| Pairs trading | |
| a strategy of taking out two spread bets to maximise the return from one share (or index) outperforming the other. For example, you buy (go long of) the share (or index) you think will perform better and sell (go short of) the share or index you think will perform worse. The advantage of this strategy is that is doesn't matter which way the overall market moves - as long as you're right about the pair, you make a profit. | |
| Par | |
| The nominal value of a stock or share. | |
| Partial closing | |
| closing a portion of an open trade by making an opposite bet. This has the effect of locking a profit or loss while leaving some of the original position open. For example, if you have an existing position of buy 10 Dec Lloyds and you sell 5 Dec Lloyds then you are left with an open position of buy 5 Dec Lloyds (half of your original trade). As opposed to cut and reverse. | |
| Parity | |
| when futures are trading at the same level as the spot. | |
| Part Close | |
| when you decide to close part of your bet but leave a percentage still open. | |
| PEG | |
| PEG stands for 'price earnings growth' and relates the PE ratio of a company to its growth rate. It is worked out by dividing the forecast PE by the expected percentage points growth in earnings per share (EPS). PEGs were invented by British investment guru Jim Slater with the aim of giving an indication as to whether or not the price you are paying for the potential growth of a company is reasonable. The PEGs work on a 0-1 scale, and the lower the PEG ratio, the cheaper the share is relative to the expected growth of the company. PEGs can be useful for comparing growth companies but are all but useless for those which are loss making or experiencing falling profits. | |
| Partly paid | |
| Shares which have been only partly paid for and on which further payment or payments are due. | |
| Per Point/Pip/Tick | |
| a term meaning how much. A term used by spread betting companies to clarify the bets placed. For instance, a bet per point on British Railways is for each penny movement in the British Airways share price. A bet per point on the FTSE is for each point move in the relevant FTSE contract, e.g. a 100 point movement from 5,100 to 5,200 on a Daily FTSE contract would therefore incorporate a win or loss of £100 per £1 placed as a bet. | |
| Penny Shares | |
| Penny shares are shares with a market value of less than £1. In theory they're a good way of making money, as a 1p increase in value is still an impressive percentage increase. In practice, however, they are an equally good way of losing money. | |
| Placing | |
| The sale of a large number of shares in one company by arrangement direct to institutions and others without going through the market. | |
| Plc Public Limited Company (previously Ltd) | |
| Private limited companies are still Ltd so you can now tell the difference. Some Plc companies are not quoted on the Stock Exchange. | |
| Point | |
| the unit of a contract/bet. For example, UK shares one point equals one penny, for US shares one point equals one cent. | |
| Portfolio | |
| The sale of a large number of shares in one company by arrangement direct to institutions and others without going through the market. | |
| Pounds per points | |
| The usual way of describing the size of a bet; for instance with UK shares one point equals one penny so if you bet one pound per point you gain or lose one pound for every penny the share moves. | |
| Preference share | |
| A share giving a fixed rate of dividend. The dividend ranks ahead of ordinary shares, but below debentures and loan stock | |
| Premium | |
| 1. the amount by which a price for one instrument is higher than that of a similar instrument. As opposed to discount. 2. the difference between the futures price and the spot price when the future is trading above the spot. | |
| Premium to Cash | |
| the amount by which a future exceeds the actual current market price. For example, current DOW market (CASH) is 7150 but the December future is trading at 7180 so the premium to cash is 30 points. | |
| Price earnings (P/E) ratio | |
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The P/E ratio provides an insight into how the market rates an individual share. The higher the ratio, the more highly valued the share. It is calculated by dividing the company's share price by its EPS figure. So, a retail stock valued at 300p with an EPS of 30p would be on a P/E ratio of 10. (It could be said to be 'on a multiple of 10' or to sell at '10 times earnings'). A more simplistic definition of the P/E (but meaning the same): this is calculated by taking the current earnings (profits after certain deductions) of the company and dividing them by the number of shares issued. This gives the earnings by share figure. It is then divided into the current share price which gives the P/E ratio. See also Earnings per share. |
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| Price to book value (P/BV) | |
| Book value - also known as net asset value (NAV) - is calculated by dividing shareholders' equity in the balance sheet by the number of shares in issue. This is literally the net worth of the company's assets today. This NAV figure is then divided into the share price. Any figure below 1 suggests a company is looking cheap. | |
| Price to earnings growth (PEG) | |
| To calculate this, divide the PE by the stock's EPS growth rate. A PEG between 0 and 1 generally suggests a share is cheap relative to its growth prospects, and a PEG above 1 suggests a share is pretty fully valued. | |
