|
Glossary
A B C
D E F G H
I J K L M N
O P Q R S
T U V W X Y Z
Arbitrage
The simultaneous purchase and sale of identical or equivalent financial
instruments or commodity futures in order to benefit from a discrepancy
in their price relationship.
Ask
Also called "offer". Indicates a willingness to sell a futures
contract at a given price.
Back Months
The futures or options on futures months being traded that are furthest
from expiration. (back to top)
Bear
One who believes prices will decrease.
Bear Market
A market in which prices are declining.
Bid
The price that the market participants are willing to pay.
Bull
One who expects prices to rise.
Bull Market
A market in which prices are rising.
Buy On Close
To buy at the end of a trading session at a price within the closing range.
Buy On Opening
To buy at the beginning of a trading session at a price within the opening
range.
Cabinet Trade or cab
A trade that allows options traders to liquidate deep out-of-the-money
options by trading the option at a price equal to one-half tick. (back
to top)
Call
An option to buy a commodity, security or futures contract at a specified
price any time between now and the expiration date of the option contract.
Cash Commodity
The actual physical commodity as distinguished from a futures commodity.
Close, The
The period at the end of the trading session.
Closing Range (or Range)
The high and low prices, or bids and offers, recorded during the period
designated as the official close.
Commission (or Round Turn)
The one-time fee charged by a broker to a customer when a futures or options
on futures position is liquidated either by offset or delivery.
CFTC
CFTC - The Commodity Futures Trading Commission as created by the Commodity
Futures Trading Commission Act of 1974. This government agency currently
regulates the US commodity futures industry.
Contract
Unit of trading for a financial or commodity future. Also, actual bilateral
agreement between the parties (buyer and seller) of a futures or options
on futures transaction as defined by an exchange.
Contract Month
The month in which futures contracts may be satisfied by making or accepting
delivery. (See delivery month.)
Day Order
An order that is placed for execution during only one trading session.
If the order cannot be executed that day, it is automatically cancelled.
(back to top)
Day Trading
Refers to establishing and liquidating the same position or positions
within one day's trading, thus ending the day with open position in the
market.
Deferred
Another term for "back months."
Delivery
The tender and receipt of an actual commodity or financial instrument,
or cash in settlement of a futures contract.
Exercise Or Strike Price
The price at which the holder (buyer) may purchase or sell the underlying
futures contract upon the exercise of an option. (back
to top)
Expiration Date
The last day that an option may be exercised into the underlying futures
contract. Also, the last day of trading for a futures contract.
Floor Broker
An exchange member who is paid a fee for executing orders for Clearing
Members or their customers. A Floor Broker executing orders must be licensed
by the CFTC. (back to top)
Floor Trader
An exchange member who generally trades only for his/her own account or
for an account controlled by him/her. Also referred to as a "local."
Futures
A Futures Contract is an agreement between a buyer and a seller to receive
and deliver on a future date a specified amount of a product at an agreed
price.
Futures Commission Merchant
A firm or person engaged in soliciting or accepting and handling orders
for the purchase or sale of futures contracts, subject to the rules of
a futures exchange and, who, in connection with solicitation or acceptance
of orders, accepts any money or securities to margin any resulting trades
or contracts. The FCM must be licensed by the CFTC.
Hedge
Hedgers are individuals and firms that make purchases and sales in the
futures market solely for the purpose of establishing a known price level--weeks
or months in advance--for something they later intend to buy or sell in
the cash market. (back to top)
Holder
One who purchases an option.
Initial Margin (Also referred to as Initial Performance
Bond)
The funds required when a futures position (or a short options on futures
position) is opened.
Limit Order
An order given to a broker by a customer that specifies a price; the order
can be executed only if the market reaches or betters that price. (back
to top)
Limit Price
The maximum amount the contract price can change, up or down, during one
trading session, as stipulated by Exchange rules.
Limit Down: Maximum price drop allowed on a futures contract in a single trading day.
Limit Up: Maximum price increase allowed on a futures contract in a single trading day.
Liquidation
Any transaction that offsets or closes out a long or short futures position.
Long
One who has bought a futures or options on futures contract to establish
a market position through an offsetting sale; the opposite of Short.
Long Hedge
The purchase of a futures contract in anticipation of an actual purchase
in the cash market. Used by processors or exporters as protection against
and advance in the cash price.
