Important Terms -III

PART III

• Bulls and Bears
  
  "Don't take the bull by the horns, take him by the tail; then you can let go when you want to."
  -Josh Billings (1818 - 1885)
  
  Person who thinks prices will rise. One can be bullish on the prospects for an individual stock, bond, or commodity, an industry segment, or the market as a whole. In a more general sense, bullish means optimistic, so a person can be bullish on the economy as a whole. When a bull attacks, it throws its opponent upward, whereas a bear grapples its opponent down. The symbol of a bull and bear locked in combat represents the stock market.
  
  One who believes that prices in the security and commodity markets will decline. A bear can profit from a declining stock market by selling a stock short or buying a put option. A bull, the opposite of a bear, thinks prices will rise.
  
  
• Futures
  
  The terms "futures contract" and "futures" refer to essentially the same thing. For example, you might hear somebody say they bought "oil futures", which means the same thing as "oil futures contract". If you want to get really specific, you could say that a futures contract refers only to the specific characteristics of the underlying asset, while "futures" is more general and can also refer to the overall market as in: "He's a futures trader."
  
  A contractual agreement, generally made on the trading floor of a futures exchange, to buy or sell a particular commodity or financial instrument at a pre-determined price in the future. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash.
  
  
• Options
  
  A privilege sold by one party to another that offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date.Options are extremely versatile securities that can be used in many different ways. Traders use options to speculate, which is a relatively risky practice, while hedgers use options to reduce the risk of holding an asset.
  
  
• Fundamental Analysis
  
  A method of evaluating a security by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and individually specific factors (like the financial condition and management of companies).
  
  
  The end goal of performing fundamental analysis is to produce a value that an investor can compare with the security's current price in hopes of figuring out what sort of position to take with that security (underpriced = buy, overpriced = sell or short).This method of security analysis is considered to be the opposite of technical analysis.
  
  
• Technical Analysis
  
  A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. Technical analysts believe that the historical performance of stocks and markets are indications of future performance.