Basic Formulas - Day Trading

`Dividend Yield = Annual Dividends Paid Per Share / Price Per Share`

For example, if a company paid out $5 in dividends per share and its shares currently cost $150, its dividend yield would be 3.33%.

Here are 20 essential metrics commonly used in trading and investing, along with their formulas and examples. Note that there are many more metrics and variations, so this list is not exhaustive.

Stock Metrics:

1. Price-to-Earnings (P/E) Ratio:

   • Formula: P/E Ratio = Stock Price / Earnings Per Share (EPS)
   • Example: If a stock is trading at $50 per share, and the EPS is$5, the P/E ratio is 10.

2. Price-to-Sales (P/S) Ratio:

   • Formula: P/S Ratio = Stock Price / Sales Per Share
   • Example: If a stock is trading at $60 per share, and the Sales Per Share is$12, the P/S ratio is 5.

3. Dividend Yield:

   • Formula: Dividend Yield = (Annual Dividend / Stock Price) x 100
   • Example: If a stock pays an annual dividend of $2 and is trading at$40, the dividend yield is 5%.

4. Earnings Per Share (EPS):

   • Formula: EPS = (Net Income - Dividends on Preferred Stock) / Average Outstanding Shares
   • Example: If a company earned $10 million, paid$1 million in dividends on preferred stock, and has 2 million shares outstanding, the EPS is $4.50.

5. Return on Equity (ROE):

   • Formula: ROE = (Net Income / Shareholders' Equity) x 100
   • Example: If a company has a net income of $15 million and shareholders' equity of$100 million, the ROE is 15%.

6. Beta:

   • Formula: Measures the stock's volatility compared to the market.
   • Example: A beta of 1.2 means the stock is expected to be 20% more volatile than the market.

7. Market Capitalization:

   • Formula: Market Cap = Stock Price x Total Outstanding Shares
   • Example: If a stock is trading at $50 and has 1 million shares outstanding, the market cap is$50 million.

8. Price-to-Book (P/B) Ratio:

   • Description: Compares a stock's market value to its book value.
   • Formula: P/B Ratio = Stock Price / Book Value per Share

9. Price-to-Cash Flow (P/CF) Ratio:

   • Description: Compares a stock's price to its operating cash flow.
   • Formula: P/CF Ratio = Stock Price / Cash Flow per Share

10. Dividend Payout Ratio:

    • Description: The proportion of earnings paid out as dividends.
    • Formula: Dividend Payout Ratio = Dividends / Earnings

11. Price/Earnings-to-Growth (PEG) Ratio:

    • Description: Evaluates a stock's valuation relative to its growth rate.
    • Formula: PEG Ratio = P/E Ratio / Annual Earnings Growth Rate

12. Debt-to-Equity Ratio:

    • Description: Measures a company's leverage and financial risk.
    • Formula: Debt-to-Equity Ratio = Total Debt / Shareholders' Equity

13. Free Cash Flow (FCF):

    • Description: The cash generated by a company's operations after capital expenditures.
    • Formula: FCF = Operating Cash Flow - Capital Expenditures

Options Metrics:

8. Option Premium:

   • Formula: The price of the option.
   • Example: An option premium of $4 means you need to pay$400 for one option contract (since one contract represents 100 shares).

9. Intrinsic Value of an Option:

   • Formula: Intrinsic Value = Max(0, Stock Price - Strike Price) for Call Options; Max(0, Strike Price - Stock Price) for Put Options
   • Example: For a call option with a strike price of $50 and a stock price of$55, the intrinsic value is $5.

10. Time Value of an Option:

    • Formula: Time Value = Option Premium - Intrinsic Value
    • Example: If the option premium is $4, and the intrinsic value is$2, the time value is $2.

11. Implied Volatility (IV):

    • Formula: Estimated volatility derived from option prices.
    • Example: An IV of 30% suggests that the market expects the stock's annualized volatility to be 30%.

12. Delta (for Call Options):

    • Formula: Delta = Change in Option Price / Change in Stock Price
    • Example: If the delta of a call option is 0.6, the option's price will change by $0.60 for every$1 change in the stock price.

13. Theta (Time Decay):

    • Description: Measures the rate of time decay in the option's premium.
    • Formula: Theta = Change in Option Price / Change in Time

14. Gamma:

    • Description: Measures the change in an option's delta in response to a $1 change in the underlying stock.
    • Formula: Gamma = Change in Delta / Change in Stock Price

15. Vega (Volatility Sensitivity):

    • Description: Measures the sensitivity of an option's price to changes in implied volatility.
    • Formula: Vega = Change in Option Price / Change in Implied Volatility

16. Rho:

    • Description: Measures the sensitivity of an option's price to changes in interest rates.
    • Formula: Rho = Change in Option Price / Change in Interest Rates

17. Option Open Interest:

    • Description: The total number of open or outstanding options contracts for a particular strike price and expiration date.

18. Option Volume:

    • Description: The number of options contracts traded during a given time period.

ETF Metrics:

13. Net Asset Value (NAV):

    • Formula: NAV = (Total Assets - Total Liabilities) / Total Outstanding Shares
    • Example: An ETF with $100 million in assets,$10 million in liabilities, and 2 million outstanding shares has an NAV of $45.

14. Expense Ratio:

    • Formula: Expense Ratio = (Total Expenses / Total Assets) x 100
    • Example: If an ETF has $1 million in expenses and$100 million in assets, the expense ratio is 1%.

15. Tracking Error:

    • Formula: Measures how closely an ETF follows its benchmark index.
    • Example: A tracking error of 1% means the ETF's returns differ from the benchmark by 1%.

16. Bid-Ask Spread:

    • Formula: The difference between the highest bid (buying) and lowest ask (selling) prices.
    • Example: If an ETF's bid price is $49.90, and the ask price is$50.10, the spread is $0.20.

17. Liquidity:

    • Formula: A measure of how easily an ETF can be bought or sold in the market.
    • Example: An ETF with high trading volume is considered more liquid.

18. Average Daily Trading Volume:

    • Description: Measures the average number of shares traded daily over a specified time frame.

19. Yield to Maturity (YTM):

    • Description: The total return anticipated on a bond or fixed-income ETF if held until maturity.

20. Turnover Ratio:

    • Description: Measures how often the ETF buys and sells assets within its portfolio.
    • Formula: Turnover Ratio = Total Portfolio Purchases / Average Assets

21. Distribution Yield:

    • Description: The income generated by an income-oriented ETF, often through dividends and interest.

22. Economic Exposure:

    • Description: Reflects the ETF's exposure to the underlying economic sectors or themes.

23. Portfolio Beta:

    • Description: Measures an ETF's sensitivity to market movements relative to a benchmark index.
    • Formula: Portfolio Beta = Covariance between ETF Returns and Benchmark Returns / Variance of Benchmark Returns