in a book-built IPO.
- Promoter: the person or group in control of a company, named as such in its filings.
- Put option: the right to sell at a fixed strike price on expiry.
- Put-call ratio (PCR): total put open interest divided by total call open interest.
Q
- QIB: qualified institutional buyer, such as a mutual fund, insurer, bank or foreign portfolio investor.
R
- Record date: the date on which a company checks its register to see who is entitled to a dividend, bonus, rights or buyback.
- Registrar: the agency that keeps a company’s shareholder records and processes IPO allotments.
- RHP: red herring prospectus, the offer document filed shortly before an IPO opens.
- Rights entitlement (RE): the credited right to apply for new shares in a rights issue, which can be used, sold or allowed to lapse.
- Rights issue: new shares offered to existing shareholders in proportion to their holding.
S
- SEBI: the Securities and Exchange Board of India, the market regulator.
- SME platform: the separate exchange platforms for small and medium companies, such as NSE Emerge and BSE SME.
- Stock split: dividing each share into more shares of a lower face value. The total value held is unchanged.
- Strike price: the fixed price written into an option contract.
T
- T+1 settlement: shares and money for an ordinary trade change hands one working day after the trade.
- Tender offer: a buyback in which shareholders offer their shares to the company at a fixed price.
U
- Underlying: the index or share on which a futures or options contract is based.
- UPI mandate: a request in a UPI app to block money for an IPO bid until allotment.
Y
- Yield: income from an investment as a share of its price, such as dividends divided by the share price.
Sources
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For education only. This is not investment advice or a recommendation to buy or sell anything.