Billions: Glossary

We don’t think it’s essential to be a financial or legal expert to enjoy Billions. It is a show more about characters and their interesting relationships than about the workings of Axe Capital or the US Attorney’s office. Having said that, we believe we are more likely to enjoy Billions once we understand exactly what’s going on… which brings us to this Billions glossary.

We have seen it mentioned on various social media that some are distracted by the fact they are finding the stock market jargon difficult to follow. Only natural for those of us who do not spend our days talking about longing and shorting and looking out for people ditching stock through back doors at lunch time.

Think of this page as a constant work in progress. We list terms that we think could be helpful, in alphabetical order, and we will keep adding to it!  If you hear a term (or terms) we haven’t added yet, let us know and we will be on it!

Without further ado:

10-K – A 10-K is a comprehensive summary report of a  company’s performance that must be submitted annually to the SEC. Typically, the 10-K contains much more detail than the annual report, particularly what an investor would want to know prior to buying or selling shares of stock in the corporation or investing in the firm’s corporate bonds.

10-Q – The SEC form 10-Q is a comprehensive report of the company’s performance that must be submitted quarterly by all public companies to the SEC. In the 10-Q, firms are required to disclose relevant information regarding their financial position. There is no filing after the fourth quarter, because that is when the 10-K is filed.

13F  –  Also known as Information Required of Institutional Investment Managers Form, this is a quarterly filing with the  SEC required of all investment managers with over $100 million in their qualifying assets and shows what positions a fund has.

Lady Trader says when the 13Fs come out, it shows if funds have increased, decreased, sold or bought positions. Those filings can move stocks. If a fund took a new position in something like McDonalds (MCD), it could make the stock price go up, since the street will believe the fund is positive on the name. Same if the fund had a position in MCD and then sold it. The stock would do down.

Absolute Returns – Absolute return is the return that an asset achieves over a certain period of time. This measure looks at the appreciation or depreciation, expressed as a percentage that an asset, such as a stock or a mutual fund, achieves over a given period of time. Absolute return differs from relative return because it is concerned with the return of a particular asset and does not compare it to any other measure or benchmark.

Activist Investor – purchases large numbers of a public company’s shares and/or tries to obtain seats on the company’s board with the goal of effecting a major change in the company. Then when does a company become a target for an activist investor? If it is mismanaged, has excessive costs, or could be run more profitably as a private company or has another problem that the investor believes s/he can fix and make the company more valuable.

Adverse Selection -Adverse selection refers generally to a situation in which sellers have information that buyers do not have, or vice versa, about some aspect of product quality – in other words, it is a case where asymmetric information is exploited. Asymmetric information, also called information failure, happens when one party to a transaction has greater material knowledge than the other party. Typically, the more knowledgeable party is the seller.

Allocating –Strategic asset allocation is a portfolio strategy that involves setting target allocations for various asset classes and re-balancing periodically.

Allocator – endowments, foundations, pensions, family offices, funds of funds and other institutions who want to invest in hedge funds will hire an allocator to research which funds are right for their specific requirements.

Alpha – Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over some period. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole. The excess return of an investment relative to the return of a benchmark index is the investment’s alpha. Alpha may be positive or negative and is the result of active investing. Beta, on the other hand, can be earned through passive index investing.

Algo – short for algorithmic trading, is used for deciding the timing, pricing and quantity of stock orders An algorithm is set of rules for accomplishing a task in a certain number of steps. Algorithms are essential for computers to process information. Financial companies use algorithms in areas such as loan pricing, stock trading and asset-liability management.

Analyst – does the research. They analyse the data (relating to how stocks are doing) and then make recommendations to the Portfolio Manager.

Anti-Dilution Provision: protects an investor from equity dilution resulting from later issues of stock at a lower price than the investor originally paid.

Assets Under Management (AUM) – is the total market value of assets that an investment company or financial institution manages on behalf of investors. Assets under management definitions and formulas vary by company.

Axe – next to being Bobby Axelrod’s nickname in Billions, Lady Trader hints that if you are called “axe” on a stock, that means you are the expert on that stock. It seems our Bobby has been aptly nicknamed, doesn’t it?

B-School -B-school is simply an abbreviation for an institution that focuses on teaching business-related courses. While business schools may offer courses ranging from undergraduate degrees to post-doctoral programs, their prime offering is the Masters of Business Administration (MBA) program. Top-tier business schools are usually renowned for the high quality of their graduates, many of whom climb the corporate ladder steadily to eventually become among the highest-ranking executives in their organizations.

Basis Points (Bps) –Basis point (BPS) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to denote the percentage change in a financial instrument. The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points, and 0.01% = 1 basis point.

Basis Points Percentage Terms
1 0.01%
5 0.05%
10 0.1%
50 0.5%
100 1%
1000 10%
10000 100%

Basis point is typically expressed in the abbreviations “bp”, “bps”, or “bips.

Bellwether -Bellwether companies are usually the market leaders in their respective sectors and may be considered ‘blue chips’.

Benchmark – An investment benchmark is a standard against which the performance of an individual security or group of securities is measured.

Bivens Action/Claim – It is a claim against federal officials, sued in their individual capacities, for a violation of a person’s constitutional rights. It comes from Supreme Court Justice Brennan’s opinion in Bivens vs Six Unknown Named Agents. In Season 2, Axe brings a Bivens Claim against Chuck citing violation of his Fourth Amendment rights.

Black Swan Event – A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.

