Page 157 - PRIAA Glossary

and increases the price per share proportionally. This is the reverse action of a stock split.
STOCK INDEX
An index based on a weighting of share prices of representative stocks. Indices are used to measure and describe the returns of different sectors of the stock market.
STOCK INDEX FUTURES
A futures contract on a stock index. It is an agreement to buy or sell a standardised value of a stock index on a specified future date at a specified price.
STOCK INDEX OPTIONS
An agreement that gives the holder the right, but not the obligation, to buy or sell a stock index (i.e., S&P 500) at a specified price on a specified future date.
STOCK MARKET
A broad term to describe the issuance and trading of equity securities on exchanges, or over the counter (OTC).
STOCK SPLIT
A corporate action where the company increases or decreases the number of shares outstanding. The stock price is inversely adjusted for the increase or decrease in the number of shares.
STOP LIMIT ORDER
An order placed that combines the features of stop order and limit order. A limit order is entered after the specified stop price has been reached and is executed at limit price or better.
STOP ORDER
An order placed with a broker to buy or sell a particular underlying at the market price, if and when the price reaches a specified level. Also referred as “stop-loss order,” this type of order limits the investor’s loss against the adverse market moves.
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