Trading Basics
Basis point
A basis point is 0.01% and is typically used when quoting interest rate changes.
A move of 0.25% is described as 25 basis points.
Other Trading Basics
Backwardation
Backwardation occurs when a bid price exceeds the ask price.
This usually occurs when stock is suspended or under a share repurchase scheme.
It can also mean that a futures contract will trade at a higher price when it is coming close to expiring.
The opposite of backwardation is known as contango.
Averaging Down
Once an initial long trade is place this is the practice of opening additional positions at a lower price with the view of bringing the average opening price of the position down.
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