Trading Glossary

Agri commodities are farm-produce futures like chana, soybean, and cotton traded on NCDEX, India's exchange dedicated to agricultural commodities.

Beta measures how much a fund moves relative to its benchmark; Alpha measures the extra return a fund manager added beyond what Beta alone predicts.

An AMO is an order placed after market hours that queues up and releases to the exchange in the next session's pre-open or opening window.

An anchor investor is a large institutional investor allotted IPO shares a day before the issue opens to the public, at a price the company sets in advance.

Buying an asset in one market and simultaneously selling it in another to profit from a temporary price difference between the two, with little to no risk.

The lowest price a seller is currently willing to accept for a stock or option — the other half of the bid-ask spread traders check before placing an order.

An option whose strike price is equal to (or nearest to) the current market price of the underlying — the option has no intrinsic value yet.

When a seller fails to deliver shares on settlement day, the exchange buys them from the open market in an auction, and the defaulting seller pays the cost plus a penalty.

AUM is the total market value of all the money investors have put into a fund or fund house, a measure of scale, not a measure of performance.

Base metals are MCX futures on industrial metals like copper, zinc, and aluminium, distinct from bullion and energy because they settle by compulsory delivery.

A Basket Order lets you place multiple orders across different stocks or contracts together as one group, useful for rebalancing or multi-leg strategies.

A sustained period where prices are falling or expected to fall, typically 20% or more from a recent high, accompanied by pessimism.

The bid-ask spread is the gap between the highest price buyers are offering and the lowest price sellers are asking for an option right now, a direct measure of how easily you can actually trade that strike.

The highest price a buyer is currently willing to pay for a stock or option — the other half of the bid-ask spread alongside the ask price.

A Bracket Order bundles an entry with a preset target and stop-loss into one order, though most Indian brokers discontinued it after SEBI's 2020-21 margin rules.

BTST is selling shares the next trading day after buying, before they've formally settled into your demat account, relying on the original seller's delivery.

A sustained period where prices are rising or expected to rise, usually accompanied by investor optimism and rising trading volumes.

Buy the rumor, sell the news describes how a price often moves in anticipation of an expected event, then reverses once the event is confirmed, because the anticipated outcome was already priced in by then.

A call option gives the buyer the right, not the obligation, to buy the underlying at a fixed strike price, used to bet on a price rise without holding the asset.

Change in OI is the difference between today's Open Interest and the previous session's closing OI for a strike, showing whether positions are net opening or closing today.

The maximum percentage a stock or index is allowed to move up or down in a session before exchange trading is automatically paused.

The price at which a stock or contract last traded on the exchange — the reference figure used for placing orders and calculating gains or losses.

CNC is the product type for buying equity shares to hold for delivery, requiring full payment upfront with no leverage and no forced square-off deadline.

Collateral Margin is margin funded by pledged securities rather than cash, valued after a haircut, with non-cash collateral capped at covering 50% of the requirement.

A commodity futures contract is an agreement to buy or sell a fixed quantity of gold, crude oil, or another physical commodity at a set future price.

A contrarian indicator is a signal traders read against the crowd. An extreme reading in one direction is treated as a sign of a possible reversal, not confirmation.

A Cover Order is an intraday order type requiring a compulsory stop-loss alongside your entry, in exchange for higher leverage than a plain MIS order.

Crude Oil Mini is MCX's smaller crude oil futures contract, 10 barrels per lot instead of the standard contract's 100, built for lower-capital trading.

Currency derivatives are futures and options on exchange rates like USDINR, settled in rupees based on the RBI's reference rate at expiry.

Buying and selling the same stock or contract within a single trading session, closing all positions before the market closes.

DDT was a tax companies paid on dividends before distributing them to shareholders. It was abolished from FY 2020-21 by Budget 2020, and dividends are now taxed directly in the investor's hands instead.

Buying or selling shares with full upfront payment, taking actual ownership into your demat account — no borrowing, no forced exit.

Cash-settled commodities pay the price difference at expiry with no physical delivery; delivery-based commodities require actually giving or taking the goods.

An option Greek that measures how much an option's premium is expected to change for every ₹1 move in the underlying asset's price.

An electronic account that holds your shares and securities in digital form, replacing physical share certificates, required for trading in India.

DII stands for Domestic Institutional Investor, an India-based entity like a mutual fund, insurance company, or bank investing money raised within India. DII buying often offsets FII selling and is tracked as a stabilizing counter-signal.

