When purchasing this put option, the key factor is the price of the option here must be below the original purchase price for you to receive the payoff. If the price is above the original purchase price then you receive nothing for the option.

Autoregressive – Also known as forecasting, it is the act of taking past data and using that information to make educated guesses or predictions into future events or values within the stock markets.

Balance of Payments A measurement of payments that transact between an individual country and other countries of the world determining the economic position of that country over a specific period of time, usually a year. This position is made up of current account balances, those of imports and exports of good and services, and capital accounts, which are made up of the difference between the capital a country invests in another country and the capital that a country receives from another country.

Bankruptcy – The situation when a person or firm has the inability to pay their debts to all of their creditors. The debtor then petitions the courts for relief, which in return may ease or even erase all debts. Creditor can counter the bankruptcy by filing against the debtor in order to recoup some of the payments owed to them.

Accounts Payable (AP) – Debts of an individual or an organizations that are owed to another entity for goods and/or services received. AP entries are usually found within the balance sheet under current liabilities.

Accounts Receivable (AR) – Credits made to an individual or a company, in which the sale has been made, but payment has not yet been received. AR is normally credited as an asset on the balance sheet for they have the goods/services but have yet to pay the supplier or other party.

This weeks market term is Alpha – Alpha is a measurement of risk that has a direct correlation between the return on a stock and the return on the market as a whole. Alpha takes the price risk of a stock and compares it to a benchmark index. The excess return of the stock as compared to the benchmark index is termed the Alpha. If stocks rise when the market as a whole is declining, then it is said that the stock has a “positive” alpha. If the stocks were declining as the market is rising, then the stock would have a “negative” alpha.

The goal at BetterTrades is to help students learn more about the stock market and then use that knowledge to make better trading decisions. One of the first steps toward becoming an educated trader is to get familiar with the terminology used in the stock market.  To help speed your progress, BetterTrades brings you stock and options terms that you need to learn. Knowledge is the first step toward making better trades.

To learn more about the stock market attend a free stock market education seminar in your area. See the schedule