| Prospectus | |
| An independently audited document detailing a company's financial history and current situation and published ahead of a new share issue. | |
| Proxy | |
| Someone who votes on your behalf if you cannot attend a shareholders' meeting. You can tell your proxy how to vote or let him make up his own mind. | |
| Put Option | |
| the right, but not the obligation, to sell a market at a specified price (the strike price) on a particular date in the future. | |
| Quote | |
| The price at which customers can buy or sell a particular index or share. | |
| Range trading | |
| a share or an index often trades within a certain price range. Range trading is about buying at the low end of the range (on the hopes of a price rise to the high end of the range). Conversely, traders will sell at the high end of the range (on the hopes of a price fall towards the low end the range). | |
| Recession | |
| defined as two consecutive quarters of negative economic growth as measured by a county's gross domestic product (GDP). | |
| Redemption | |
| The date when the nominal value of a stock will be repaid to the holder. | |
| Redemption yield | |
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The yearly return you get from a fixed interest stock which you hold until it is redeemed. It consists of two parts: the interest, often after tax, and the averaged out difference between what you paid and the value at redemption. |
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| Registered stock | |
| Stock in which the name of the holder is listed in the company's register and the stock is transferable only by his signature on a stock transfer form as opposed to bearer stock which is transferable by delivery. | |
| Regulation S | |
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Regulation S was crafted as a safe harbor that allows US public companies to sell shares to non-U.S. citizens. In essence, while regulators wanted to assure that U.S. investors had adequate access to information about public companies, non-U.S. residents were not afforded the same protection. Those non-U.S. residents would be permitted to buy and sell shares, among themselves, even though the issuer had never registered those shares with the SEC. In other words, companies were given license to do abroad what they could not do at home - dump shares on the marketplace without registration or disclosure. To qualify for a Regulation S exemption, the shares must be sold offshore to a non-U.S. resident, and may not be sold back into the United States for one year. Those requirements are not as stringent as they may seem at first blush. The U.S. market is foreclosed to re-sales for one year, but that leaves the rest of the world - and the market for U.S. public companies is thriving around the globe. |
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| Relative Strength Index (RSI) | |
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One of the most widely used indicators by short-term traders is the Relative Strength Index (RSI). This compares the number of days that an index finishes higher against the number that it ends lower. It ranges in value from 0 to 100 and is generally considered to be showing overbought conditions if it reaches 70 or more and oversold if it approaches 30, although some traders prefer to use 80 and 20 respectively. |
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| Renunciation | |
| The giving up of the right to be registered as the holder of a new issue, enabling the issue to be transferred to another. | |
| Resistance level | |
| a price level identified by technical analysts at which persistent selling of a share or commodity takes place. For example, if the share price history of company X is plotted on a chart, and the chart shows that the share never seems able to rise above £4.20 or fall below £3.60, then the resistance level is £4.20 and the support level is £3.60. The significance of this is that if a share price does break through its resistance level, you could make a profit from the subsequent rise in price. | |
| Return on capital employed (ROCE) | |
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a ratio that shows the efficiency and profitability of a company's capital investments. Calculated as earnings before interest and tax (EBIT): (Capital employed + Short term borrowings - Intangible assets). |
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| Rights issue | |
| if a company needs to raise capital - to buy another company or develop a product - it may consider a rights issue. It invites its shareholders to buy additional shares, and the number you can buy will depend on how many you already own. Because this creates more shares in the company, their value will fall, so, to compensate, extra shares will be offered at a discount. | |
| Roll over | |
| Rollover is the closing of an open bet and the opening of a new bet for the same amount at a point in time; typically incurs a charge for futures style bets. It allows you to transfer a trade that is near its expiry date to the next expiry date. Rolling over is a facility offered by a spreadbetting firm to those clients whose financial positions are due to expire within a short time and want to roll them into the next contract month. Normally clients can roll positions from the expiring contract to the next contract month for a reduced spread. | |
| Risk | |
| the possibility that the real return of an investment will be worse than expected. This could mean losing some, or all, of the original investment. | |