Block Trade / Block Order – A block trade involves a significantly large number of shares or bonds being traded at an arranged price between parties, outside of the open markets, in order to lessen the impact of such a large trade hitting the tape.

Bitcoin – a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

Bloomberg  Terminal – The Bloomberg Terminal is a computer software system provided by the financial data vendor Bloomberg L.P. that enables professionals in the financial service sector and other industries to access the Bloomberg Professional service through which users can monitor and analyze real-time financial market data and place trades on the electronic trading platform.

Book – A book is a record of all the positions held by a trader. This record shows the total amount of long and short positions that the trader has undertaken. Traders maintain a book to facilitate trades for their customers and to profit from the spread between their bid and ask prices.

Boutique Firm – A boutique is a small financial firm that provides specialized services for a particular segment of the market. Boutique firms are most common in the investment management or investment banking industries. These firms may specialize by industry, client asset size, banking transaction type or other factors to address a market not well-addressed by larger firms

Bucket Shop – A brokerage firm or hedge fund that makes trades on a client’s behalf and promises a certain price. The firm, however, waits until a different price arises and then makes the trade, keeping the difference as profit. If your firm is called a bucket shop, it’s not a compliment!

Buying a “Seat” – Seat refers to membership on a stock exchange, which enables a person to trade on the floor of the exchange, either as an agent for someone else, a floor broker, or for one’s own personal account, a floor trader. In the industry, owning a seat on an exchange was long considered a prestigious position, open only to a lucky and wealthy few. It was most commonly used to refer to membership on the New York Stock Exchange, in a structure that ceased to exist when it became a publicly traded company in 2005.

Buy-Side Analyst – The job of a buy-side analyst is much more about being right; benefiting the fund with high-alpha ideas is crucial, as is avoiding major mistakes. In point of fact, avoiding the negative is often a key part of the buy-side analyst’s job, and many analysts pursue their job from the mindset of figuring out what can go wrong with an idea.

“C” Round Funding: funding rounds provide outside investors the opportunity to invest cash in a growing company in exchange for equity, or partial ownership of that company. When you hear discussion of Series A, Series B, and Series C funding rounds, these terms are referring to this process of growing a business through outside investment.

CapEx – Capital expenditures, commonly known as CapEx, are funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, an industrial plant, technology or equipment. CapEx is often used to undertake new projects or investments by the firm. Making capital expenditures on fixed assets can include everything from repairing a roof to building, to purchasing a piece of equipment, to building a brand new factory. This type of financial outlay is also made by companies to maintain or increase the scope of their operations

Cap Gains (Capital Gains) -A capital gain is a rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes.

Central Bank -A central bank, or monetary authority, is a monopolized and often nationalized institution given privileged control over the production and distribution of money and credit. In modern economies, the central bank is responsible for the formulation of monetary policy and the regulation of member banks. The central bank of the United States is the Federal Reserve System, or “the Fed,” which Congress established with the 1913 Federal Reserve Act.

Chapter 11  -Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business affairs, debts, and assets. Named after the U.S. bankruptcy code 11, corporations generally file Chapter 11 if they require time to restructure their debts. This version of bankruptcy gives the debtor a fresh start. However, the terms are subject to the debtor’s fulfillment of his obligations under the plan of reorganization.

Chapter 11 bankruptcy is the most complex of all bankruptcy cases. It is also usually the most expensive form of a bankruptcy proceeding. For these reasons, a company must consider Chapter 11 reorganization only after careful analysis and exploration of all other possible alternatives.

CIO (Chief Investment Officer) – A chief investment officer is an executive position responsible for managing a company’s investment portfolios. The chief investment officer (CIO) usually oversees a team of professionals who have responsibilities such as managing and monitoring investment activity, managing pensions, working with external analysts and maintaining good investor relations. They will also develop short-term and long-term investment policies.

Cold Calling – Cold calling is the solicitation of potential customers who were not anticipating such an interaction. Cold calling is a technique whereby a salesperson contacts individuals who have not previously expressed an interest in the products or services that are being offered.

‘Covering’ is the term related to the short position. That is, when you short, you are selling the stock on the basis you expect it to fall in value and thus when you buy it back or ‘cover’ you expect to do so for less than you sold it and make a profit. However, if you get it wrong and the stock price rises, you must still cover the position and will make a loss.

Credit Default Swap – A credit default swap is insurance against non-payment. Through a CDS, the buyer can moderate the risk of their investment by shifting all or a portion of that risk onto an insurance company or other CDS seller in exchange for a periodic fee. In this way, the buyer of a CDS receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the debt security. For example, the buyer of a credit default swap will be entitled to the par value of the contract by the seller of the swap, should the issuer default on payments.

Cryptocurrency – A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.

Dark Pool – Dark pools are a type of alternative trading system that give investors the opportunity to place orders and make trades without publicly revealing their intentions during the search for a buyer or seller.

Dead Cat Bounce – a temporary recovery in share price of a stock after a substantial fall, caused by speculators buying in order to cover their short positions.

Deleverage – A company’s attempt to decrease its financial leverage and the best way to do it is through paying off any existing debt on its balance sheet right away.

Delivering Alpha Conference – We see Bobby Axelrod as a speaker at this conference in the pilot. Delivering Alpha is an annual conference hosted by CNBC (please note that Andrew Ross Sorkin, one of the Billions executive producers is also a co-anchor on CNBC’s pre-market morning news program Squawk Box) and Institutional Investor and held in New York City. Here’s a brief description of what the conference is about from the conference website:

Delivering Alpha continues to be an incomparable who’s who of the investor community, with hedge fund titans and institutional investors offering candid views, along with illustrious political and economic commentators appearing in panel discussions moderated by top journalists from CNBC and II.”

