Expand your [financial] vocabulary

[Miss_Risky]

In the book I'm currently reading, Rich Dad's Guide to Investing by Robert Kiyosaki, he mentions that the rich/sophisticated investors (which is what we should all aspire to be) have a different vocabulary from the poor. Even on this forum, from their vocabulary, it is clear to see who's been either doing a lot of reading or has a lot of experience in the investment world - not dropping any names [WindyWendy] wink, wink.

One way of developing your skills and speaking like the rich is by learning a new investment term every week and then trying to use it repeatedly. So I'm starting this thread so we can all learn new financial/investment terms. Call it 'Word of the Day.'

Just give your financial term and a definition of the term. You might even go as far as using it in a sentence (just for fun).

[dotunk]

We go hear plenty of english for this thread o! but its all good.

Am sure i get to learn new words and meanings to words i never new what they meant.

[Dansanda]

Where are Madam Risky, Uncle Dr. Dotuk, Apache, Bwala, zainabusman, Hispy99, Billions, Natty, Olusolakemmy, c kenneth and other notable investors too numerous to mention.

We are waiting to hear what God bless you with.

[tonidol]

Originally Posted by Dansanda

Where are Madam Risky, Uncle Dr. Dotuk, Apache, Bwala, zainabusman, Hispy99, Billions, Natty, Olusolakemmy, c kenneth and other notable investors too numerous to mention.

We are waiting to hear what God bless you with.

U know mention my name, d young shall grow o!!! Laugh it off!!!

[hispy99]

ok...this is my own contribution for today.

Put Option: A contract that gives the buyer the right to sell a financial instrument to the seller (or writer) of the option at a certain time for a certain price (also called the strike price). In short, a put option guarantees the holder a price at which to sell his instrument (in our case, shares). Investors use puts to protect themselves from a decline in share prices. If for instance I hold FBN's stock, I can buy a put with a strike price of say N35. If FBN's price falls to N30, I will sell my FBN to the "writer" of the put at N35. The writer of the put collects a fee for this service.

We don't trade options in Nigeria, but in the past one week (during the "freeze") everyone that sold just traded a form of American "Puts", courtesy of Madam Ndidi. If you look at the bolded portion, the "certain time" for "Ndidi's" put was one week (beginning on Monday and ending on Friday). The "certain price" arises because of Ndidi's freeze. If I decide to sell my FBN for example on Friday, I am guaranteed to sell at a price not lower than Thursday's closing price. The slight difference is that in a normal put, there is only "one" strike price (N35). In "Ndidi's" put there are multiple "strikes" because I can sell at a price range between N35 and N36.75, if we assume that the closing price was N35 on Thursday.

Also Ndidi's put is "free", AKA "awoof", since the writer (in this case who ever bought the shares from you) is not charging you a fee for it.

[hispy99]

this is my own contribution for today.

Value Trap: Some of us use metrics such as P/E or P/B to determine if a stock is cheap or expensive. In our analysis, it is important to ensure that we do not fall into what has been described as the "value" trap. This usually happens when a stock looks cheap because its price has fallen significantly, thus looking cheap from a valuation standpoint.

Ivestopedia describes this concept thus "stock that has experienced a large price depreciation and is mistaken to be a value stock".

Value Trap

Enjoy the following articles:


How to tell a cheap value stock from a 'value trap' - MarketWatch

Don't Get Caught in a Value Trap - Kiplinger.com


Beware The Value Trap

[petterford]

hello, i'm agree to dotunk... i'm sure it will add to our vocabulary...