Junk

"Junk" is an informal label traders put on a security, usually a stock or bond, that they consider low quality or unreliable to hold or trade. It is not a precise technical term with one fixed meaning — it is more of a warning label people attach to something for a mix of reasons.

Those reasons vary. A stock might get called junk because the company behind it has weak or deteriorating finances, a history of diluting shareholders (issuing lots of new stock, which shrinks the value of existing shares), erratic price swings with no clear cause, a bankruptcy in its past, or management that the market simply doesn't trust. A bond might be called junk in a more formal sense: credit rating agencies grade bonds by how likely the issuer is to pay back what it owes, and bonds rated below a certain grade are officially classified as "speculative grade" or "high yield," which traders shorthand as junk bonds. That bond usage is the one place "junk" has an actual industry meaning tied to a rating scale, rather than just being slang.

The nuance that trips people up is mixing these two uses. Calling a stock "junk" is usually just someone's opinion — colored by past price action, chatroom reputation, or a company's history — and it says nothing formal about credit quality. Calling a bond "junk" refers to an actual rating tier assigned by an agency, which then affects who is even allowed to buy it, since some funds are restricted to only holding higher-rated debt.

Because the stock version of "junk" is subjective, two traders can disagree sharply about whether the same ticker deserves the label. One trader's junk is another's speculative opportunity — the term describes sentiment and reputation as much as any measurable fact.