A call option is a type of a financial derivative contract that gives option buyers the right, but not the obligation to purchase underlying assets like stocks, bonds, currencies, commodities etc., at a fixed price within a fixed time period. As a call buyer, you profit when the price of the underlying asset increases.
Close price, also called closing price is the price at which a share closes at the end of trading hours in a stock market. It is the weighted average of all the prices in the last 30 minutes of trading hours. Close price should not be confused with LTP or last trading price, i.e., the final price at which the stock was traded before market closing.
Convertible securities are any stocks, bonds, or other market instruments (other than options), that you can change from their initial form into another form. For instance, you can convert or exchange convertible bonds or convertible preferred shares to common stock.
In the investment market, capital is the money a business has to fund its everyday operations in order to pay for its future growth. From an investor's perspective, the capital is the money you invest in a security. For instance, if you buy shares worth INR 20,000, INR 30,000 and INR 50,000 in three different companies, your capital investment is INR 80,000.
Capital Gain or Loss
Capital gain implies the profit you earn on selling assets like shares, bonds, real estate, etc. If the selling price of the asset exceeds your purchase price, the gains earned in profits are deemed capital gains. Conversely, if the selling price is lower than the purchase price, the loss incurred is called a capital loss.
The marketplace where securities or commodities purchased are paid for in cash and received by buyers at the point of sale is known as Cash Market. Here, the transactions are settled "on the spot", which is why the cash market is also called the spot market. E.g., when the stock exchanges are cash markets because you receive shares instantly when you pay cash.
Charting is a type of technical indicator that graphically represents or illustrates stock or commodity prices and how the prices change. Technical traders typically use a wide variety of charting indicators such as bar charts, point and figure charts, candlestick charts, etc., to assess price trends and movements.
A circuit breaker is a temporary measure taken to halt trading to curtail panic selling in the investment market. It is a pre-defined value expressed in percentage terms, triggering an automatic check when a runaway move occurs in any index or security in an upward or downward direction. Traders calculate values from the security or index's previous closing levels.
A contract note is a legal document or record of any trades undertaken by brokerage houses on stock exchanges. It confirms that your brokerage firm conducted trade on your behalf on a specific date and day on a specific stock exchange. The brokerage firm hands over this document (in the electronic or digital format) to you when you buy or sell stocks through them.
A cover order is a type of market order that allows you as an intraday trader to place two different orders for the same stock simultaneously. Also known as a two-legged order, it comprises a market order and a second order specifying the Stop Loss Trigger Price and Limit Price. Cover orders allow you to leverage extra exposure on your trades while protecting them through a stop-loss order.
The marketplace wherein buyers and sellers indulge in the trade of financial securities such as stocks, bonds, mutual funds, etc., is known as the capital market. The participating buyers and sellers could be individual investors or institutions.
Capital Gain Bonds
Capital gain bonds, also called 54EC bonds, are fixed income instruments providing tax exemptions on capital gains under Section 54EC of the Income Tax Act of India, 1961. You can reduce tax liabilities on long-term capital gains from the sale of immovable properties by investing in capital gain bonds.
Capital Gain Index
Capital Gain Index, often called the Cost inflation index, is a measure of inflation that finds application in tax laws when calculating long-term capital gains on the sale of assets. CGI is a tool used to calculate the estimated annual increase in the price of an asset due to inflation. The CGI is fixed by the central government and defined under Section 48 of the Income Tax Act of India, 1961.
Capital gains are the gains you accrue when you sell an asset at a price higher than your buying price. It implies an increase in the value of the capital asset at the time of sale. If you earn more than what you originally paid for investments like stocks, bonds, gold, or real estate, the profits you book are called capital gains.
Capital Gains Exemption
Capital Gains Exemption is the benefit the government offers to taxpayers under which they can enjoy tax exemptions or deductions on selling capital assets. You can avail exemptions on gains on selling certain government-specified capital assets, and the exemption is deemed capital gains exemption.
Capital Gains on Shares
Capital Gains on shares are the gains you book on selling shares for a profit. For instance, if you buy 100 shares of a company at INR 50 each with a total investment of INR 5,000 and sell them at INR 80 after a few months, you stand to gain profits of INR 3000. This profit of INR 3,000 is your capital gains on shares.
Capital Gains Tax
Capital Gains Tax is the tax a country's government imposes on its investors when they book profits or capital gains on selling an asset. You have to pay this tax when you convert your asset into cash upon selling, and not while it is still in your hand. Depending on the type of asset you sell and the holding duration, you have to pay short or long-term capital gains tax.
Capital Gains Tax On Property
The tax you have to pay on selling an immovable property after booking a profit on it is known as capital gains tax on property. If you sell your property after 3 years, you have to pay a long-term capital gains tax of 20% + indexation benefits. Conversely, if you sell it within 2 years, you have to pay a short-term capital gains tax, per your tax slab.
