Click on the first letter of the term you
wish to lookup:
A
to M | N | O
| P | Q | R
| S | T | U
| V | W | X
| Y | Z
N
Nasdaq-100®: An index
comprised of 100 of the largest domestic, non-financial
common stocks listed on the Nasdaq Stock Market. The Nasdaq-100
index is rebalanced quarterly and has a modified capitalization
weighting to ensure a more diversified index.
National Futures Association (NFA):
An industrywide, industry-supported, self-regulatory organization
for futures and options markets. The primary responsibilities
of the NFA are to enforce ethical standards and customer
protection riles, screen futures professional for membership,
audit and monitor professionals for financial and general
compliance rules and provide for arbitration of futures-related
disputes.
Nearby (Delivery) Month: The futures contract month closest to expiration. Also
referred to as spot month.
Negative Yield Curve: A chart in which the yield level is plot on the vertical axis and the
term to maturity of debt instruments of similar creditworthiness
is plotted n the horizontal axis. The yield curve is positive
when long-term rates are higher than short-term rates However,
yield curve is negative or inverted.
Notice Day:
According to Chicago Board of Trade rules, the second day
of the three-day delivery process when the clearing corporation
matches the buyer with the oldest reported long position
to the delivering seller and notifies both parties. See
First Notice Day.
Return To Top
O
OPEC: Organization
of Petroleum Exporting Countries, emerged as the major petroleum
pricing power in 1973, when the ownership of oil production
in the Middle East transferred from the operating companies
to the governments of the producing countries or to their
national oil companies. Members are: Algeria, Ecuador, Gabon,
Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi
Arabia, the United Arab Emirates, and Venezuela.
Offer: An expression
indicating one's desire to sell a commodity at a given price;
opposite of bid.
Offset: Taking
a second futures or options position opposite to the initial
or opening position. Selling (or purchasing) futures contracts
of the same delivery month purchased (or sold) during an
earlier transaction or making (or taking) delivery of the
cash commodity represented by the futures contract.
Open Interest:
The total number of futures or options contracts of a given
commodity that have not yet been offset by an opposite futures
or option transaction nor fulfilled by delivery of the commodity
or option exercise. Each open transaction has a buyer and
a seller, but for calculation of open interest, only one
side of the contract is counted.
Open Market Operation: The buying and selling of government securitiesÐTreasury
bills, notes, and bondsÑby the Federal Reserve.
Open Outcry:
Method of public auction for making verbal bids and offers
in the trading pits or rings of futures exchanges.
Opening Range:
A range of prices at which buy an sell transactions took
place during the opening of the market.
Option Buyer:
The purchaser of either a call or put option. Option buyers
receive the right, but not the obligation, to assume a futures
position. Also referred to as the holder.
Option Premium:
The price of an optionÐthe sum of money that the option
buyer pays and the option seller receives for the rights
granted by the option.
Option Seller:
The person who sells an option in return for a premium and
is obligated to perform when the holder exercises his right
under the option contract. Also referred to as the writer.
Option Spread:
The simultaneous purchase and sale of one or more options
contracts, futures, and/or cash positions.
Option Writer:
The person who sells an option in return for a premium and
is obligated to perform when the holder exercises his right
under the option contract.Also referred to as the Option
Seller.
Option: A contract
that conveys the right, but not the obligation, to buy or
sell a particular item at a certain price for a limited
time. Only the seller of the option is obligated to perform.
Original Margin:
The amount a futures market participant must deposit into
his margin account at the time he places an order to buy
or sell a futures contract. Also referred to as initial
margin.
Out-of-the-Money Option: An option with no intrinsic value, i.e., a call whose
strike price is above the current futures price or a put
whose strike price is below the current futures price.
Over-the-Counter Market: A market where products such as stocks, foreign currencies,
and other cash items are bought and sold by telephone and
other means of communications.
Return To Top
P
Par: The face
value of a security. For example, a bond selling at par
is worth the same dollar amount it was issued for or at
which it will be redeemed at maturity.
Payment-In-Kind Program: A government program in which farmers who comply with
a voluntary acreage-control program and set aside an additional
percentage of acreage specified by the government receive
certificates that can be redeemed for government-owned stocks
of grain.