A direct plan is bought straight from the AMC with no distributor commission; a regular plan is bought through an intermediary at a higher expense ratio.

A Disclosed Quantity order reveals only part of a large order to the market at a time, with at least 10% of the total quantity required to be visible on NSE/BSE.

ELM is a flat margin buffer on top of VaR Margin in equity trading, charged at 3.5% of a stock's value to cover genuinely extreme, tail-risk price moves.

ELSS is an equity mutual fund that qualifies for a Section 80C tax deduction, with the shortest lock-in, 3 years, of any 80C investment option.

Ownership shares in a company, representing a claim on its assets and earnings — the broad asset class that includes stocks traded on an exchange.

A fund holding a basket of securities, such as an index's stocks, that trades on an exchange throughout the day like an individual stock.

A European option can only be exercised on its expiry date itself, not any day before, the style every NSE and BSE-listed option follows, unlike American-style options traded in some other markets.

The first day a stock trades without its upcoming dividend attached — buy on or after this date and you will not receive that particular payout.

Exercising an option means actually using the contract's right — buying at the strike (call) or selling at it (put) — instead of just closing the position. Indian index options settle this automatically in cash at expiry.

An exit load is a percentage fee some mutual funds charge if you redeem before a set holding period, typically 1% within the first year for equity funds.

The expense ratio is the annual percentage of a mutual fund's assets charged for management and operating costs, deducted daily from the fund's NAV.

Exposure Margin is an extra F&O margin layer charged on top of SPAN, covering sharp moves SPAN's model may miss — typically 2% for index, 3.5% for stock contracts.

FII stands for Foreign Institutional Investor, a foreign entity like a mutual fund, pension fund, or hedge fund registered to trade in Indian markets. Their daily buying and selling is published by NSE and widely tracked as a market sentiment signal.

Futures & Options — exchange-traded derivative contracts with a fixed expiry date, distinct from delivery or MTF equity positions.

A folio number is the unique account ID an AMC or its registrar assigns you when you first invest in a fund house, used to track your holdings there.

Evaluating a company's financial statements, business model, and economic environment to estimate its intrinsic value and investment worth.

A standardized agreement to buy or sell an underlying asset at a predetermined price on a specific future date, traded on an exchange.

An option Greek that measures how fast delta itself changes for every ₹1 move in the underlying — a second-order measure of how much your exposure can shift.

When a stock or index opens well above (gap up) or well below (gap down) its previous close, usually driven by news that broke while the market was shut.

GMP is the unofficial premium IPO shares trade at over the issue price in India's informal grey market, before the stock officially lists on the NSE or BSE.

Gold Mini and Gold Petal are smaller MCX gold futures variants, 100 grams and 1 gram per lot, for traders who want gold exposure with lower capital.

Growth reinvests a fund's gains so they show up as a rising NAV; IDCW pays gains out periodically in cash, cutting the NAV by the payout amount.

GTC is a global order type that stays live until executed or cancelled, but Indian exchanges auto-cancel all pending orders daily, so no broker here truly offers it.

An order that stays active until a price condition you set is met, without needing to be placed fresh every day — useful for a target or stop-loss set days in advance.

A Haircut is the discount applied to a pledged security's value before it counts as usable margin, ranging from about 12.5% for blue chips up to 100% for risky stocks.

Taking a position specifically to offset potential losses in another position you already hold, rather than to make a fresh directional bet.

A measure of how much a stock's price has actually fluctuated over a past period, calculated from real price data rather than option prices.

The length of time an investor keeps an investment before selling it, which determines whether gains are taxed as short-term or long-term capital gains.

An Iceberg Order splits a large order into many small legs, revealing only a small slice to the market at a time so the true size stays hidden.

Implied Volatility (IV) is the market's forecast of how much an asset will swing before expiry, expressed as a percentage and baked into the option's premium.

iNAV is an ETF's real-time indicative NAV, recalculated roughly every 15 seconds during market hours to show if the ETF is trading at a premium or discount.

A mutual fund designed to mirror the performance of a specific market index, like Nifty 50, by holding the same stocks in the same proportion.

COMEX, NYMEX, and LME are the exchanges whose gold, crude oil, and metal prices, converted to rupees, set the benchmark that MCX contracts track.

In the money (ITM) means an option has real intrinsic value right now — a call with strike below spot, or a put with strike above it.

