TRADING INSTRUMENTS / ASSETS
TRADING & INVESTING TERMS
What is a Stock?
Stock is a type of investment that is usually purchased and sold through stock exchanges. A unit of stock is called a share. Equity is security that embodies the possession of a certain part (in the form of shares) of the organization. The two main types of stocks are common and preferred. Owning a common stock means shareholders have a right to vote in the meeting and dividends are also paid to them. On the other hand, in preferred shares, shareholders have priority on the assets and they are paid before the common stakeholders in case of bankruptcy.
What is an Option?
Option is a type of contract in which a trader (who buys the Option) has the right to purchase or sell the assets, but not the obligation, at a fixed price until the expiration of the contract. A Call Option provides a choice to traders to buy an asset at a set value within a certain amount of time (expiration date). A Put Option permits a trader to sell the asset at a set value within a certain amount of time.
What is Futures?
Futures is also a derived contract in which the trader has the right and obligation to purchase and sell the assets at a prearranged price within the predefined time (expiry date). The Futures contract is a legally binding agreement. In this trading type, a trader can trade on commodities such as corn, oil, potatoes etc. in addition to equities or financial instruments.
What is Spot Forex?
Spot Forex, also known as Foreign Exchange, is a procedure of exchanging the currency for trade, business, or tourism. In forex trading, a trader trades the money on foreign exchange. It is a place where currencies of different countries are exchanged and traded against each other. Unlike other trading types, the Forex market solely relies on OTC (Over-The-Counter) and the market functions 24 hours a day for five days a week.
What are Bonds & Fixed Income?
Like in a loan, a Bond buyer approves to lend capital to a corporation or government. In return, they will get an interest rate on the amount they are lending. Fixed income is usually defined as a kind of security where the investor will be paid a set amount of interest rate or dividend until the expiration of a contract or bond. Fixed income funds fall under bonds.