A:

For stocks, one point equals one dollar. So when you hear that a stock has lost or gained X number of "points," this is the same as saying that the stock has lost or gained X number of dollars.

Although one point always equals one dollar, the percentage value of one point movement can be different for two companies. Let's consider a simple example: if the fictional company TSJ Sports Conglomerate loses four points, dropping from \$12 to \$8, it would be experiencing a 33% drop in share price. Yikes! This is dramatically different from a four-point drop experienced by a company like Cory's Tequila Co., which is trading at \$104. If CTC goes down to \$100, this only represents a 3.8% decline.

Do not confuse points with percentages. When you hear someone say the stock dropped 10 points, the significance of that drop depends on how high the share price is.

It is important to note here that we are referring strictly to stocks, nothing else. People often refer to indexes, bond prices or currencies being up or down X number of basis points, and basis points are different. One basis point is equal to 1/100th of a percent, so if someone says the dollar is up 50 basis points, this is like saying it is up 0.5%.

The chart above illustrates the daily percentage changes of the major U.S. indexes.

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