Maintenance Margin (also known as a Maintenance Performance
Bond)
A sum, usually smaller than--but part of--the initial margin, which must
be maintained on deposit in the customer's account at all times. If a
customer's equity in any futures position drops to, or under, the maintenance
margin level, a "margin call" is issued for the amount of money
required to restore the customer's equity in the account to the initial
margin level. (back to top)
Margin (also known as Performance Bond)
Funds that must be deposited as a margin by a customer with his or her
broker, by a broker with a clearing member, or by a clearing member, with
the Clearing House. The margin helps to ensure the financial integrity
of brokers, clearing members and the Exchange as a whole.
Margin Call (also known as Performance Bond Call)
A demand for additional funds because of adverse price movement.
Mark-To-Market
The daily adjustment of margin accounts to reflect profits and losses.
Market Order
An order for immediate execution given to a broker to buy or sell at the
best obtainable price.
Minimum Price Fluctuation
Smallest increment of price movement possible in trading a given contract,
often referred to as a tick.
M.I.T.
Market-If-Touched. A price order that automatically becomes a market order
if the price is reached.
Nearby
The nearest active trading month of a futures or options on futures contract.
Also referred to as "lead month."
Offer
Also called "ask". Indicates a willingness to sell a futures
contract at a given price. (back to top)
Offset
Selling if one has bought, or buying if one has sold, a futures or options
on futures contract.
Open Interest
Total number of futures or options on futures contracts that have not
yet been offset or fulfilled by delivery. An indicator of the depth or
liquidity of a market (the ability to buy or sell at or near a given price)
and of the use of a market for risk- and/or asset-management.
Open Order
An order to a broker that is good until it is canceled or executed.
Opening, The
The period at the beginning of the trading session during which all transactions
are considered made or first transactions were completed.
Opening Price (Or Range)
The range of prices at which the first bids and offers were made or first
transactions were completed.
Option
A contract giving the holder the right, but not the obligation, hence,
"option," to buy or sell a futures contract in a given commodity
at a specified price at any time between now and the expiration of the
option contract.
Out-Trades
A situation that results when there is some confusion or error on a trade.
A difference in pricing, with both traders thinking they were buying,
for example, is a reason why an out-trade may occur.
Position
An interest in the market, either long or short, in the form of open contracts.
(back to top)
Premium
1.) The excess of one futures contract price over that of another, or
over the cash market price.
2.) The amount agreed upon between the purchaser and seller for the purchase
or sale of a futures option --purchasers pay the premium and sellers (writers)
receive the premium.
Put
An option to sell a commodity, security, or futures contract at a specified
price at any time between now and the expiration of the option contract.
Rally
An upward movement of prices following a decline; the opposite of a reaction.
(back to top)
Range
The high and low prices or high and low bids and offers, recorded during
a specified time.
Reaction
A decline in prices following an advance. The opposite of rally.
Registered Representative
A person employed by, and soliciting business for, a commission house
or a Futures Commission Merchant.
Round-Turn
Procedure by which a long or short position is offset by an opposite transaction
or by accepting or making delivery of the actual financial instrument
or physical commodity.
Scalp
To trade for small gains. Scalping normally involves establishing and
liquidating a position quickly, usually within the same day, hour or even
just a few minutes. (back to top)
Settlement Price
A figure determined by the closing range that is used to calculate gains
and losses in futures market accounts. Settlement prices are used to determine
gains, losses, margin calls, and invoice prices for deliveries.
Short
One who has sold a futures contract to establish a market position and
who has not yet closed out this position through an offsetting purchase;
the opposite of long.
Short Hedge
The sale of a futures contract in anticipation of a later cash market
sale. Used to eliminate or lessen the possible decline in value of ownership
of an approximately equal amount of the cash financial instrument or physical
commodity.
Speculator
One who attempts to anticipate price changes and, through buying and selling
futures contracts, aims to make profits; does not use the futures market
in connection with the production, processing, marketing or handling of
a product. The speculator has no interest in making or taking delivery.
Spread
The simultaneous purchase and sale of futures contracts for the same commodity
or instrument for delivery in different months, or in different but related
markets. A spreader is not concerned with the direction in which the market
moves, but only with the difference between the prices of each contract.
Stop Order (Or Stop)
An order to buy or sell at the market when and if a specified price is
reached.
Tick
Refers to a change in price, either up or down. (back to
top)
Trend
The general direction of the market.
Volume
The number of transactions in a futures or options on futures contract
made during a specified period of time.
Writer
An individual who sells an option. (back to top)
|