Lady Trader says “a hedge-fund manager can make or break a stock with his comments” at this conference. That is very telling about Axe being a speaker at the conference and him being a real influence on the markets.

Deposition – out-of-court oral testimony of a witness that is put in writing for later use in court or for discovery purposes.

Derivative – A derivative is a financial security with a value that is reliant upon, or derived from, an underlying asset or group of assets. The derivative itself is a contract between two or more parties, and its price is determined by fluctuations in the underlying asset. The most common underlying assets include stocksbondscommoditiescurrenciesinterest rates and market indexes.

Devaluation -Devaluing a currency is decided by the government issuing the currency, and unlike depreciation, is not the result of non-governmental activities. One reason a country may devaluate its currency is to combat trade imbalances. Devaluation causes a country’s exports to become less expensive, making them more competitive in the global market. This, in turn, means that imports are more expensive, making domestic consumers less likely to purchase them, further strengthening domestic businesses.

While devaluating a currency can seem like an attractive option, it can have negative consequences. By making imports more expensive, for example, it protects domestic industries who may then become less efficient without the pressure of competition. Higher exports relative to imports can also increase aggregate demand, which can lead to inflation.

Discretionary Investment Account (DIA) – A discretionary account is an investment account that allows a broker to buy and sell securities without the client’s consent. The client must sign a discretionary disclosure with the broker as documentation of the client’s consent. A discretionary account is sometimes referred to as a managed account; many brokerage houses require client minimums (such as $250,000) to be eligible for this service

ESG (Environmental, Social, and Governance) – Environmental, social and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

Execution Management System (ESMX) – EMSX is a multi-asset class trading platform that integrates Bloomberg exchange and broker data with equity, futures and options orders. As an execution management system, EMSX allows you to seamlessly route single name or baskets/lists to more than 1,300 brokers representing more than 6,000 algorithmic/DMA, program and cash-trading destinations.

Exchange-Traded Fund (ETF) – an investment fund traded on stock exchanges much like stocks. ETFs usually track an index, such as stock index or bond index. They experience price changes throughout the day as they are bought and sold.

Event-Driven Strategy – Strategy adopted to take advantage of a merger or a restructuring that can result in a short run mis-pricing of a company’s stock.

Family Office – They serve as advisory firms for managing ultra-high net worth investors. Family offices are different from traditional wealth management shops that they cannot handle outside money but instead offer totally outsourced solutions to manage the financial and investment side of a affluent individual or family. For example, many family offices offer budgeting, insurance, charitable giving, family-owned businesses, wealth transfer and tax services.

We see in Billions Episode 2 Naming Rights that Steven Birch of Piedmont Capital settles with the US attorney’s office by voluntarily shuttering his hedge fund and turning it into a family office.

FCPA  ‘Foreign Corrupt Practices Act’ – A United States law passed in 1977 which prohibits U.S. firms and individuals from paying bribes to foreign officials in furtherance of a business deal and against the foreign official’s duties. The FCPA places no minimum amount for a punishment of a bribery payment. The Foreign Corrupt Practices Act also specifies required accounting transparency guidelines

FDIC – The FDIC is a United States government corporation providing deposit insurance to depositors in U.S. commercial banks and savings banks.

FERCFederal Energy Regulatory Commission: The Federal Energy Regulatory Commission, or FERC, is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC also reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines as well as licensing hydropower projects. The Energy Policy Act of 2005 gave FERC additional responsibilities as outlined and updated Strategic Plan. As part of that responsibility, FERC:

Financial Leverage –  The use of debt to acquire additional assets. The more debt financing a company uses, the higher its financial leverage. A high degree of financial leverage means high interest payments, which negatively affect the company’s earnings per share.

Financial Models – It is the goal of the analyst to accurately forecast the price or future earnings performance of a company. Numerous valuation and forecast theories exist, and financial analysts are able to test these theories by recreating business events in an interactive calculator referred to as a financial model. A financial model tries to capture all the variables in a particular event. It then quantifies the variables and creates formulas around these variables. In the end, the model provides the analyst with a mathematical depiction of particular business event. The primary software tool used to do this is the spreadsheet. Spreadsheet language allows the financial modeler to reconstruct almost any cash flow or revenue stream.

Finder’s Fee (aka Referral Fee) – A commission paid to an intermediary of a transaction. The intermediary is rewarded for discovering and bringing the deal to interested parties.

Front Running – The unethical practice of a broker trading an equity in his personal account based on advanced knowledge of pending orders from the brokerage firm or from clients, allowing him to profit from the knowledge. It can also occur when a broker buys shares in his personal account ahead of a strong buy recommendation that the brokerage firm is going to make to its clients.

Fundamental Analyst – Fundamental analysts study anything that can affect the security’s value, including macroeconomic factors such as the overall economy and industry conditions, and microeconomic factors such as financial conditions and company management. The end goal of fundamental analysis is to produce a quantitative value that an investor can compare with a security’s current price, thus indicating whether the security is undervalued or overvalued

Futures – Futures are financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical deliveryof the asset, while others are settled in cash.

Greenwash -disinformation disseminated by an organization so as to present an environmentally responsible public image.

