ShmoopTube

What are ascending and descending tops and triangles? Ascending and descending tops and triangles are used to describe market performance graphs. T...

What are Capital Markets? The most often context used for “Capital Markets” is in corporate finance and investment banking, and it refers prima...

A fundamental analyst is basically the opposite of a chartist - they care about a company's earnings, profit margins, gross rates, etc.

What are overbought and oversold? Hit play to find out.

What is volatility? In the world of investing, volatility basically means riskiness. It looks at the returns for stocks or indexes, and if they are...

What is Alpha? Alpha is an investing term that describes the success of an investment. It looks at the investment’s ability to beat beta (or mark...

What is Beta? Beta is a figure associated with public companies that measures how risky the company’s stock is in comparison to the market as a w...

What is short interest theory? Watch this not-so-short video to find out.

What does “Away from the Market” mean? Away from the market just means that a stock is moving away from its benchmark. This happens when the bu...

Selling away is the practice of selling securities that aren't under the seller's auspices to sell.

What is a thin market, and has it been on Jenny Craig recently?

What are moving averages? Moving averages are calculated using past stock prices in an attempt to determine future trends. It’s calculated by ave...

What is Above Full Employment Equilibrium? Above Full Employment Equilibrium happens when an economy is basically doing more than it realistically...

What is the Fast Market Rule? The fast market rule is something that is used in the U.K. to keep the market under control when any sort of crash ha...

What is Devaluation? The process by which a nation deliberately lowers the value of its currency relative to other international currencies is call...

A secular trend is something that changes over time, but is not necessarily an element in a repeated, continuing cycle.

What is the Advance Decline Ratio? The advance decline ratio is used to determine how the market performed on a given day. It does this by comparin...

What does “Breaking the Buck” mean? Breaking the buck means that a money market fund’s value has dropped to less than $1. This happens becaus...

What is speculation? Speculation refers to a high risk, high reward scenario in investing. When an investor engages in a speculation, they take on...

What is After Hours Trading/Extended Trading? After hours trading describes any trades made after the market closes or before the market opens. Bec...

What is the Dow Jones Industrial Average? The Dow Jones Industrial Average is usually just called the Dow. It’s an average of 30 of the most well-known and influential stocks. Using these stocks, it determines how the market is performing overall.

What are T-Notes, T-Bonds, and TIPS? T-Notes are debt securities (like bonds) that are issued by the government and mature within one to 10 years. T-Bonds are exactly the same but their maturity is longer...more than 10 years. TIPS stands for treasury inflation protected securities. The government also issues TIPS; these securities are extremely safe, because not only are they backed but the government, but they also account for inflation and protect the investor in that way.

A liquid market is a market featuring high trading volumes, i.e. investors actually want to put their cash to work.

What are bond ratings and what do they mean? Bond ratings are just credit ratings used on bonds. Just like a credit rating, they give the investor an idea of the issuer’s ability to pay the bond’s principal and interest payments. It’s common to see higher rated bonds with lower interest rates and lower rated bonds with higher interest rates because of the risk/reward factor.

What is a partnership? A partnership is an arrangement where two or more parties agree to form a business in cooperation with each other. Partnerships can be created between individuals, corporations, institutions, or even governments. In most but not all cases, some kind of partnership agreement is signed that outlines the parameters and obligations of each partner. Profits and liabilities are allocated in accordance with the agreement, as not all partners are automatically equal ones. The details of each partnership is unique to the enterprise in question.

What is the Black Scholes Model? The Black Scholes Model is used to determine the price of call options. It looks at the change in stock price over time also using time value of money as well as the strike price and expiration date for the option.

How do you judge the performance of an index fund? For index funds, they're really just a reflection of the stocks and bonds they, uh... reflect. So if the stocks in the fund are doing okay... well, the fund is probably doing okay, too. Relative performance is everything. The S&P 500, NASDAQ, and the Dow are the typical measuring sticks.

Trading volume is the number of shares trading back and forth at a given time.

What does “Called Away” mean? Calling away means that an option has been called and exercised and the writer is now responsible for giving the person who bought the option the underlying asset (or responsible for buying the asset as would be the case with a put). This term is also used with the trading of other securities like bonds.

An MBO is a Management Buy Out (a buy out by inside management); an LBO is a Leveraged Buy Out (taking on debt to buy a company).

What is a Money Market Fund/Commercial Paper? Money Market Funds are mutual funds that are very safe and liquid. They invest in cash and securities with short-term maturities. Commercial paper is similar in that it has the short-term aspect. It is different because it’s issued by companies and used to take care of various financial obligations in the short term, or to buy inventory.

What is inflation, and if we poke it with a pin, will it pop?

What is a Bubble? In markets and economic cycles, any kind of rapid run up trend characterized by over exuberance and emotion over fundamentals that is followed by a collapse and subsequent contraction is called a bubble. The analogy is not unlike that of a soap bubble: it expands rapidly and its fragility inevitably leads to the bubble bursting when it gets too large.

What is a Block Trade? A Block Trade just means that a very big number of securities are being traded, either bought or sold. The group of securities is referred to as a block.

What is a Breakaway Gap? A breakaway gap is the point in time when a stock price changes direction (it goes from increasing to decreasing or vice versa). After this happens, lots of trading occurs depending upon the direction of the price.

What is the maturity of a bond? Maturity refers to the time when an investment ends. When maturity happens, the investor is either on the hook for the cash or is paid out, depending on the nature of the investment. In some cases they choose and are able to extend the investment, in which case a new maturity date would be established.

Who invests in stocks? 401k plans, pension funds, institutional investors, banks, traders, clients of Schwab, Fidelity, and Franklin. Joe Blow buys stocks. It's likely you own stocks. They are the retirement investment vehicle of the masses.

A naked option isn't as risqueé as it sounds...it's just an option you sell without having enough of the underlying security to cover your butt if the price changes. We suppose you could sell it naked, though...

What rights does a public stockholder have? Common shareholders elect the board of directors. They vote. They have the right to quarterly financial disclosures in GAAP. 10Qs, 10Ks, annual reports... audited... are all obligations of the company.

Why do companies buy back or repurchase their own stock? Companies buy back their own stock because it helps them to increase the value of stock and improve the “conditions,” we’ll say, for their current investors. After a buyback, there are less outstanding shares, so those shares are worth more and those investors own a larger part of the company.