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Finance GlossaryProgram Trading
Program Trading
Definition of Program Trading
Program trading, which is frequently linked with algorithmic trading, is the use of computer algorithms for automatically generating and executing orders in large volumes based on predetermined sets of rules, such as price or timing conditions. It is the buying or selling of a basket of stocks at the same time. Program trading has significantly increased the speed and volume of market transactions and is commonly employed in arbitrage, index arbitrage, and portfolio insurance strategies.
Related Terms
Pair Trading
Pair Trading is a market-neutral trading strategy that involves taking opposite positions in two highly correlated securities. The aim is to make a profit from the temporary difference in the prices. A trader may purchase the relatively underperforming stock (the 'long' position) and short-sell the relatively outperforming stock (the 'short' position) in the pair. The expectation is that the prices will eventually return to their historical mean relationship (convergence).
CANSLIM
CANSLIM is an acronym for a seven-step strategy to pick growth stocks by combining fundamental and technical analysis. Here’s the full form of CANSLIM:
- Current quarterly Earnings Per Share (EPS): compare this fundamental indicator with the same figure from the previous quarter. If the figure grows (by 20% or more as a rule of thumb), the company is fundamentally strong.
- Annual earnings: Compare this fundamental indicator from the previous years. If there’s year-on-year growth, the company is fundamentally strong. If the year-on-year growth is by 20-25%, even better.
- New product or service: strong companies continue to innovate. That’s what this letter is about - checking if the company is continuously launching new products, services, or holding events.
- Supply: a fundamentally strong business should have a good supply and demand when it comes to its goods, services, and stock. Executive supply of shares may reduce the value of the company - that’s why it should always be scarce in supply.
- Leader: the company should be a leader in its own right, either in or across industries.
- Institutional holding: a valuable company will have higher institutional ownership, the percentage of which should always be tracked.
- Market trend: an investor must check whether the company or stock is going or against the trend by comparing it to broader indices.
Authorized Capital
Authorized capital or authorized share capital is the maximum amount of capital for which shares can be issued by a company to its shareholders.
Or in other words, authorized capital denotes all the shares across all the categories that a company could issue if it wanted to raise money.
Or in other words, authorized capital denotes all the shares across all the categories that a company could issue if it wanted to raise money.
Advance Payment Guarantee/Bond
An Advance Payment Guarantee or Advance Payment Guarantee Bond is a contract issued by a third party willing to take responsibility for fulling the terms of an agreement or payments owed by one party to another.
The guarantee could be:
The guarantee could be:
- Primary: Indemnity (fulling payments)
- Secondary: Guarantee (assuring that the outcome will be met)
Sector Rotation
Sector rotation is an investment strategy where investors keep shifting their funds between sectors based on economic cycles or market trends. For example, defensive sectors tend to perform better during slowdowns. Cyclical sectors perform impressively during phases of growth. With strategic sector rotation, investors can manage risk while capitalizing on opportunities in different market conditions.
All Or None Order
An all or none order is an instruction to execute the entire order or none of it. For example, you place an order for 1000 shares with a contingency that it should be an all or none order.
If so, then the order will be not executed if 999 shares are available. The order will only go through if 1000 shares are available. Otherwise, the order will be canceled.
If so, then the order will be not executed if 999 shares are available. The order will only go through if 1000 shares are available. Otherwise, the order will be canceled.
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