Intrinsic value is the part of an option's premium that comes purely from being in the money, separate from time value, and it's never negative.

An IOC order fills whatever quantity is available instantly and cancels the unfilled remainder, instead of leaving it resting on the order book.

The first time a private company sells its shares to the public on a stock exchange, raising capital and letting the company's shares trade freely afterward.

IPO subscription is how many times an issue's bids exceed the shares on offer in a category, expressed as a multiple like "subscribed 12 times."

IV crush is the sharp drop in implied volatility right after a known event resolves, which can shrink an option's premium even if the price moved as expected.

IV Rank measures where an option's current implied volatility sits within its own 52-week high-low range, showing whether today's IV is relatively high or low for that stock.

Trading slang for buying and selling the same stock repeatedly within a session to profit from small, frequent price moves rather than one big directional call.

An index tracking the 50 largest NSE-listed companies ranked just after the Nifty 50, often seen as a pipeline of future Nifty 50 entrants.

A bond rated below investment grade, offering a higher interest rate to compensate investors for a meaningfully higher risk of the issuer defaulting.

A price zone where a stock has repeatedly stopped falling (support) or stopped rising (resistance) in the past, watched closely for a possible reaction again.

A candlestick pattern where a stock gaps sharply in the opposite direction of its prior trend, signaling an abrupt shift in sentiment overnight.

Kostak price is a flat, fixed amount paid for an IPO application itself in the grey market, paid regardless of whether the applicant actually gets allotted shares.

A regulatory identity-verification process brokers and banks must complete before opening your trading or demat account, using documents like PAN and Aadhaar.

Ledger Balance is your actual settled cash; Margin Available is the broader real-time trading limit that also includes collateral value and unsettled amounts.

Using borrowed capital to control a bigger position than your own funds would allow — amplifying both potential gains and potential losses.

A market order guarantees execution at the best available price; a limit order guarantees your price but may never fill if the market doesn't trade there.

Overnight funds hold securities maturing the next day, the lowest-risk debt category; liquid funds hold slightly longer debt for marginally higher yield.

Liquidity is how easily you can buy or sell an option at a fair price right now — measured by tight bid-ask spreads and steady trading volume, not just by how many contracts exist.

Long Buildup is the option chain pattern where price and Open Interest rise together on a strike, showing fresh long positions being added, not existing ones just marking higher.

Long Unwinding is the option chain pattern where price falls while Open Interest falls, showing existing long positions being exited, not fresh short positions.

Long means you've bought an option and hold the right it describes. Short means you've sold one and taken on the obligation instead.

Lot size is the fixed number of underlying units one options or futures contract represents. You can only trade in whole multiples of it, never less.

LTCG is the tax on profit from selling equity shares or equity mutual funds held over 12 months, currently 12.5% on gains above ₹1.25 lakh in a financial year, with no indexation benefit.

LTP (Last Traded Price) is the price at which a stock or option's most recent trade actually executed, not the current bid or ask quote.

Borrowed funds from a broker used to increase buying power beyond your own cash.

A broker's demand for additional funds or collateral when a leveraged position's value falls below the required maintenance margin.

A Margin Shortfall Penalty is charged when collected margin falls short of the exchange requirement, escalating to 5% of the shortfall per day if it persists.

A market maker is a firm that continuously quotes buy and sell prices for an option, providing the liquidity that lets other traders enter and exit.

MCX is India's largest commodity derivatives exchange, where futures on gold, crude oil, natural gas, and base metals trade under SEBI's regulation.

MIS is an intraday-only product type that gives extra leverage in exchange for your position auto-closing before market close if you don't square it off yourself.

Moneyness describes where an option's strike sits versus the underlying's spot price — in the money, at the money, or out of the money.

A SEBI-regulated facility letting you buy stock by paying only part of its value upfront — your broker funds the rest as an interest-bearing loan against the shares you buy.

MTM revalues open positions to their current market price to calculate real-time profit or loss, with F&O MTM losses settled in cash daily even on open positions.

A naked option is a sold call or put with no offsetting position in the underlying or another option to cap the risk, leaving the seller exposed to the full move against them.

MCX Natural Gas futures track international Henry Hub prices in rupees, with a standard lot of 1,250 mmBtu and a smaller Mini lot of 250 mmBtu.

The per-unit value of a mutual fund's holdings, calculated by dividing total assets minus liabilities by the number of outstanding units.

The gap between what a bank earns on loans and what it pays on deposits, expressed as a percentage of its earning assets, and the single biggest driver of a bank's profit.

