Paper trade - Paper trades are simulated trades that let aspiring investors and traders practice buying and selling without putting their own money at risk. The expression stems back to a time when ambitious traders would train on paper before putting their money at risk in real markets (before the ubiquity of online trading platforms). While learning, it is recommended to a journal. Therefore a paper trader manually logs every transaction to Toto keep track of simulated trading positions, portfolios, gains and/or losses. The majority of practice trading nowadays includes the use of a simulator that looks and feels just like a real trading platform.
Pattern day trader (PDT) - The term "pattern day trader" (PDT) refers to a trader or investor who uses a margin account to execute four or more day trades in a row during a period of five working days. Within that five-day period, the total number of day trades must exceed 6% of the entire volume of trades in the margin account.
Paris agreement - An accord within the United Nations Framework Convention on Climate Change setting a worldwide target to keep the rise in global temperatures over pre-industrial levels to well below 2° Celsius while pursuing measures to restrict the increase to 1.5° Celsius.
Par value - A bond's par value is the initial purchase price plus the amount that will be repaid when it matures. Normally, bonds are sold in multiples of $1,000.
Pennant - A pennant is a type of consolidation pattern in technical analysis that develops after a security experiences a major movement, or the flagpole, followed by a sideways move in price action. During this consolidation period, two diagonal and converging trend lines can be drawn to form what looks like a pennant. At some point when price breaks out of the pennant consolidation, the expectation is that price will resume the movement in the same direction of the previous trend, prior to the consolidation period.
Penny stock - The term penny stock refers to a company's stock that is traded for less than $5 a share. The $5 price level comes from the 1934 Securities Exchange Act, a law which was passed by the U.S. Congress to control all securities transactions involving parties other than the original issuer. The Security Exchange Act stated that equity securities with a market value of less than $5 per share could not be listed on any national stock exchange or index. Although some penny stocks are traded on significant exchanges like the New York Stock Exchange (NYSE), the majority are traded over-the-counter (OTC) using either the privately held OTC Markets Group or the electronic OTC Bulletin Board (OTCBB). OTC trades don't take place on a trading floor. All quotations are generated digitally.
Pink sheet - The term pink sheets refers to a listing for equities that trade over-the-counter (OTC) as opposed to on a major U.S. stock exchange. Many pink sheet listings are shares of company stock that don't meet the criteria to list on the main U.S. stock exchanges, like the New York Stock Exchange (NYSE), or the National Association of Securities Dealers Automated Quotations Stock Market (NASDAQ) for example.
Portfolio - A portfolio is a collection of financial assets, such as securities, bonds, commodities, cash, and cash equivalents, such as exchange-traded funds (ETFs). The common belief is that the three main components of a portfolio are equities, bonds, and cash. Although this is frequently the case, it need not be the exception. Various types of assets, such as private investments, real estate, and fine art, may be included in a portfolio. A portfolio can be held and managed either by the individual who owns it, or by a money manager, financial advisor, or other finance expert.
Portfolio allocation - A type of investment strategy that divides up a portfolio's assets according to a person's objectives, risk tolerance, and investment horizon in order to balance risk and reward. Equities, fixed-income, and cash and equivalents, the three primary asset classes, each have a unique level of risk and return, and as a result, each will perform differently over time, providing capital diversification and various degrees of risk protection.
Portfolio holdings - Investments that are a part of a portfolio. A variety of financial instruments, such as stocks, bonds, mutual funds, options, futures, and exchange-traded funds (ETFs), may be included in a portfolio's holdings.
Portfolio manager - The person or organization in charge of choosing the investments for the portfolio to achieve its particular investment target or objective.
Position trader - Trader with a mid-long term horizon (between one and twelve months) who purchases a security in the hope that its value will increase over the long run. Unless something changes in the position's long-term outlook, position traders are not concerned by short-term price fluctuations, market volatility and world events.
Positive tilt - A method of investing that skews a fund or portfolio toward a certain industry, business, or project using predetermined values or norms-based criteria. Sometimes, the terms positive tilt is used in reference to sustainable investing strategy in which the portfolio will be weighted toward industries, companies, or projects with favorable environmental, social and governance (ESG) attributes.
Power purchase agreements (PPAs) - Power Purchase Agreements (PPAs) are financial arrangements made by a developer to design, obtain necessary approvals, finance, and install a solar energy system on a client's property for little to no cost.
Preferred stock - A form of fixed-dividend stock that is given preference over common stock in the distribution of dividends and the sale of corporate assets. Preferred stock comes in a variety of forms, including convertible and adjustable-rate options.
