|
Accrued Interest:
Interest earned between the most recent interest payment
and the present date but not yet paid to the lender.
|
|
Add-on Method:
A method of paying interest where the interest is added
onto the principal at maturity or interest payment dates.
|
|
Adjusted Futures Price:
The cash-price equivalent reflected in the current futures
price. This is calculated by taking the futures price
times the conversion factor for the particular financial
instrument (e.g., bond or note) being delivered.
|
|
Arbitrage:
The simultaneous purchase and sale of similar commodities
in different markets to take advantage of a price
discrepancy. |
|
Arbitration:
The procedure of settling disputes between members, or
between members and customers. |
|
Assign:
To make an option seller perform his obligation to assume
a short futures position (as a seller of a call option) or
a long futures position (as a seller of a put option).
|
|
Associated Person (AP):
An individual who solicits orders, customers, or customer
funds (or who supervises persons performing such duties)
on behalf of a Futures Commission Merchant, an Introducing
Broker, a Commodity Trading Adviser, or a Commodity Pool
Operator. |
|
Associate Membership (CBOT):
A Chicago Board of Trade membership that allows an
individual to trade financial instrument futures and other
designated markets. |
|
At-the-Money Option:
An option with a strike price that is equal, or
approximately equal, to the current market price of the
underlying futures contract. |
|
Balance of Payment:
A summary of the international transactions of a country
over a period of time including commodity and service
transactions, capital transactions, and gold movements.
|
|
Bar Chart:
A chart that graphs the high, low, and settlement prices
for a specific trading session over a given period of
time. |
|
Basis:
The difference between the current cash price and the
futures price of the same commodity. Unless otherwise
specified, the price of the nearby futures contract month
is generally used to calculate the basis. |
|
Bear:
Someone who thinks market prices will decline.
|
|
Bear Market:
A period of declining market prices. |
|
Bear Spread:
In most commodities and financial instruments, the term
refers to selling the nearby contract month, and buying
the deferred contract, to profit from a change in the
price relationship. |
|
Bid:
An expression indicating a desire to buy a commodity at a
given price; opposite of offer. |
|
Board of Trade Clearing Corporation:
An independent corporation that settles all trades made at
the Chicago Board of Trade acting as a guarantor for all
trades cleared by it, reconciles all clearing member firm
accounts each day to ensure that all gains have been
credited and all losses have been collected, and sets and
adjusts clearing member firm margins for changing market
conditions. Also referred to as clearing corporation. See
Clearinghouse. |
|
Book Entry Securities:
Electronically recorded securities that include each
creditor's name, address, Social Security or tax
identification number, and dollar amount loaned, (i.e., no
certificates are issued to bond holders, instead, the
transfer agent electronically credits interest payments to
each creditor's bank account on a designated date).
|
|
Broker:
A company or individual that executes futures and options
orders on behalf of financial and commercial institutions
and/or the general public. |
|
Bull:
Someone who thinks market prices will rise. |
|
Bull Market:
A period of rising market prices. |
|
Bull Spread:
In most commodities and financial instruments, the term
refers to buying the nearby month, and selling the
deferred month, to profit from the change in the price
relationship. |
|
Butterfly Spread:
The placing of two interdelivery spreads in opposite
directions with the center delivery month common to both
spreads. |
|
Calendar Spread:
See Interdelivery Spread and Horizontal Spread.
|
|
Call Option:
An option that gives the buyer the right, but not the
obligation, to purchase (go "long'') the underlying
futures contract at the strike price on or before the
expiration date. |
|
Canceling Order:
An order that deletes a customer's previous order.
|
|
Carrying Charge:
For physical commodities such as grains and metals, the
cost of storage space, insurance, and finance charges
incurred by holding a physical commodity. In interest rate
futures markets, it refers to the differential between the
yield on a cash instrument and the cost of funds necessary
to buy the instrument. Also referred to as cost of carry
or carry. |
|
Carryover:
Grain and oilseed commodities not consumed during the
marketing year and remaining in storage at year's end.
These stocks are "carried over'' into the next marketing
year and added to the stocks produced during that crop
year. |
|
Cash Commodity:
An actual physical commodity someone is buying or selling,
e.g., soybeans, corn, gold, silver, Treasury bonds, etc.
Also referred to as actuals. |
|
Cash Contract:
A sales agreement for either immediate or future delivery
of the actual product. |
|
Cash Market:
A place where people buy and sell the actual commodities,
i.e., grain elevator, bank, etc. See Spot and Forward
Contract. |
|
Cash Settlement:
Transactions generally involving index-based futures
contracts that are settled in cash based on the actual
value of the index on the last trading day, in contrast to
those that specify the delivery of a commodity or
financial instrument. |
|
Certificate of Deposit (CD):
A time deposit with a specific maturity evidenced by a
certificate. |
|
Charting:
The use of charts to analyze market behavior and
anticipate future price movements. Those who use charting
as a trading method plot such factors as high, low, and
settlement prices; average price movements; volume; and
open interest. Two basic price charts are bar charts and
point-and-figure charts. See
Technical Analysis. |
|
Cheap:
Colloquialism implying that a commodity is underpriced.
|
|
Cheapest to Deliver:
A method to determine which particular cash debt
instrument is most profitable to deliver against a futures
contract. |
|
Clear:
The process by which a clearinghouse maintains records of
all trades and settles margin flow on a daily
mark-to-market basis for its clearing member. |
|
Clearinghouse:
An agency or separate corporation of a futures exchange
that is responsible for settling trading accounts,
clearing trades, collecting and maintaining margin monies,
regulating delivery, and reporting trading data.