The total value of what you own minus what you owe — assets minus liabilities — used both for individuals and to judge a company's financial health.

An NFO is the initial subscription window for a brand-new mutual fund scheme, priced at a flat ₹10 per unit, similar in spirit to a company's IPO.

The benchmark index tracking the 50 largest and most liquid companies listed on the NSE, weighted by free-float market capitalization.

NII is the SEBI category for IPO applications above ₹2 lakh, allotted proportionately based on demand rather than by lottery like the retail category.

NRML is the F&O product type for positions carried beyond the trading day, requiring full exchange-mandated margin instead of intraday leverage.

India's largest stock exchange by trading volume, where most equity, futures, and options contracts referenced in this glossary are actually traded.

Open Interest (OI) is the total number of option or futures contracts still open for a strike and expiry, a headcount of live positions, not trades executed.

An option chain is the live table listing every strike price for an underlying's options, showing open interest, price, and implied volatility for calls and puts side by side.

Expiry is the date an option or futures contract stops trading and gets settled. Every F&O contract has one, and it drives how fast time value decays.

Out of the money (OTM) means an option has no intrinsic value right now, a call above the current price or a put below it, worth only time value.

Overbought describes a security that's risen sharply enough, fast enough, that traders read the rally as overdone and potentially due for a pullback.

Oversold describes a security that's fallen sharply enough, fast enough, that traders read the drop as overdone and potentially due for a bounce.

Peak Margin is the highest of several random intraday margin snapshots the exchange takes, used as your real margin requirement instead of a single point-in-time check.

Marking your shares as collateral against a broker-funded position, like MTF, without giving up ownership of them.

Premium is the price an option buyer pays the seller for the contract, quoted per share and multiplied by the lot size to get the total cost.

The Pre-Open Market Session is a 15-minute NSE/BSE window before regular trading that discovers a fair opening price through order collection and matching phases.

Profit booking means selling all or part of a position after it has gained in value, to lock in the profit rather than risk giving it back if the price reverses.

Put Call Ratio (PCR) is the ratio of total Put Open Interest to total Call Open Interest for an expiry, used as a quick read on whether options positioning is leaning bearish or bullish.

A put option gives the buyer the right, not the obligation, to sell the underlying at a fixed strike price, used to bet on a price fall or hedge an existing position.

A SEBI-defined category of large institutional investors, like mutual funds and banks, that get a reserved allotment quota in IPOs distinct from retail investors.

The maximum number of shares or contracts a single order can specify on an exchange, set to prevent erroneous fat-finger trades from disrupting the market.

The current bid and ask price (and often last-traded price) for a stock or contract, shown together as the real-time snapshot of what the market will pay.

The 6-member committee that sets India's repo rate by majority vote, meeting every two months and announcing its decision through the RBI Governor.

The interest rate at which RBI lends short-term money to commercial banks, and the base rate that ripples through loan rates, deposit rates, and bank profits across the economy.

An offer letting existing shareholders buy additional shares of a company at a discounted price, in proportion to what they already hold, usually to raise capital.

RII is the SEBI category for IPO applicants investing up to ₹2 lakh, reserved a minimum share of the issue and allotted by lottery if the category is oversubscribed.

A comparison of how much a trader stands to lose against how much they stand to gain on a trade, used to judge whether a setup is worth taking.

Closing a futures or options position in the current expiry and simultaneously opening the same position in the next expiry, to keep the trade going.

A momentum indicator, scaled 0-100, that measures how fast and how far a stock's price has moved recently to flag potentially overbought or oversold conditions.

The Sharpe Ratio measures a fund's return per unit of risk taken, calculated as excess return over the risk-free rate divided by the fund's volatility.

Short Buildup is the option chain pattern where price falls and Open Interest rises together, showing fresh short positions being added on that strike.

Short Covering is the option chain pattern where price rises while Open Interest falls, showing existing short positions being closed out, not fresh buying.

A SIP is a fixed amount auto-debited from your bank account at regular intervals to buy mutual fund units, the most common way Indians invest in equity funds.

The difference between an order's expected price and the price it actually fills at.

SL (Stop-Loss Limit) triggers a limit order at your stop price, risking a missed fill on a gap; SL-M (Stop-Loss Market) guarantees a fill at whatever price is next.

SPAN Margin is the core F&O margin requirement, calculated by stress-testing your position across roughly 16 market scenarios for the worst-case one-day loss.

