Price to earnings (P/E)
Share price divided by earnings per share. What you pay for a dollar of profit.
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Words beside it
- Consumer Price Index
A number the government publishes that tracks how much everyday things like food and gas cost over time. When that number goes up it means your money buys a little less than it used to.
- Earnings per share (EPS)
Profit divided by shares. Watch the share count, not just the profit.
- seesaw analogy for rates and prices
When interest rates go up, the price of a bond goes down, and when rates go down, the price goes up, kind of like opposite ends of a seesaw. This happens because older bonds paying lower interest become less attractive when newer ones pay more.
- Strike price
The price an option lets you buy or sell at.
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