Performance Bond Margin: The amount of money deposited by both buyer and seller
of a futures contract or an options seller to ensure performance
of the term of the contract. Margin in commodities is not
a payment of equity or down payment on the commodity itself,
but rather it is a security deposit. Within the futures
industry, financial guarantees required of both buyers and
sellers of futures contracts and sellers of options contracts
to ensure fulfilling of contract obligations. FCMs are responsible
for overseeing customer margin accounts. Margins are determined
on the basis of market risk and contract value. Financial
safeguards to ensure that clearing members (usually companies
or corporations) perform on their customers' open futures
and options contracts. Clearing margins are distinct from
customer margins that individual buyers and sellers of futures
and options contracts are required to deposit with brokers.
Pit: The area
on the trading floor where futures and options on futures
contracts are bought and sold. Pits are usually raised octagonal
platforms with steps descending on the inside that permit
buyers and sellers of contracts to see each other.
Point-and-Figure Charts: Charts that show price changes of a minimum amount
regardless of the time period involved.
Position Day:
According to the Chicago Board of Trade rules, the first
day in the process of making or taking delivery of the actual
commodity on a futures contract. The clearing firm representing
the seller notifies the Board of Trade Clearing Corporation
that its short customers want to deliver on a futures contract.
Position Limit:
The maximum number of speculative futures contracts one
can hold as determined by the Commodity Futures Trading
Commission and/or the exchange upon which the contract is
traded. Also referred to as trading limit.
Position Trader:
An approach to trading in which the trader either buys or
sells contracts and holds them for an extended period of
time.
Position: A
market commitment. A buyer of a futures contract is said
to have a long position and, conversely, a seller of futures
contracts is said to have a short position.
Premium: (1)
The additional payment allowed by exchange regulation for
delivery of higher-than-required standards or grades of
a commodity against a futures contract. (2) In speaking
of price relationships between different delivery months
of a given commodity, one is said to be "trading at
a premium" over another when its price is greater than
that of the other. (3) In financial instruments, the dollar
amount by which a security trades above its principal value.
The price of an optionÐthe sum of money that the option
buyer pays and the option seller receives for the rights
granted by the option.
Price Discovery:
The generation of information about "future" cash
market prices through the futures markets.
Price Limit Order: A customer order that specifies the price at which a trade can be executed.
Price Limit:
The maximum advance or declineÐfrom the previous day's settlementÐpermitted
for a contract in one trading session by the rules of the
exchange. According to the Chicago Board of Trade rules,
an expanded allowable price range set during volatile markets.
Primary Dealer:
A designation given by the Federal Reserve System to commercial
banks or broker/dealers who meet specific criteria. Among
the criteria are capital requirements and meaningful participation
in the Treasury auctions.
Primary Market:
Market of new issues of securities.
Prime Rate:
Interest rate charged by major banks to their most creditworthy
customers.
Producer Price Index (PPI): An index that shows the cost of resources needed to
produce manufactured goods during the previous month.
Pulpit: A raised
structure adjacent to, or in the center of, the pit or ring
at a futures exchange where market reporters, employed by
the exchange, record price changes as they occur in the
trading pit.
Purchase and Sell Statement: A Statement sent by a commission house to a customer
when his futures or options on futures position ha changed,
showing the number of contracts bought or sold, the prices
at which the contracts were bought or sold, the gross profit
or loss, the commission charges, and the net profit or loss
on the transaction.
Purchasing Hedge or Long Hedge: Buyer futures contracts to protect against a possible
price increase of cash commodities that will e purchased
in the future. At the time the cash commodities are bought,
the open futures position is closed by selling an equal
number and type of futures contracts as those that were
initially purchased. Also referred to as a buying hedge.
The practice of offsetting the price risk inherent in any
cash market position by taking an equal but opposite position
in the futures market. Hedgers use the futures markets to
protect their business from adverse price changes.
Put Option:
An option that gives the option buyer the right but not
the obligation to sell (go "short") the underlying
futures contract at the strike price on or before the expiration
date.
Return To Top
Q
Return To Top
R
Range (Price):
The price span during a given trading session, week, month,
year, etc.
Reciprocal of European Terms: One method of quoting exchange rates, which measured
the U.S. dollar value of one foreign currency unit, i.e.,
U.S. dollars per foreign units. See European Terms. See
European Terms.
Repurchase Agreements or (Repo): An agreement between a seller and a buyer, usually
in U.S. government securities, in which the seller agrees
to buy back the security at a later date.
Reserve Requirements: The minimum amount of cash and liquid assets as a percentage of demand
deposits and time deposits that member banks of the Federal
Reserve are required to maintain.
Resistance:
A level above which prices have had difficulty penetrating.