A spot exchange settles trades in physical commodities almost immediately, while a futures exchange like MCX trades contracts that settle on a future date.

Spot price is the current market price of the underlying asset right now, the number every option's intrinsic value is measured against.

Closing an open trading position by taking the opposite trade — selling what you bought, or buying back what you sold short.

STBT is the mirror of BTST — selling a stock you don't own to buy back tomorrow — but it isn't permitted in India's cash equity segment for retail investors.

A standing order to sell or buy a security once it hits a set price, capping how much you can lose on a trade.

An STP moves a fixed amount from one mutual fund to another, usually a debt fund into an equity fund, at regular intervals within the same fund house.

The strike price is the fixed price written into an option contract at which the buyer can exercise their right to buy (call) or sell (put) the underlying.

Securities Transaction Tax — a government tax deducted automatically on every share and derivative transaction on Indian exchanges.

Subject to Sauda is a grey market IPO deal on the shares themselves that only goes through if the seller actually receives an allotment. If allotment is zero, the deal is void.

An SWP is the reverse of a SIP, a fixed amount or number of units redeemed from a mutual fund at regular intervals, often used for regular income.

Studying a stock's past price and volume patterns on a chart to forecast likely future moves, rather than looking at the company's underlying financials.

An option Greek that measures how much an option's premium is expected to decay each day purely from the passage of time, all else being equal.

The minimum price increment by which a stock or contract's price is allowed to move on the exchange, set by the exchange for that specific instrument.

Tracking error measures how far an index fund or ETF's returns drift from its benchmark index, caused by costs, cash holdings, and rebalancing lag.

T2T is a category certain stocks are placed into to curb speculation, requiring every trade to settle by actual delivery with no intraday square-off or netting.

A stop-loss that automatically moves up as a stock's price rises, locking in gains, but stays fixed if the price falls, protecting the position below.

An uncovered or naked call is selling a call option without owning the underlying shares to cover it, exposing the seller to theoretically unlimited loss.

The actual stock, index, or commodity that a derivative contract — a future or an option — derives its value from and is ultimately based on.

A UPI Mandate is the approval request that lets your bank block your IPO application amount in your own account without debiting it, until shares are allotted.

The maximum price a stock is allowed to rise to in a session before exchange trading in it is automatically paused for the rest of that limit.

VaR Margin is the equity cash-market margin covering a stock's worst expected one-day move, with rates ranging from a 9% floor for liquid stocks to 75% for illiquid ones.

An option Greek that measures how much an option's premium is expected to change for every 1% change in the underlying's implied volatility.

A measure of how much and how fast a stock or index's price fluctuates, used as a general gauge of risk and uncertainty in a stock or the broader market.

Volatility skew is the pattern of implied volatility differing across strikes and expiries for the same underlying, usually higher for out-of-the-money puts than calls.

Volume is the number of option or futures contracts traded today, counted fresh from zero each session, different from Open Interest, which counts contracts still open regardless of when they traded.

The average price a stock has traded at during the day, weighted by the volume traded at each price, reset fresh at the start of every session.

An illegal practice of simultaneously buying and selling the same security to create misleading trading activity, without any real change in ownership.

A saved list of stocks or contracts a trader tracks closely without necessarily holding a position in them, used to monitor for a specific setup.

Weekly expiry is an options contract that expires every week instead of only once a month, letting traders trade shorter-dated contracts around near-term events and news.

An average that gives more importance to some values than others based on a chosen weight, rather than treating every value equally like a simple average.

A standardized digital format that Indian listed companies use to file financial statements and disclosures with SEBI and the exchanges electronically.

A method of calculating annualized returns for investments with irregular cash flows, like SIPs, where money goes in or out at different, uneven dates.

CAGR measures the smooth annual growth of a single lump sum investment; XIRR measures actual returns when money went in or out on multiple dates, like a SIP.

The performance or return of an investment measured from the first trading day of the current calendar year up to today's date.

The income an investment generates, usually expressed as a percentage of its price — for example, the dividend income a stock pays relative to its share price.

A pricing model, popularized by discount brokers, where equity delivery trades carry no brokerage charge at all, though other fees like STT and taxes still apply.

A bond that pays no periodic interest at all, instead sold at a discount to its face value and redeemed at full face value when it matures.

A statistical measure of how many standard deviations a value is from the average, used in trading to flag when a price move looks unusually extreme.