Value Investing Blog

Investopedia

Search for glossary terms (regular expression allowed)
Begin with Contains Exact termSounds like

Glossaries

  • investopedia
TermDefinition
P/E

The price-earnings ratio (P/E ratio) is a valuation metric of the company's earnings relative to its share price. A high P/E ratio means that investors are willing to pay more money per dollar of earnings. However, keep in mind that P/E ratio's differ greatly from industry to industry.

P/E ratio = Share price / Earnings per share

probability of profit

Based on a statistical normal distribution, we can say that if you sell an option 1 standard deviation out of the money, there is an 84% probability that the option will expire worthless, in which case you profit since you get to keep the premium.

put option

A contract which gives the holder the right (but not the obligation) to sell a stock at a specified price (strike price) within a specified time period (before exercise date). A put option increases in value if the underlying stock decreases in value.