Full Wall Street Glossary

In recent weeks, small investors in the United States, who began their careers at the WallStreetBets forum on the Reddit website, have joined in order to invest – all together as one strong and popular entity – in stocks that are considered weak.

Hedge fund people (see dictionary) gambled on the decline of these stocks in a kind of stock market move, where the decline, which seemed like a safe bet, would have yielded large profits for the funds. The purpose of the small investors was to thwart this move – rather to raise the prices of the failed shares, thus causing the hedge funds to sell them with no choice at high prices, and to lose billions.

These actions were done in the new online trading apps, which make the capital market accessible to the masses. They allow any individual to send orders to buy and sell securities to the stock exchanges, with minimal fees. They also allow you to buy a share of a stock: for example, not the entire Amazon stock for $ 3,000, but a tenth of it for $ 300. The app operators connect the partial orders for a single purchase or sale, creating a kind of purchasing group. Robin Hood is now the best known trading app, but there are many like it.

Trading in a security without owning it, on the basis of a bet that its price is about to fall. This is a stock market move where the sale precedes the purchase. The shortlist accompanies a stock from a body or investor, sells it, waits for its price to fall, buys it again at the low price, and returns it to its owner. The difference between the price at which he sold and the price at which he bought he earns.

Example: The price of the stock was NIS 1,500 while it was on loan. He sells it at this price and waits until its value drops, for example to NIS 1,200. So he buys it back to return it to its owner, and he has a difference of NIS 300 left in his hands.

In order to perform the action, the shortlist must provide collateral to the lender. If the stock went up and did not go down, it loses of course, as happened to the hedge funds in GameStop stock.

Squeeze means to squeeze, and refers to the psychological pressure put on shortlisters, of the kind that trading app members Robin Hood caused the hedge funds to start buying the stocks the funds gambled would fall in price (causing a sharp jump in their price). The shortlisters came under pressure from the expected loss and began buying the shares, which further boosted their price.

An investment fund whose strategy is profit in any market situation – rising or falling. Hedging comes from the GDR root, which means that the fund defines (limits) its risk of losing its activity on the stock exchange through a variety of techniques, including short selling, investing in futures contracts, trading and writing complex options and more.

Some hedge funds only profit when the stock market rises by surprise, and some profit when it goes down, using the short selling technique. This is while a regular investor who buys a stock only profits if the price goes up.

In Israel, the hedge fund industry is not developed compared to the United States. The Capital Hedge Fund, one of the largest in the country, established by Roy Vermus, former CEO of Psagot Investment House, has assets of NIS 5 billion – a small amount compared to the market. In addition, hedge funds in Israel are more conservative and the scope of their activities does not constitute a fertile ground for manipulations and shocks.

Purchase through credit and not through equity. In the context of the capital market, it refers to investors who purchase shares not out of their own money but through loans, in the belief that they will repay them from the stock’s earnings.

These are investors who take a risk: if the share price falls and they lose from the purchase, they still have to repay the loan. Lenders also take a risk. Therefore, the authorities limit the level of leverage allowed, for example up to a quarter of the value of the purchased share.

A private company that wants to raise capital from the public is offering, for the first time, its shares, or its bonds, for sale to the public. The offer is accompanied by the publication of a prospectus, in which it details its activities, shareholders, profitability, value, etc., so that the public has comprehensive information about it and can examine whether it is interested in purchasing its shares at the price offered by it.

Once issued, its shares are tradable and anyone can purchase them. The consideration is received by the company or its owners. From the moment it is issued, the share price will be determined according to its supply and demand on a daily basis.

Every public company, ie a company traded on the stock exchange, is obliged to publish its financial reports to the public every certain period, usually a quarter, including many data on its activities – income, loans, profit of various kinds (gross, operating, net), in order to give Maximum transparency for its stock buyers on its condition.

The financial statements are made according to strict rules set by the regulators, headed by the Securities Authority, to prevent “creativity” in presenting the data, inflated profitability, coverage of losses, etc. False reporting in the reports is a criminal offense.

Market value is the value of a public company according to the current price of its shares traded on the stock exchange. In general, the market value is a product of the number of shares in the share price, but in many markets it is permissible to list different types of shares with different rights for trading, and then the calculation becomes complicated.

In theory, a company’s market capitalization should be an outgrowth of its operations and profitability or losses, but as in the case of GameStop – a failed company worth $ 23 billion – a company could break away from its real value following artificial hysterical demand for the stock, soaring its price regardless of company performance.

An index that weighs the average price level of certain industries of securities traded on the stock exchange, for example the manufacturing industry, the biotechnology industry, trading, etc.

The index is based on a weighted price of the industry’s shares, and serves investors as a basis for evaluating the performance of a particular stock within the industry, and of investment portfolio performance. The most prominent stock indices in the world are the Dow Jones and Nasdaq in the US, Nikkei in Japan, Dax in Germany, and more.

In many places in the world, there are stock exchanges where you can buy or sell goods, agricultural products, metals such as copper and steel, gold, silver, coal, oil and more. The best known is the Chicago Stock Exchange, where traders trade or gamble on the prices of metals: copper, aluminum, steel, etc.

Commodity prices are determined both by immediate demand and supply, by future supply and demand forecasts, and by speculations in future supply contracts. Trading in commodity exchanges is not accessible and is not recommended for small investors.

A financial instrument that is traded on the stock exchange and is in fact a commitment to provide or purchase an asset, such as a commodity, currency, security and more, at a future date, at a predetermined price or exchange rate. The tool was originally designed to allow companies or traders, who are afraid of a price increase for goods they want to buy, to guarantee themselves the price.

The risk: If the bet on the price increase was wrong, and the price did not reach the price set in the contract, the contract holder is still obliged to purchase the goods or the security at the price he has promised, even though in the market its price is lower. Therefore, upon purchasing the option, the buyer is required to provide collateral to the financial entity with which he is trading.

The bear market describes a long and continuous state of declines in the capital market. The technical definition is a decrease of 20% or more from the last peak level. A bull market (bull language) is the opposite – a market where there is a continuing trend of increases.

The origin of the image of a bull or a bear is not entirely clear and there are many explanations and stories around it. One explanation: the bull attacks and tries to flip his opponent up with his horns. The bear, on the other hand, presses its prey down to the ground.