Hard to Borrow List – An inventory used by brokerages to indicate securities that are unavailable for borrowing for short sale transactions. A brokerage firm’s hard-to-borrow list provides an up-to-date catalog of securities that cannot be shorted. The security may be on the hard-to-borrow list because it is in short supply or because of its volatility. In order to enter a short sale, a brokerage client must first borrow the shares from the broker. To provide the shares, the broker can use its own inventory or borrow from the margin account of another client or from another brokerage firm.

Hedge –A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security.

Hedge-Fund – “In the investment world, “I run a hedge fund” has the same meaning as “I’m a consultant” in the rest of the business world. In general, a hedge fund is a private partnership that operates with little to no regulation from the U.S. Securities and Exchange Commission (SEC).

A hedge fund uses a range of investment techniques and invests in a wide array of assets to generate a higher return for a given level of risk than what’s expected of normal investments. In many cases, hedge funds are managed to generate a consistent level of return, regardless of what the market does.

To understand what a hedge fund is, it helps to know what hedging is. Hedging means reducing risk, which is what many hedge funds are designed to do. Although risk is usually a function of return (the higher the risk, the higher the return), a hedge fund manager has ways to reduce risk without cutting into investment income.”

Hedge-Fund Manager – A hedge fund manager can look for ways to get rid of some risks while taking on others with an expected good return. For example, a fund manager can take stock market risk out of the fund’s portfolio by selling stock index futures. Or (s)he can increase her return from a relatively low-risk investment by borrowing money, known as leveraging. Keep in mind, however, that risk remains, no matter the hedge fund strategy.

The challenge for the hedge fund manager is to eliminate some risk while gaining return on investments — not a simple task, which is why hedge fund managers get paid handsomely if they succeed.”

High Frequency Trading (HFT) – High-frequency trading (HFT) is a program trading platform that uses powerful computers to transact a large number of orders at very fast speeds. It uses complex algorithms to analyze multiple markets and execute orders based on market conditions. Typically, the traders with the fastest execution speeds are more profitable than traders with slower execution speeds.

Holding Company – A holding company does not produce its own goods or services; rather it owns other companies’ outstanding stock. It exists to own shares of other companies to form a corporate group. Holding companies allow the reduction of risk for the owners and allow the ownership and control a number of different companies. A modern day example for a holding company is Warren Buffet’s Berkshire Hathaway.

Idea Dinner – Idea dinners  are a way for managers to not only socialize but discuss trading ideas and strategies.

Impact Investing – Impacting investing aims to generate specific beneficial social or environmental effects in addition to financial gains. Impact investments may take the form of numerous asset classes and may result in many specific outcomes. The point of impact investing is to use money and investment capital for positive social results.

Index – A market index is a hypothetical portfolio of investment holdings which represents a segment of the financial market. The calculation of the index value comes from the prices of the underlying holdings. Some indices have values based on market-cap weighting, revenue-weighting, float-weighting, and fundamental-weighting. Weighting is a method of adjusting the individual impact of items in an index.

Insider Trading – Insider trading is when you buy (or short) a stock with information that is not known to the public. Example: if a CFO (Chief Financial Officer) tells me privately that their company had a very good quarter, but the quarter hasn’t ended, and I buy the stock at $20. When the company reports good earnings the stock goes up to $30, I made $10 per share. That’s a very clear cut insider trading case.

A good example comes from Billions pilot where Axe talks to his analysts Butch and “Dollar” Bill who want to long and short Superior Auto stocks, respectively: Bill gave $$ to a worker at Superior to get info no one else has (and seen they have lots of inventory). That’s insider trading for Bill, but not for Axe – he didn’t know where the information came from; he’s just taking the recommendation from his analyst.

Intellectual Property (IP) – Intellectual property is a broad categorical description for the set of intangibles owned and legally protected by a company from outside use or implementation without consent. Intellectual property can consist of patentstrade secretscopyrights and trademarks or simply ideas

Initial Public Offering (IPO) – Shares of a company are sold to the general public on a securities exchange for the first time.

Institutional Investor – An institutional investor is an organization that invests on behalf of its members. There are generally six types of institutional investors: endowment funds, commercial banks, mutual funds, hedge funds, pension funds and insurance companies.

Investment Banker –An investment banker is an individual who often works as part of a financial institution and is primarily concerned with raising capital for corporations, governments, or other entities.  An investment banker can save a client time and money by identifying risks associated with a particular project before a company moves forward. In theory, the investment banker is an expert in his or her field, who has a finger on the pulse of the current investing climate. Businesses and non-profit institutions often turn to investment bankers for advice on how best to plan their development.

Investor Relations (IR) -The investor relations (IR) department is present in most medium-to-large public companies that provides investors with an accurate account of company affairs. This helps private and institutional investors make informed buy and sell decisions. A company’s IR department also serves as a bridge for providing market intelligence to internal corporate management.

Latency – In high frequency trading, the latency gold standard is 200 nanoseconds. If you’re an equity trader using a Bloomberg Terminal or Thomson Reuters Eikon, latency of more than 200 nanoseconds is considered to be shockingly pedestrian, putting you at risk of buying or selling a stock at a higher or lower price than the one you saw quoted..

Leverage  -Leverage results from using borrowed capital as a funding source when investing to expand the firm’s asset base and generate returns on risk capital. Leverage is an investment strategy of using borrowed money to increase the potential return of an investment.  At the same time, leverage will also multiply the potential downside risk in case the investment does not pan out. Investors use leverage to significantly increase the returns that can be provided on an investment.