Pre-initial public offering (IPO) - Before a stock is launched on a public exchange, substantial blocks of shares are privately sold in an initial public offering (IPO) placement. Typically, the buyers are institutions eager to purchase sizable shares in the company, such as private equity firms, hedge funds, and other organizations. The price of a pre-IPO placement is typically lower than the price listed in the prospectus for the IPO because of the amount of the investments being made and the risks involved.
Pre-market trading - The trading period that takes place prior to the normal market session is known as pre-market trading. Every trading day, the pre-market trading session normally lasts from 8 to 9:30 a.m. EST. Many investors and traders monitor the pre-market trading activity to assess the market's strength and direction ahead of the regular trading session.
Preference shares - Preference shares, also known as preferred stock, are shares of a company's stock that pay dividends to shareholders ahead of dividends on common stock. Preferred investors are entitled to receive payment from corporate assets before common stockholders in the event that the company declares bankruptcy.
Premium - In finance, premium can mean many things. It most frequently refers to the following definitions. A security is often trading at a premium when it is priced higher than its theoretical or intrinsic worth (in contrast to a discount). If the price paid for a fixed-income security is greater than par, the distinction between that price and the security's face amount is referred to as a premium. Premium also refers to the cost of purchasing an insurance policy or the recurring payments that an insurer requires to offer coverage for a specific amount of time. Finally, the premium is the full cost of purchasing an option contract.
Price/earnings to growth ratio (PEG ratio) - The price/earnings to growth ratio (PEG ratio) is calculated by dividing a stock's price-to-earnings (P/E) ratio by the earnings growth rate over a given time period. In comparison to the more popular P/E ratio, the PEG ratio is used to calculate a stock's valuation while also taking the company's expected earnings growth into account.
Price-to-book (P/B) ratio - Companies measure a company's market capitalization to its book value (net worth) using the price-to-book ratio (P/B ratio). It is determined by dividing the stock price per share by the book value per share of the company (BVPS). In order to determine an asset's book value, which is the same as its carrying value on the balance sheet, businesses net the asset against the asset's total cumulative depreciation. The weighted average price-to-book ratio of the companies in a portfolio is used to calculate the ratio.
Price-to-earnings (P/E) ratio - The ratio for valuing a firm that compares its current share price to its earnings per share. Investors and analysts use P/E ratios to assess the relative value of a company's shares in a direct comparison. It can also be used to compare a company to its past performance or to compare broad markets over time or to one another. P/E estimates can either be forecast (projected) or trailing (backward-looking). For example the P/E ratio 1 year trailing is the price of a stock divided by its earnings from the latest year. On the other hand, the P/E ratio 1 year forecast is the price of a stock divided by its projected earnings for the coming year.
Price-to-cash flow (P/CF) ratio - A stock valuation indicator used to assesses the value of a stock in relation to its operating cash flow per share. The operating cash flow (OCF) used in the ratio adds back non-cash expenditures like depreciation and amortization to net income. P/CF is particularly helpful for appraising firms with good cash flow but negative profitability due to significant non-cash charges.
Price to Sale (P/S) - The price-to-sales (P/S) ratio is a measure of a company's value that compares its stock price with its sales. It serves as a gauge of how much the financial markets value each dollar of a company's sales or revenues. The price-to-sales ratio (P/S) is derived by dividing a company's market capitalization, which is calculated by multiplying the number of outstanding shares by the share price, by its 12-month total sales or revenue. The investment is more desirable the lower the P/S ratio. P/S ra a good metric for evaluating stocks.
Prospectus - A formal written offer to sell securities that includes all the information an investor needs to make an informed decision, such as the business plan for a planned venture or details on an existing one. Mutual funds also publish prospectuses that include information required by the SEC, including financial statements, risk disclosures, manager biographies, objectives, and policies.
Proxy - A proxy is a representative who is legally permitted to act on behalf of another party or a voting method that enables a shareholder to cast a ballot even if they are not physically present at the meeting. Non-attending shareholders may vote their shares via proxy—having someone else cast votes on their behalf—or by mail if they are unable to attend the annual general meeting (AGM) of the corporation.
Public offering price (POP) - The price at which fresh issues of stock are made available to the general public by an underwriter is known as the public offering price (POP). Underwriters must choose a public offering price that will appeal to investors because the primary objective of an initial public offering (IPO) is to raise capital. The soundness of the company's financial accounts, its level of profitability, prevailing trends in the marketplace, growth rates, and even investor confidence are all taken into account by underwriters when determining the public offering price.
Put option - A put is an option that grants the owner the right, but not the obligation, to sell a particular quantity of the underlying asset for a predetermined price within a predetermined window of time. When purchasing a put option, the buyer is betting that the underlying stock will decline in value below the exercise price before the option expires. The price at which the underlying asset must trade in order for the put option contract to remain valuable is known as the exercise price.