Stock Market Glossary
Certificate
Bearer bond whose value depends on an underlying asset.
In brief: Bearer bond whose value depends on an underlying asset.
Meaning in practice
Certificates are available as discount, bonus, index, knock-out or express versions. They are not special assets – in the event of the issuer’s insolvency there is a risk of total loss. Lehman 2008 is the reminder that no investor should forget.
Context for investors and traders
For traders, this term is most useful when preparing and executing an order. Its meaning depends on the venue, liquidity, time frame and order type. A single reading is not a reliable buy or sell decision.
How to use this in practice
In practice, the term should be linked to a specific trading plan: entry, exit, position size and costs belong together. In short time frames, spread, slippage and delayed execution can quickly outweigh the theoretical benefit of an observation.
What to keep in mind
Write down which observation confirms or invalidates your assumption before trading. This keeps the term a decision-making tool rather than a retrospective justification for risk already taken.