Leverage up x times – That means you can trade x times what your account is actually worth. For example, if you have $1 million in cash in an account, you can trade $2 million worth of positions if leveraged up 2 times.

Leverage Build Up – The accumulation of additional debt to enter a position that has the potential for large returns. From the perspective of portfolio management, leverage build up involves partaking in excessive leveraged positions for the opportunity to magnify returns.

Limited Liability Company (LLC) – A business structure that operates like a traditional partnership. The company distributes income to the partners (who report it on their individual income tax returns) but also protects them from personal liability for the business’s debts, as with the corporate business form. In general, unless the business owner establishes a separate corporation, the owner and partners (if any) assume complete liability for all debts of the business. Under the LLC rules, however, an individual isn’t responsible for the firm’s debt, provided he or she didn’t secure them personally, as with a second mortgage, a personal credit card or by putting personal assets on the line.

Limit Order – A limit order is an order to buy or sell stock for a specific price. For example, if you wanted to purchase shares of a $100 stock at $100 or less, you can set a limit order that won’t be filled unless the price you specified becomes available.

Liquidity – Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price.

Lock-Up Period –   A lock-up period is a window of time when investors of a hedge fund or another closely held investment vehicle are not allowed to redeem or sell shares. The lock-up period helps portfolio managers avoid liquidity problems while capital is put to work in sometimes illiquid investments.

The initial public offering (IPO) lock-up is a common lock-up period in the equities market used for newly issued public shares, typically lasting anywhere from 90 to 180 days after the first day of trading, so fund managers can keep a lower amount of cash on hand

Long or ‘long position’ –is where you expect the value of stock to rise. You buy this stock and own it.

Margin Call – A margin call happens when a broker demands that an investor deposits additional money or securities so that the margin account is brought up to the minimum maintenance margin. A margin call occurs when the account value falls below the broker’s required minimum value.

Market Correlation – Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management. Correlation is computed into what is known as the correlation coefficient which has value that must fall between -1 and 1.

Market Order (or “at the market) – An at-the-market order buys or sells a stock or futures contract at the prevailing market bid or ask price at the time it gets processed. An at-the-market order usually executes within minutes of being received and can be placed anytime during market hours.

Market Order vs Limit Order – When an investor places an order to buy or sell a stock, there are two fundamental execution options: place the order “at market” or “at limit.” Market orders are transactions meant to execute as quickly as possible at the present or market price. Conversely, a limit order sets the maximum or minimum price at which you are willing to buy or sell

Market Maker– The most common type of market maker is a brokerage house that provides purchase and sale solutions for investors, in an effort to keep financial markets liquid. A market maker can also be an individual intermediary, but due to the size of securities needed to facilitate the volume of purchases and sales, the vast majority of market makers work on behalf of large institutions.

Market Timing – A money manager who seeks a profit for clients from their own ability to predict when the market will rise and fall.

Municipal Bond/ Muni-Bond – A security issued by a state, municipality or county to finance its capital expenses, e.g. including the construction of highways, bridges or schools. These bonds are exempt from federal taxes and from most state and local taxes, making them especially attractive to people in high income tax brackets. Remember Axe tells Taylor this is the kind of giving he likes 😀

Non-compete agreement – is an agreement between an employee and employer where the employee agrees not to use information s/he learned during this particular employment in future business efforts for a period of time set in the agreement. Very common on Wall Street. Investopedia says employers typically insist their employees sign such agreements “because of the possibility of an employee, upon termination or resignation, working for a competitor or starting a business, and gaining competitive advantage by abusing confidential information about their former employer’s trade secrets or sensitive information such as customer/client lists, business practices, upcoming products and marketing plans.”

Non-solicitation agreement –  Is an agreement that typically states you agree not to try and take clients or employees for your own benefit, or a competitor’s benefit, after leaving the company. A non-solicitation agreement could be part of a larger document, an employment contract or a non-compete agreement. However, a firm that wants to protect only its client list might choose to use a standalone non-solicitation agreement.

Office of Professional Responsibility (OPR) – The office is responsible for investigating allegations of misconduct concerning the exercise of department attorneys’ use of their authority to investigate, litigate or provide legal advice, as well as allegations of misconduct concerning law enforcement personnel related to allegations of attorney misconduct within the jurisdiction of OPR. The OPR directly reports to the Attorney General.

Opportunity Zone -An opportunity zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as opportunity zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service.

Option – An option represents a contract sold by one party to another. The contract offers the buyer the right, but not the obligation, to buy (call option) or sell (put option) a some financial asset at a price agreed upon by the two parties, the strike price, during a certain period of time or on a specific date (exercise date). If you buy a “call” on a stock, it gives you the right to buy it at a certain price (a 40 call Microsoft allows you to buy the stock at 40. So if you buy a 40 call on Microsoft, and you think the stock is going to 50, you get the stock at a very good price. A 35 “put” allows you to sell it at that price. If you buy a 35 put and think the stock is going to 30, you get a good price to sell it.

Passive Investor – Also known as a buy-and-hold strategy, passive investing involves buying a security with the intention of owning it for many years. Unlike active traders, passive investors are not attempting to profit from short-term price fluctuations, or otherwise “time the market.” The basic assumption that underpins a passive investment strategy is that the market generally posts positive returns given enough time.

Portfolio – a group of stocks, bonds and other financial investments.

Portfolio Manager – The person or persons responsible for the management of the portfolio day-to-day.