Resumption:
The reopening the following day of specific futures and
options markets that also trade during the evening session
at the Chicago Board of Trade.
Reverse Crush Spread: The sale of soybean futures and the simultaneous purchase of soybean
oil and meal futures. The purchase of soybean futures and
the simultaneous sale of soybean oil and meal futures.
Runners: Messengers who rush orders
received by phone clerks to brokers for execution in the
pit.
Russell 2000®: An index
based on 2000 stocks that is the most widely recognized
small-capitalization U.S. benchmark. The Russell 2000 is
a capitalization-weighted index and is re-balanced by the
Frank Russell Company every June 30 to reflect changes in
the marketplace.
Return To Top
S
S&P 500®: An index
based on the stock prices of 500 large-capitalization companies.
The S&P 500 is capitalization-weighted, representing
the market value of all outstanding common shares of the
firms listed (share price x shares outstanding)
S&P MidCap 400®:
An index that represents the "middle" of the market.
The S&P MidCap 400 is capitalization-weighted, but tracks
the market performance of medium-capitalization stocks instead
of large-cap firms.
Scalper: A
trader who trades for small, short-term profits during the
course of a trading session, rarely carrying a position
overnight.
Secondary Market: Market where previously issued securities are bought and sold.
Security: Common
or preferred stock; a bond of a corporation, government,
or quasi- government body.
Selling Hedge or Short Hedge: Selling futures contracts to protect against possible
declining prices of commodities that will be sold in the
future. At the time the cash commodities are sold, the open
futures position is closed by purchasing an equal number
and type of futures contracts as those that were initially
sold. The practice of offsetting the price risk inherent
in any cash market position by taking an equal but opposite
position in the futures market. Hedgers use the futures
markets to protect their business from adverse price changes.
Settle: The
last price paid for a commodity on any trading day. The
exchange clearinghouse determines a firm's net gains or
losses, margin requirements, and the next day's price limits,
based on each futures and options contract settlement price.
If there is a closing range of prices, the settlement price
is determined by averaging those prices. Also referred to
as settlemeny price or closing price.
Settlement Price: The last price paid for a commodity on any trading day. The exchange
clearinghouse determines a firm's net gains or losses, margin
requirements, and the next day's price limits, based on
each futures and options contract settlement price. If there
is a closing range of prices, the settlement price is determined
by averaging those prices. Also referred to as settle or
closing price.
Short (noun):
One who has sold futures contracts or plans to purchase
a cash commodity. (verb) Selling futures contracts or initiating
a cash forward contract sale without offsetting a particular
market position.
Short Hedge:
Selling futures contracts to protect against possible declining
prices of commodities that will be sold in the future. At
the time the cash commodities are sold, the open futures
position is closed by purchasing an equal number and type
of futures contracts as those that were initially sold.
Speculator:
A market participant who tries to profit from buying and
selling futures and options contracts by anticipating future
price movements. Speculators assume market price risk and
add liquidity and capital to the futures markets.
Spot Month:
The futures contract month closest to expiration. Also referred
to as nearby delivery month.
Spot: Usually
refers to a cash market price for a physical commodity that
is available for immediate delivery.
Spread: The
price difference between two related markets or commodities.
Spreading:
The simultaneous buying and selling of two related markets
in the expectation that a profit will be made when the position
is offset. Examples include: buying one futures contract
and selling another futures contract of the same commodity
but different delivery month; buying and selling the same
delivery month of the same commodity on different futures
exchanges; buying a given delivery month of one futures
market and selling the same delivery month of a different,
but related, futures market.
Steer/Corn Ratio: The relationship of cattle prices to feeding costs. It is measured by
dividing the price of cattle ($/hundredweight) by the price
of corn ($/bushel). When corn prices are high relative to
cattle prices, fewer units of corn equal the dollar value
of 100 pounds of cattle. Conversely, when corn prices are
low in relation to cattle prices, more units of corn are
required to equal the value of 100 pounds of beef. A ratio
used to express the relationship of feeding costs to the
dollar value of livestock.
Stock Index:
An indicator used to measure and report value changes in
a selected group of stocks. How a particular stock index
tracks the market depends on its compositionÐthe sampling
of stocks, the weighing of individual stocks, and the method
of averaging used to establish an index.
Stock Market:
A market in which shares of stock are bought and sold.
Stop Order:
An order to buy or sell when the market reaches a specified
point. A stop order to buy becomes a market order when the
futures contract trades (or is bid) at or above the stop
price. A stop order to sell becomes a market order when
the futures contract trades (or is offered) at or below
the stop price.
