Quant Trading Terms

Stock / Equity

Ownership share in a company.

Bond

Debt security paying interest over time.

ETF (Exchange-Traded Fund)

Basket of securities traded like a stock.

Index

Measures performance of a group of stocks (e.g., S&P 500).

Market Capitalization

Total value of a company’s shares (Price × Shares Outstanding).

Liquidity

Ease of buying/selling without affecting price.

Bid Price

Highest price a buyer is willing to pay.

Ask Price

Lowest price a seller is willing to accept.

Spread

Difference between bid and ask price.

Volume

Number of shares traded during a period.

Volatility

Measure of price fluctuation over time.

Market Order

Buy/sell at the current market price.

Limit Order

Buy/sell at a specified price or better.

Stop Loss Order

Automatically sell to prevent further losses.

Stop Limit Order

Combination of stop order and limit order.

High-Frequency Trading (HFT)

Automated trading with extremely low latency.

Algo Trading / Algorithmic Trading

Using algorithms to execute trades.

Market Maker

Provides liquidity by quoting buy and sell prices.

Taker

Executes against existing orders, consuming liquidity.

Order Book

Record of buy/sell orders for a security.

Level 1 / Level 2 Data

Market data showing prices and depth.

Slippage

Difference between expected and actual execution price.

Fill

Execution of a trade order.

Partial Fill

Only part of the order is executed.

Execution Latency

Time delay between order submission and execution.

Co-Location

Placing servers near exchange to reduce latency.

Tick Size

Minimum price increment for a security.

Market Depth

Quantity of buy/sell orders at each price level.

Dark Pool

Private trading venue not visible in public order book.

Liquidity Provider

Entity providing buy/sell orders to maintain liquidity.

Alpha

Measure of performance relative to a benchmark.

Beta

Measure of volatility relative to the market.

Sharpe Ratio

Risk-adjusted return metric (return ÷ volatility).

Sortino Ratio

Risk-adjusted return focusing on downside risk.

Value at Risk (VaR)

Maximum potential loss over a time period at a confidence level.

Expected Shortfall / CVaR

Average loss beyond VaR.

Drawdown

Peak-to-trough decline in portfolio value.

Correlation

Measure of how two assets move together.

Covariance

Measure of joint variability of two assets.

Volatility Surface / Smile

Variation of implied volatility across strikes/maturities.

Implied Volatility

Market-expected volatility derived from option prices.

Realized Volatility

Historical volatility of a security’s price.

Delta

Sensitivity of option price to underlying asset price.

Gamma

Sensitivity of delta to underlying price changes.

Theta

Time decay of an option’s value.

Option

Contract giving the right, not obligation, to buy/sell.

Call Option

Right to buy at a specific price.

Put Option

Right to sell at a specific price.

Strike Price

Price at which option can be exercised.

Expiry / Maturity

Date when option contract ends.

Futures Contract

Obligation to buy/sell at a future date at a set price.

Forward Contract

Customized OTC agreement to buy/sell in future.

Swaps

Agreement to exchange cash flows or financial instruments.

Greeks

Risk sensitivities for options (Delta, Gamma, Vega, Theta, Rho).

Implied Volatility Surface

3D view of implied volatility across strikes and maturities.

Long Position

Buy expecting price to rise.

Short Position

Sell expecting price to fall.

Hedging

Reducing risk via offsetting positions.

Pairs Trading

Trading correlated assets to exploit divergence.

Arbitrage

Profit from price differences across markets.

Momentum Trading

Buy assets trending up; sell those trending down.

Mean Reversion

Trade expecting prices to revert to mean.

Market Neutral

Balancing long and short positions to minimize market risk.

Factor Investing

Investing based on factors like value, size, or momentum.

Quantitative Strategy

Using models and data to generate trades.

Algorithmic Market Making

Automated provision of liquidity.

Statistical Arbitrage (Stat Arb)

Exploit statistical patterns for profit.

VWAP Strategy

Trade aligned with volume-weighted average price.

TWAP Strategy

Trade evenly over time to minimize market impact.

Execution Algorithm

Optimized method to execute trades efficiently.

Diversification

Spreading investments to reduce risk.

Portfolio Allocation

Distribution of capital across assets.

Rebalancing

Adjusting portfolio to target weights.

Exposure

Amount of risk or capital invested in a position.

Leverage

Borrowing to amplify returns.

Margin

Borrowed funds or collateral for leveraged trades.

Stop-Loss / Take-Profit

Automatic order to exit at certain levels.

Hedging Ratio

Proportion of risk offset by hedge.

Position Sizing

Determining trade size relative to portfolio.

Risk-Adjusted Return

Return metric accounting for risk taken.

Order Matching Engine

Core exchange system matching buy/sell orders.

Latency

Time delay in order processing or market data.

Market Impact

Price change caused by executing a large order.

Slippage

Difference between expected and executed price.

Tick-by-Tick Data

Every market event recorded with time.

Level 2 / Market Depth

Full order book visibility.

Hidden Orders

Orders not visible in public book.

Iceberg Order

Large order with only partial visible quantity.

Crossing Network

Private matching venue for trades.

Latency Arbitrage

Exploit small time differences in prices.

P/E Ratio (Price/Earnings)

Price relative to earnings per share.

PEG Ratio

P/E divided by growth rate; valuation measure.

ROE (Return on Equity)

Profitability relative to shareholder equity.

ROA (Return on Assets)

Profitability relative to total assets.

Debt-to-Equity Ratio

Financial leverage metric.

EPS (Earnings per Share)

Portion of profit allocated to each share.