Position – “The amount of a security either owned (which constitutes a long position) or borrowed (which constitutes a short position) by an individual or by a dealer (a person or firm in the business of buying and selling securities for their own account, whether through a broker or otherwise.)”

Position Sizing – The  dollar amount of an investment. When determining a position sizing, and investor usually accounts for their own risk tolerance and the total amount they have to invest. One may think of position sizing as the dollar amount of the part of a portfolio in a single security.

Private Equity – Private equity is composed of funds and investors that directly invest in private companies, or that engage in buyouts of public companies. Institutional and retail investors provide the capital for private equity, and the capital can be utilized to fund new technology, make acquisitions, expand working capital, and to bolster and solidify a balance sheet.  Private equity investment comes primarily from institutional investors and accredited investors, who can dedicate substantial sums of money for extended time periods. In most cases, considerably long holding periods are often required for private equity investments in order to ensure a turnaround for distressed companies or to enable liquidity events such as an initial public offering (IPO) or a sale to a public company

Prime Brokerage – Services provided by brokerages to special clients. The services provided under prime brokerage are securities lending (the act of lending a stock with the borrower required to put up a collateral), leveraged trade executions, and cash management. In particular, when hedge-funds shorts a stock, they have the loan executed through their prime brokerages. Most of the biggest broker firms like Goldman Sachs, Paine Webber, and Morgan Stanley Dean Witter provide prime brokerage services.

Proffer Session – Meetings between prosecutors and individuals who are the focus of an ongoing investigation. They are commonplace in criminal investigations. While it carries the potential to reduce or resolve a client’s criminal exposure, it also presents a great deal of risk.

Proxy Time – A company has an annual shareholder meeting. At the meeting shareholders vote for different things: board members, CEO compensation, dividend, etc. It’s called proxy time because there are companies that urge shareholders to vote a certain way. They send out questionnaires to the thousands of shareholders. When the shareholders send it back, they are giving the company their proxy in how to vote.

The “Quants” – short for an analyst that runs quantitative analysis that aims to understand or predict behavior or events through the use of mathematical measurements and calculations, statistical modeling and research. The analysts and Portfolio Managers at Axe Capital would be considered Fundamental Analysts (see definition above).

Quant Fund – An investment fund that selects securities based on quantitative analysis. In a quant fund, the managers build computer-based models to determine whether an investment is attractive. In a pure “quant shop” the final decision to buy or sell is made by the model; however, there is a middle ground where the fund manager will use human judgment in addition to a quantitative model. Axe Capital is more of a Fundamental shop. They research companies and make trading decisions based on the fundamentals of a company (potential revenue and earnings growth, management, etc.) . Lady Trader trades both a quant strategy and a fundamental strategy.

Real Estate Investment Trust (REIT) – Congress established real estate investment trusts (REITs) in 1960 as an amendment to the Cigar Excise Tax Extension of 1960. The provision allows individual investors to buy shares in commercial real estate portfolios that receive income from a variety of properties. Properties included in a REIT portfolio may include apartment complexes, data centers, health care facilities, hotels, infrastructure—in the form of fiber cables, cell towers, and energy pipelines—office buildings, retail centers, self-storage, timberland, and warehouses.

Most REITs have a straightforward business model: The REIT leases space and collects rents on the properties, then distributes that income as dividends to shareholders.

Realized Gains – A realized gain results from selling an asset at a price higher than the original purchase price. It occurs when an asset is sold at a level that exceeds its book value cost. While an asset may be carried on a balance sheet at a level far above cost, any gains while the asset is still being held are considered unrealized as the asset is only being valued at fair market value.

Redemption – A redemption is the return of an investor’s principal, or the sale of units in a hedge fund. Most funds only allow redemptions at certain intervals (ex. once a year), and usually need a certain period of time to be notified (ex. 1 month) so they can liquidate without flooding the market.

Reverse Merger – A reverse merger occurs when a private company that has strong prospects and is eager to acquire financing buys a publicly-listed shell company, usually one with no business and limited assets. The private company reverse merges into the public company, and together they become an entirely new public corporation with tradable shares.

Revenue Sharing – A firm sometimes will seed a small fund with capital. Depending on the strategy and what else the firm provides for the seed company (office space, marketing, etc) they agree on how to divide up the profits.” We see Axe in Episode 10 offering a take it or leave it revenue sharing agreement to Carly, Channing and Hlasa and they accept. Axe wants (along with everything else he asked for) 40% of any profits those 3 make. Since they will have to split that 3 ways, it’s 20% each from them.

Risk Management – Essentially, risk management occurs any time an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given his investment objectives and risk tolerance.

Road Show – A road show is a presentation by an issuer of securities to potential buyers. The management of a company issuing securities or doing an initial public offering (IPO) travels around the country to give presentations to analysts, fund managers and potential investors. The road show is intended to generate excitement and interest in the issue or IPO, and is often critical to the success of the offering.

Runner –  After a customer places an order to the broker’s order taker, the runner will pass the instructions to the pit trader and wait for confirmation. Once the trade is executed, the runner will return to the order taker, confirming the order has been filled. They are responsible for passing on the customer’s order to the broker in a timely fashion and thus keep the link between the customer and the floor trader.

Statistical Arbitrage (Stat Arb)  – Statistical arbitrage strategies are market neutral because they involve opening both a long position and short position simultaneously to take advantage of inefficient pricing in correlated securities. For example, if a fund manager believes Coca-Cola is overvalued and Pepsi is undervalued, he or she would open a long position in Coca-Cola, and at the same time, open and short position in Pepsi. Investors often refer to statistical arbitrage as “pairs trading.” (For more, see:Arbitrage and Pairs Trading.)

