

Want to sound like a Wall Street hotshot? Learn these 16 words

Crack spread, straddle/strangle, Alpha — what do these words mean? This Wall Street big shot probably knows.

The financial markets are much more complicated than just stock market price-earnings ratios and bond market interest rates.

Thanks to complex statistics-based theories and the explosion of derivatives, reports analyzing the financial markets are now riddled with incredibly intimidating jargon.

We selected some of the key terms that are both advanced and also used pretty frequently by Wall Streeters to describe what’s going on in the markets. Learning to use them will make you sound like a real hotshot:

  1. Crack spread: The “crack spread” is the difference between cost of crude oil and price of a refined petroleum product, usually using gasoline and distillate fuel.
  2. 2s10s: This term refers to the difference in yield between a sovereign debt issuer’s 2 year bond (2s) and its 10 year bond (10s).
  3. Alpha: Alpha is a measurement of a portfolio’s risk adjusted return.  
  4. Straddle/strangle: A long straddle involves purchasing a put and call for a security at the same strike price and expiration. A long strangle is similar, except that the options have different strike prices.
  5. Reinvestment risk: Reinvestment risk stems from the possibility that payments from an investment, usually a bond, occur when market rates are low.

Click here to see the full list of words >

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