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Glossary

Dictionary of Key Quant & Broker Tech Terminology

This trading glossary gives plain definitions of the options, futures, algo trading and broker terms used across QuantPower, each with a short example. Search the A to Z list below, or use the topic groups under it to find related terms together.

32terms
21,687words
W2 minWhat Is a Trading Algorithm?A trading algorithm is a set of exact rules that decides when to buy or sell, how much and when to exit, carried out by software instead of by hand.Read the definition →W2 minWhat Is a Backtest?A backtest runs a trading strategy's rules over past market data to show how it would have performed: every trade, the profit or loss after costs, and the…Read the definition →W2 minWhat Is Futures and Options Expiry?Expiry is the last day a futures or options contract can be traded. On that day the contract is settled and stops existing.Read the definition →W2 minWhat Is Hedging in Trading?Hedging means taking a second position that gains when your main position loses, to limit how much you can lose.Read the definition →W2 minWhat Is Market Liquidity?Market liquidity is how easily you can buy or sell an instrument quickly, in the size you want, without moving its price much.Read the definition →W2 minWhat Is a Trading Lot Size?A lot size is the fixed number of units in one futures or options contract.Read the definition →W2 minWhat Is Margin in Trading?Margin is the money your broker blocks in your account to let you hold a position.Read the definition →W2 minWhat Does Mark-to-Market Mean?Mark-to-market (MTM) means valuing a position at its current market price.Read the definition →W2 minWhat Is Paper Trading?Paper trading, also called virtual trading, is trading on live market prices with virtual money, so you can test a strategy or practise without risking capital.Read the definition →W2 minWhat Is an Option Premium?An option premium is the price of an option: what the buyer pays and the seller receives for the right the option gives.Read the definition →W2 minWhat Is the Put-Call Ratio?The put-call ratio (PCR) compares activity in put options with activity in call options.Read the definition →W2 minWhat Is Trading Slippage?Slippage is the difference between the price you expected for a trade and the price you actually got.Read the definition →W2 minWhat Is an Option Strike Price?The strike price is the fixed price at which an option holder can buy (with a call) or sell (with a put) the underlying.Read the definition →W2 minWhat Is Market Volatility?Market volatility is how much and how quickly prices move.Read the definition →D4 minDelta Meaning: What Delta Tells You About an OptionDelta is the amount an option's price changes for a 1-point move in the underlying, so it shows how closely the option tracks the index.Read the definition →T4 minTheta Meaning: How Time Decay Works in OptionsTheta is the amount an option loses in value each day as time passes, with the underlying price and implied volatility unchanged.Read the definition →G5 minGamma Meaning: How Fast an Option's Delta ChangesGamma is the rate at which an option's delta changes when the underlying moves by one point.Read the definition →V4 minVega Meaning: How Volatility Moves an Option's PriceVega is the amount an option's price changes for a one-point change in implied volatility, with the underlying price and time unchanged.Read the definition →I5 minITM, ATM and OTM Meaning in OptionsITM, ATM and OTM describe where an option's strike sits against the current price of the underlying.Read the definition →I5 minIntrinsic Value Meaning: What an Option Is Worth NowIntrinsic value is the part of an option's price that it would be worth if exercised right now: for a call, the amount the underlying is above the strike…Read the definition →M5 minMax Pain Meaning: How It Is Calculated and ReadMax pain is the expiry price at which option buyers, taken together, would lose the most and option sellers would keep the most premium.Read the definition →V5 minVWAP Meaning: Volume-Weighted Average Price ExplainedVWAP, the volume-weighted average price, is the average price at which a stock or contract has traded during the session, weighted by how much traded at…Read the definition →F5 minF&O Ban Meaning: What the Ban Period Is and How It WorksThe F&O ban period is the time during which no new positions can be opened in a stock's futures and options because the open interest across the market has…Read the definition →P5 minPhysical Settlement Meaning: Delivery of Shares at ExpiryPhysical settlement means that a stock futures or options position held to expiry is settled by delivering the actual shares, not by paying the difference…Read the definition →W3 minWhat Are Upper and Lower Circuits?A circuit limit is the maximum a stock's price can rise or fall in one day.Read the definition →W2 minWhat Is the Bid-Ask Spread?The bid-ask spread is the gap between the highest price a buyer is willing to pay (the bid) and the lowest price a seller is willing to accept (the ask).Read the definition →W2 minWhat Is Market Depth?Market depth is the list of pending buy and sell orders for a stock or contract at different prices.Read the definition →W2 minWhat Does Square Off Mean in Trading?To square off is to close an open position by placing the opposite trade.Read the definition →W2 minWhat Is Rollover in Futures?Rollover is moving a futures position from the contract that is about to expire to the next one.Read the definition →W3 minWhat Is Leverage in Trading?Leverage in trading means controlling a position larger than the money you put up.Read the definition →W2 minWhat Are Derivatives in the Stock Market?Derivatives are financial contracts whose value comes from something else, called the underlying, such as a stock, an index, a commodity, a currency or an…Read the definition →W3 minWhat Is Short Selling?Short selling means selling a stock or contract you do not own, expecting to buy it back later at a lower price.Read the definition →
Key point
A definition tells you what a term means; the linked guides show how traders use it. Contract details such as lot sizes change, so check them with NSE or your broker before you trade.

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Frequently asked questions

Which trading terms should a new options trader learn first?

Start with strike price, premium, lot size and expiry, then ITM, ATM and OTM. After those, delta and theta explain most of how an option's price moves from day to day.

Is this trading glossary specific to Indian markets?

Yes. The terms are explained as they apply on NSE, BSE and MCX, including Indian rules such as the F&O ban period, physical settlement of stock F&O and SEBI's margin rules.

Are the lot sizes in the glossary examples current?

They are the lot sizes in force when each entry was last updated. NSE revises lot sizes from time to time, so check the current contract specification on NSE or with your broker before you trade.

How is a glossary entry different from a guide?

An entry gives a short definition and one example, so you can check a term quickly. Guides go further, with the method, the numbers on one lot and the risks.

Definitions are for education only and are not investment advice. Trading involves substantial risk.

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