S&P 500 (SPX)Standard & Poor’s 500 is a basket of 500 stocks that are considered to be widely held. The S&P 500 index is weighted by market value, and its performance is thought to be representative of the stock market as a whole. This index provides a broad snapshot of the overall U.S. equity market; in fact, over 70% of all U.S. equity is tracked by the S&P 500. The index selects its companies based upon their market size, liquidity, and sector.

SEC (Securities and Exchange Commission) “The mission of the Securities and Exchange Commission (SEC) is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.  Unlike the banking world, where deposits are almost always guaranteed by the federal government, stocks, bonds and other securities can lose value. There are no guarantees. The laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. To achieve this, the SEC requires public companies to disclose meaningful financial and other information to the public. This provides a common pool of knowledge for all investors to use to judge for themselves whether to buy, sell, or hold a particular security. Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions.

The SEC oversees the key participants in this securities world, including securities exchanges, securities brokers and dealers, investment advisors, and mutual funds.  Here the SEC is concerned primarily with promoting the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud.”

The SEC also has authority to bring civil actions against individuals or companies alleged to have committed any violation of the securities law such as accounting fraud, provision of false information or insider trading. The SEC also works with criminal law enforcement agencies to prosecute individuals and companies alike for offenses that include a criminal violation.

Remember Ari Spyros from the SEC in the pilot episode. He is the one that brings Chuck’s office information about three firms linked to Bobby Axelrod being potentially involved in insider trading.

Sell-Side Analyst – The job of a sell-side research analyst is to follow a list of companies, all typically in the same industry, and provide regular research reports to the firm’s clients. As part of that process, the analyst will typically build models to project the firms’ financial results, as well as speak with customers, suppliers, competitors and other sources with knowledge of the industry.

Sharpe Ratio – is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Volatility is a measure of the price fluctuations of an asset or portfolio.  A high Sharpe ratio is good when compared to similar portfolios or funds with lower returns.

Short or ‘short position’ is where you expect the value of stock to fall. You borrow this stock rather than own it. You then sell it. However, you must later buy the stock back.

Short Squeeze – Suppose there is a certain stock thought not to be doing well. So, people choose to short it. A real-life example is GameStop a video game retailer whose plunge was a triumph for short sellers of its stocks. But sometimes the company may have some good news and the stock may rise in price which means the short sellers now have to cover at a higher price and lose money. Say you buy it at $10 and the price goes up to $100. You need to cover $90 per share and if you have a lot of shares, you are a little bit screwed. This is short squeeze. Bobby says in the pilot that, Steven Birch from Piedmont Capital squeezed him on the HMOs last year. You can read about Herbalife short squeeze aka “mother of all the short squeezes” here.

Small Cap -Small-cap is a term used to classify companies with relatively small market capitalization. A company’s market capitalization is the market value of its outstanding shares. The definition of small-cap can vary among brokerages, but it is generally a company with a market capitalization of between $300 million and $2 billion.

Socially Responsible Investing (SRI) – From Wiki: “Also  known as sustainable, socially conscious, “green” or ethical investing, it is any investment strategy which seeks to consider both financial return and social good. In general, socially responsible investors encourage corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. Some avoid businesses involved in alcohol, tobacco, fast food, gambling, pornography, weapons, contraception/abortifacients/abortion, fossil fuel production, and/or the military.

Sortino Ratio – The Sortino Ratio is a useful way for investors, analysts and portfolio managers to evaluate an investment’s return for a given level of bad risk. Since this ratio uses the downside deviation as its risk measure, it addresses the problem of using total risk, or standard deviation, as upside volatility is beneficial to investors.

Sovereign Wealth Fund (SWF) – A sovereign wealth fund is a state-owned investment fund that is used to benefit the country’s economy and citizens. Funding comes from central bank reserves, currency operations, privatizations, transfer payments, and revenue from exporting natural resources. Funds tend to prefer returns over liquidity and are therefore more risk tolerant than traditional foreign exchange reserves. Acceptable investments in each SWF vary from country to country.

Special (Windfall) Dividend – A special dividend is a non-recurring distribution of company assets, usually in the form of cash, to shareholders. A special dividend is usually larger compared to normal dividends paid out by the company and often tied to a specific event like an asset sale or other windfall event. Special dividends are also referred to as extra dividends.

Specialist – A specialist is a member of a stock exchange who acts as the market maker to facilitate the trading of a given stock.

Spread – In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.

Stock Jockey – A brokers who trades very actively; buys and sells securities for their clients on a nearly constant basis.  Stock jockeys who trade too frequently, however, may be accused of churning.

Stock Index – a measurement of the value of a section of the stock market. It is computed from the prices of selected stocks (typically a weighted average). Investors and financial managers use the stock index to describe the market and to compare the return on specific investments.

“Strong Buy” – When an analyst puts a “strong buy” or “outperform” “strong buy” on a stock, they believe the stock will outperform the market significantly. It means it’s one of their top recommendations. The price target indicates where the analyst thinks the stock will trade in the next 12-18 months. Any upgrade of a stock, that has a short position, even if not many people buy the analyst reason’s, would automatically get squeezed.