Open-ended mutual fund schemes featuring child-specific investment goals and terms are known as children's funds. These are solution-oriented plans designed to cover child-specific costs like education expenses and other similar expenses. Children's funds come with a mandatory 5-year lock-in period or until the child turns 18, whichever is earlier.
A mutual fund in which a fund house issues only a fixed number of fund units at launch is called a closed-ended fund or CEF. Once the New Fund Offer period ends, you, as an investor, cannot buy or redeem units of a CEF. CEFs are launched via NFOs. They are later traded in the market like shares and usually have a fixed maturity period.
Funds invested in the trade of specific commodities are known as commodity funds. These funds invest in specific, specialised commodities and enable investors to earn returns based on how the specific commodities perform in the commodities market. Commodity funds are broadly categorised into three types – basic commodity funds, natural resources funds and index funds.
An investment that does not expose investors to excessive risks and concentrates on accruing fixed but stable returns is known as a conservative fund. Such funds do not generally deliver high returns, but they protect the capital amount from eroding and reduce financial losses significantly. E.g., debt mutual funds investing up to 80% assets in debt securities are deemed conservative funds.
Corporate Bond Funds
Mutual funds that invest over 80% of their assets in corporate bonds of companies are known as corporate bond funds. Corporate organisations sell these bonds to raise money to fund their expenses, expansion, working capital needs, etc. If you invest in a corporate bond fund, the issuing company pays you a fixed interest for the duration of your investment.
Cost Inflation Index
Cost Inflation Index is a tool used to calculate an estimated annual increase in the price of assets owing to inflation. The CII is fixed by the central government and published in its official inflation measuring gazette report. The CII is defined under Section 48 of the IT Act, India, 1961, and the government notifies the general public about the CCI each year.
Credit Risk Funds
Debt mutual fund schemes that invest at least 65% of their asset in AA-rated corporate debt securities are known as credit risk funds. These funds are open-ended debt schemes that invest in low-rated corporate bonds, making them riskier investments. However, you stand to earn significant returns when the ratings of these funds increase.
I'm an enthusiast with a deep understanding of financial markets, derivatives, and investment instruments. My expertise is rooted in years of practical experience and a comprehensive knowledge of financial concepts. Let's dive into the details of the terms mentioned in the article:
- A financial derivative giving the buyer the right (but not the obligation) to purchase underlying assets at a fixed price within a specified time period.
- Profit for the call buyer occurs when the price of the underlying asset increases.
- The price at which a share closes at the end of trading hours in a stock market.
- It's the weighted average of all prices in the last 30 minutes of trading.
- Stocks, bonds, or other market instruments that can be converted from their initial form into another form.
- In the investment market, it refers to the money a business has to fund its operations or the money an investor puts into securities.
Capital Gain or Loss:
- The profit or loss earned when selling assets like shares, bonds, real estate, etc.
- A marketplace where securities or commodities are paid for and received in cash at the point of sale.
- The graphical representation of stock or commodity prices and how they change, used by technical traders.
- A temporary measure to halt trading and prevent panic selling in the investment market.
- A legal document confirming trades undertaken by brokerage houses on stock exchanges.
- A market order allowing intraday traders to place two different orders for the same stock simultaneously.
- The marketplace for trading financial securities like stocks, bonds, mutual funds, etc.
Capital Gain Bonds:
- Fixed income instruments providing tax exemptions on capital gains under specific tax laws.
Capital Gain Index:
- A measure of inflation used in tax calculations for long-term capital gains on the sale of assets.
- Profits earned by selling an asset at a higher price than the purchase price.
Capital Gains Exemption:
- Government-offered benefit providing tax exemptions on selling certain capital assets.
Capital Gains Tax:
- Tax imposed by a government on investors when they book profits on selling an asset.
Capital Gains Tax on Property:
- Tax paid on selling immovable property after booking a profit.
- Mutual fund schemes designed for child-specific investment goals with a mandatory lock-in period.
- Mutual funds with a fixed number of units issued at launch, traded like shares with a fixed maturity period.
- Funds invested in the trade of specific commodities, categorized into basic commodity funds, natural resources funds, and index funds.
- Investments focusing on stable returns with minimal risk, such as debt mutual funds.
Corporate Bond Funds:
- Mutual funds investing over 80% of their assets in corporate bonds.
Cost Inflation Index:
- A tool used to calculate estimated annual asset price increase due to inflation, defined under tax laws.
Credit Risk Funds:
- Debt mutual funds investing at least 65% in AA-rated corporate debt securities, considered riskier but potentially offering higher returns.