FREQUENTLY USED TERMS
- 50 DMA: benchmark indicator used by pro traders and investors that shows the average closing price over the past 50 sessions.
- 200 DMA: benchmark indicator used by pro traders and investors that shows the average closing price over the past 200 session.
- Bear market: indexes down ≥ 20% off recent high.
- Correction: indexes down ≥10 and <20% off recent high.
- Death cross: 50 DMA crosses down 200 DMA, typically occurs 5-7 months after the absolute peak, confirms the down trend.
- Delta: directional risk; change in an options’ price given a $1 move in the stock price.
- Distribution: professional/institutional selling, loss of ≥0.2% in one of the major indexes on volume higher than on the previous session.
- Doji: powerful reversal candlestick where the opening close prices are the same (or just a few ticks apart); only has significance in trending markets [example].
- Institutional investors (eg hedge funds, mutual funds, investment banks, insurance companies): accounts for lion's share of each day's market activity; since they have the most supply and demand we trade on the side of institutional investors.
- Long delta position: bullish, either short put or long call.
- Marijuana stocks (high IV): CRON, NEPT, NBEV, TLRY, XXII, ZYNE
- Option premium = (intrinsic value) + (time value) + (volatility)
- Short delta position: bearish, either short calls or long puts.
- Theta: rate of decay of an options contract, positive for sellers and negative for buyers.
- VXX (VIX short-term futures): implied volatility of SPY.