Stop-Limit Order: A variation of a stop order in which a trade must be executed at the
exact price or better. If the order cannot be executed,
it is held until the stated price or better is reached again.
Strike Price:
The price at which the futures contract underlying a call
or put option can be purchased (if a call) or sold (if a
put). Also referred to as exercise price.
Supply, Law of:
The relationship between product supply and its price.
Support: The
place on a chart where the buying of futures contracts is
sufficient to halt a price decline.
Return To Top
T
Technical Analysis: Anticipating future price movement using historical prices, trading
volume, open interest and other trading data to study price
patterns.
Tick: The smallest
allowable increment of price movement for a contract.
Time Limit Order: A customer order that designates the time during which it can be executed.
Time Value:
The amount of money option buyer are willing to pay for
an option in the anticipation that, over time, a change
in the underlying futures price will cause the option to
increase in value. In general, an option premium is the
sum of time value and intrinsic value. Any amount by which
an option premium exceeds the option's intrinsic value can
be considered time value. Also referred to as extrinsic
value.
Time-Stamped:
Part of the order-routing process in which the time of day
is stamped on an order. An order is time-stamped when it
is (1) received on the trading floor, and (2) completed.
Trade Balance:
The difference between a nation's imports and exports of
merchandise.
Trading Limit:
The maximum number of speculative futures contracts one
can hold as determined by the Commodity Futures Trading
Commission and/or the exchange upon which the contract is
traded.Also referred to as position limit.
Treasury Bill:
A Treasury bill is a short-term U.S. government obligation
with an original maturity of one year or less. Unlike a
bond or note, a bill does not pay a semi-annual, fixed rate
coupon. A bill is typically issued at a price below its
par value and is therefore a discounted instrument. The
level of the discount depends on the level of prevailing
interest rates. In general, the higher short-term interest
rates are, the greater the discount. The return to an investor
in bills is simply the difference between the issue price
and par value.
Treasury Bond:
Government-debt security with a coupon and original maturity
of more than 10 years. Interest is paid semiannually.
Treasury Note:
Government-debt security with a coupon and original maturity
of one to 10 years.
Return To Top
U
U.S. Treasury Bill: A short-term U.S. government debt instrument with an original maturity
of one year or less. Bills are sold at a discount from par
with the interest earned being the difference between the
face value received at maturity and the price paid.
U.S. Treasury Bond: Government-debt security with a coupon and original maturity of more
than 10 years. Interest is paid semiannually.
U.S. Treasury Note: Government-debt security with a coupon and original maturity of one
to 10 years.
Underlying Futures Contract: The specific futures contract that is bought or sold
by exercising an option.
Return To Top
V
Variation Margin: During periods of great market volatility or in the case of high-risk
accounts, additional margin deposited by a clearing member
firm to an exchange.
Versus Cash:
A transaction generally used by two hedgers who want to
exchange futures for cash positions. Also referred to as
"against actuals" or "exchange for physicals."
Verticle Spread:
Buying and selling puts or calls of the same expiration
month but different strike prices.
Volatility:
A measurement of the change in price over a given period.
It is often expressed as a percentage and computed as the
annualized standard deviation of the percentage change in
daily price.
Volume: The
number of purchases or sales of a commodity futures contract
made during a specific period of time, often the total transactions
for one trading day.
Return To Top
W
Warehouse Receipt: Document guaranteeing the existence and availability of a given quantity
and quality of a commodity in storage; commonly used as
the instrument of transfer of ownership in both cash and
futures transactions.
Wire House:
An individual or organization that solicits or accepts orders
to buy or sell futures contracts or options on futures and
accepts money or other assets from customers to support
such orders. Also referred to as "commission house"
or Futures Commission Merchant (FCM).
Writer: The
person who sells an option in return for a premium and is
obligated to perform when the holder exercises his right
under the option contract. Also referred to as the option
seller.
Return To Top
X
Return To Top
Y
Yield Curve:
A chart in which the yield level is plot on the vertical
axis and the term to maturity of debt instruments of similar
creditworthiness is plotted n the horizontal axis. The yield
curve is positive when long-term rates are higher than short-term
rates However, yield curve is negative or inverted.
Yield to Maturity: The rate of return an investor receives if a fixed-income security is
held to maturity.
Yield: A measure
of the annual return on an investment.
Return To Top
Z
A to
M | N | O
| P | Q | R
| S | T | U
| V | W | X
| Y | Z
Return
To Top
