Glossary

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P

PER

It is the most established indicator in stock analysis. In order to calculate the PER, the stock price is divided by the net profit (after tax) per share. In principle, the PER is an amortization calculation. How many years does the company need in order to have “earned” the price through the profit? As a rule of thumb: the lower the PER, the more favourably a share is assessed. The PER analysis does have weaknesses: what happens when there is no profit? Then the price-sales ratio of the turnover multiple must be drawn on. Comparisons between the different branches are also difficult. The automotive industry traditionally has really low PERs while the software sector is very high. The increases in profit are the benchmarks for this. If the surpluses of a sector grow with about 50 percent a year then a PER of the same amount is also justifiable.

Perfect Hedge

A hedge where the profit or loss at the spot position and the profit or loss at the hedge position cancel each other.

Physical Delivery

The delivery of the effective basic security to fulfil a futures contract. Contracts, which do not refer to deliverable goods or financial tools, will be settled by cash at maturity.

Pit

A term for the areas dedicated to trading activities and the trade of a certain tool. These areas are mostly octagonal and set up in stages on the exchange floor. In German, Pits are called Börsenringe [Rings].

Point & Figure Chart

With this type of chart, increasing prices are represented by an “X“ and falling prices by an “O“. A new equal symbol is then only added if the price has increased/fallen to a previously set percentage rate. A limit value is also set for the beginning of a new column with the opposed symbol (trend reversal). Depending on which limit values were chosen, smaller short-term price fluctuations are not taken into account – therefore it is easier to identify longer-term trends. Because, compared to all other chart representations, P&F charts have no timeline, the overall picture remains unaffected even with longer lateral trends.

Portfolio Immunisation

A portfolio strategy, which aims at protecting the returns of a loan portfolio against losses from changes in the interest rate.

Portfolio Insurance

A strategy, which aims at ensuring a minimum portfolio return, while simultaneously retaining the option to benefit from a higher market return.

Position

The state of the obligations of a market participant concerning a certain financial tool. This can be a long or a short position.

Position Limit

The maximum number of contracts at the same basic security, which an individual or a group of people can hold at a given time.

Position Trading

A trading strategy where open positions are maintained for a longer period, generally at least six months to a year.

Premium

In stock exchange trading: the difference between a security’s nominal value and higher market value, expressed in % of the nominal value.
In foreign exchange trading: the difference between the spot price and the higher forward price.

Premium

The price, which the options buyer pays the options writer for the right to buy (call) or sell (put) the basic security.

Price-Earnings Ratio

It is the most established indicator in stock analysis. In order to calculate the PER, the stock price is divided by the net profit (after tax) per share. In principle, the PER is an amortization calculation. How many years does the company need in order to have “earned” the price through the profit? As a rule of thumb: the lower the PER, the more favourably a share is assessed. The PER analysis does have weaknesses: what happens when there is no profit? Then the price-sales ratio of the turnover multiple must be drawn on. Comparisons between the different branches are also difficult. The automotive industry traditionally has really low PERs while the software sector is very high. The increases in profit are the benchmarks for this. If the surpluses of a sector grow with about 50 percent a year then a PER of the same amount is also justifiable.

Price-Earnings-Ratio

It is the most established indicator in stock analysis. In order to calculate the PER, the stock price is divided by the net profit (after tax) per share. In principle, the PER is an amortization calculation. How many years does the company need in order to have “earned” the price through the profit? As a rule of thumb: the lower the PER, the more favourably a share is assessed. The PER analysis does have weaknesses: what happens when there is no profit? Then the price-sales ratio of the turnover multiple must be drawn on. Comparisons between the different branches are also difficult. The automotive industry traditionally has really low PERs while the software sector is very high. The increases in profit are the benchmarks for this. If the surpluses of a sector grow with about 50 percent a year then a PER of the same amount is also justifiable.

Price-Sales Ratio

The price-sales ration (PSR) is an indicator of the fundamental stock analysis. It shows the percentage share of the stock price on the sales. The PSR is calculated whereby the current market capitalisation of a company is divided by the revenue of the last twelve months.

Program-Trading

A computer-supported, index arbitration, where the trader looks to achieve a short-term return from price differences between a share basket or index and the futures contracts traded on this index.

PSR

The price-sales ration (PSR) is an indicator of the fundamental stock analysis. It shows the percentage share of the stock price on the sales. The PSR is calculated whereby the current market capitalisation of a company is divided by the revenue of the last twelve months.

Purchase Option

An option contract, which entitles its holder, during a certain period or at a set time, to buy a certain amount of a certain commodity at a previously determined price and which obliges the option writer to sell the basic security if the holder decides to exercise his option.

Put

An option contract, which entitles its holder to buy a certain amount of the basic security at a set price, at or before a set time, and which obliges the option writer to accept the basic security if the holder decides to exercise his option.

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