For example, when Chuck Sr and his friends block buy Cross Co shares in Episode 4 Short Squeeze, they also have an analyst upgrade the stock to a “strong buy” with a $90 price target.That alone would move a stock. And this was Chuck Sr’s “short squeeze” play against Axe.

Toxic Debt – Toxic debt refers to loans and other types of debt that have a low chance of being repaid with interest. Toxic debt is toxic to the person or institution that lent the money and should be receiving the payments with interest.

Trade by Appointment – there is not a lot of market volume on the stock.

Trader – carries out trades (buying or selling) as instructed by the Portfolio Manager.

Trading Halt – A trading halt is a temporary suspension in the trading of a particular security on one or more exchanges, usually in anticipation of a news announcement or to correct an order imbalance. A trading halt may also be imposed for purely regulatory reasons. During a trading halt, open orders may be canceled and options may be exercised.

Transaction Costs – In a financial sense, transaction costs include brokers’ commissions and spreads, which are the differences between the price the dealer paid for a security and the price the buyer pays.

Two and Twenty – A standard compensation structure that refers to how hedge fund managers charge their investors a flat 2% of total asset value as a management fee and an additional 20% of any profits earned. 2/20 is more of a standard in the industry. We have seen in Billions that Axe Capital is a Three and Thirty company and only companies that consistently give double-digit returns to their investors can charge these very high fees.

Under-valued Equities -Undervalued is a financial term referring to a security or other type of investment that is selling for a price presumed to be below the investment’s true intrinsic value. An undervalued stock can be evaluated by looking at the underlying company’s financial statements and analyzing its fundamentals, such as cash flow, return on assets, profit generation and capital management, to determine the stock’s intrinsic value. Buying stocks when they are undervalued is a key component of famed investor Warren Buffett’s investing strategy.

Unloading Position: This means getting out of your position — selling the stock if you have been longing and covering the stock if you have been shorting

Upgrading/downgrading of stock by Analyst –  An analyst on the Sell Side (they sell their reports on companies to Asset Managers and to Buy Siders, like I was) will change his/her rating on a stock when they think something fundamentally has changed in the stock. For example an analyst may have a Buy recommendation on stock X, but he/she thinks that people who are cord-cutting their cable will have a negative effect on stock Y (owned by Stock X) and the revenue they bring in. An analyst may put out a report downgrading the stock to Neutral (don’t buy, but don’t sell), or Sell or Underperform since the fundamental story on Stock X has changed, and the analyst believes growth will be harder for X.

Value Investing – Value investing is an investment tactic where stocks are selected which appear to trade for less than their intrinsic, or book, values. Value investors actively seek out the stocks they believe the market has undervalued. Investors who use this strategy think the market overreacts to good and bad news, resulting in stock price movements which do not correspond to a company’s long-term fundamentals. This overreaction gives the value investor an opportunity to profit buy stocks at a deflated price.

Venture Philanthropy – Venture philanthropy applies most of the same principles of venture capital funding to invest in start-up, growth or risk-taking social ventures. It is not explicitly interested in profit but rather in making investments which promote some sort of social good. Venture philanthropy ventures generally focuses on building capital and scale. It is an umbrella term that can be used to refer shorthand to many different kinds of philanthropic investing, but notably, it is distinct from impact investing, which places more emphasis on turning a profit while nevertheless investing in ventures that address social concerns.

VIX – CBOE Volatility Index – The Volatility Index, or VIX, is an index created by the Chicago Board Options Exchange (CBOE), which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options. This volatility is meant to be forward looking, is calculated from both calls and puts, and is a widely used measure of market risk. The VIX is often referred to as the “investor fear gauge.”Fear, volatility, and the index move up when stock prices are falling and investors are fearful. The index, volatility, and fear decline when stock prices are rising.

VIX Option – A type of non-equity option that uses the CBOE Volatility Index as the underlying asset. This is the first exchange-traded option that gives individual investors the ability to trade market volatility. Trading VIX options can be a useful tool for investors wanting to hedge their portfolios against sudden market declines, as well as to speculate on future moves in volatility.

Window Dressing – Window dressing is a strategy used by mutual fund and other portfolio managers near the year or quarter end to improve the appearance of a fund’s performance before presenting it to clients or shareholders. To window dress, the fund manager sells stocks with large losses and purchases high-flying stocks near the end of the quarter. These securities are then reported as part of the fund’s holdings.

War Chest – Reserves of cash set aside by a company to be used typically for acquisitions of other companies or businesses. But it can also be used as a buffer against adverse events during uncertain times. In Billions Episode 6 The Deal, Axe tells Wags to liquidate 2% of the fund to make their war chest.

XIV ETF – XIV is the Velocity Shares Daily Inverse VIX Short-Term ETN, which provides investors exposure to short VIX futures contracts. Put simply, investors who buy XIV are short S&P 500 volatility futures.

Zero Cost Collar –  Investors looking to secure a return will sell a cap and buy a floor, whereas borrowers will sell a floor and buy a cap. For investors, the cost of the cap is offset by the income received from the floor.

An example of a zero cost option collar is the purchase of a put option (defined above in option) and the sale of a call option (defined above in option)  with a lower strike price (defined above in option). The sale of the call will cap the return if the underlying falls in price, but it will also offset the purchase of the put. Obviously, upside risk is still unlimited.

Taylor helps Mafee to save $10 million for Axe Capital using zero cost collar in Season 2 Episode 1: Risk Management. If you want to understand what happens in that scene in further detail please see Lady Trader’s financial recap of the episode here.