Clearinghouses act as third parties to all futures and
options contracts acting as a buyer to every clearing
member seller and a seller to every clearing member buyer.
|
|
Clearing Margin:
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. See
Customer Margin.
|
|
Clearing Member:
A member of an exchange clearinghouse. Memberships in
clearing organizations are usually held by companies.
Clearing members are responsible for the financial
commitments of customers that clear through their firm.
|
|
Closing Range:
A range of prices at which buy and sell transactions took
place during the market close. |
|
COM Membership (CBOT):
A Chicago Board of Trade membership that allows an
individual to trade contracts listed in the commodity
options market category. |
|
Commission Fee:
A fee charged by a broker for executing a transaction.
Also referred to as brokerage fee. |
|
Commission House:
See Futures Commission Merchant (FCM). |
|
Commodity:
An article of commerce or a product that can be used for
commerce. In a narrow sense, products traded on an
authorized commodity exchange. The types of commodities
include agricultural products, metals, petroleum, foreign
currencies, and financial instruments and indexes, to name
a few. |
|
Commodity Credit Corporation (CCC):
A branch of the U.S. Department of Agriculture,
established in 1933, that supervises the government's farm
loan and subsidy programs. |
|
Commodity Futures Trading Commission (CFTC):
A federal regulatory agency established under the
Commodity Futures Trading Commission Act, as amended in
1974, that oversees futures trading in the United States.
The commission is comprised of five commissioners, one of
whom is designated as chairman, all appointed by the
President subject to Senate confirmation, and is
independent of all cabinet departments. |
|
Commodity Pool:
An enterprise in which funds contributed by a number of
persons are combined for the purpose of trading futures
contracts or commodity options. |
|
Commodity Pool Operator (CPO):
An individual or organization that operates or solicits
funds for a commodity pool. |
|
Commodity Trading Adviser (CTA):
A person who, for compensation or profit, directly or
indirectly advises others as to the value or the
advisability of buying or selling futures contracts or
commodity options. Advising indirectly includes exercising
trading authority over a customer's account as well as
providing recommendations through written publications or
other media. |
|
Computerized Trading Reconstruction (CTR) System:
A Chicago Board of Trade computerized surveillance program
that pinpoints in any trade the traders, the contract, the
quantity, the price, and time of execution to the nearest
minute. |
|
Consumer Price Index (CPI):
A major inflation measure computed by the U.S. Department
of Commerce. It measures the change in prices of a fixed
market basket of some 385 goods and services in the
previous month. |
|
Convergence:
A term referring to cash and futures prices tending to
come together (i.e., the basis approaches zero) as the
futures contract nears expiration. |
|
Conversion Factor:
A factor used to equate the price of T-bond and T-note
futures contracts with the various cash T-bonds and
T-notes eligible for delivery. This factor is based on the
relationship of the cash-instrument coupon to the required
8 percent deliverable grade of a futures contract as well
as taking into account the cash instrument's maturity or
call. |
|
Coupon:
The interest rate on a debt instrument expressed in terms
of a percent on an annualized basis that the issuer
guarantees to pay the holder until maturity. |
|
Crop (Marketing) Year:
The time span from harvest to harvest for agricultural
commodities. The crop marketing year varies slightly with
each ag commodity, but it tends to begin at harvest and
end before the next year's harvest, e.g., the marketing
year for soybeans begins September 1 and ends August 31.
The futures contract month of November represents the
first major new-crop marketing month, and the contract
month of July represents the last major old-crop marketing
month for soybeans. |
|
Crop Reports:
Reports compiled by the U.S. Department of Agriculture on
various ag commodities that are released throughout the
year. Information in the reports includes estimates on
planted acreage, yield, and expected production, as well
as comparison of production from previous years.
|
|
Cross-Hedging:
Hedging a cash commodity using a different but related
futures contract when there is no futures contract for the
cash commodity being hedged and the cash and futures
markets follow similar price trends (e.g., using soybean
meal futures to hedge fish meal). |
|
Crush Spread:
The purchase of soybean futures and the simultaneous sale
of soybean oil and meal futures. See
Reverse Crush. |
|
Current Yield:
The ratio of the coupon to the current market price of the
debt instrument |
|
Customer Margin:
Within the futures industry, financial guarantees required
of both buyers and sellers of futures contracts and
sellers of options contracts to ensure fulfillment of
contract obligations. FCMs are responsible for overseeing
customer margin accounts. Margins are determined on the
basis of market risk and contract value. Also referred to
as performance-bond margin. See
Clearing Margin. |
|
Daily Trading Limit:
The maximum price range set by the exchange each day for a
contract. Day Traders: Speculators who take positions in
futures or options contracts and liquidate them prior to
the close of the same trading day. |
|
Deferred (Delivery) Month:
The more distant month(s) in which futures trading is
taking place, as distinguished from the nearby (delivery)
month. |
|
Deliverable Grades:
The standard grades of commodities or instruments listed
in the rules of the exchanges that must be met when
delivering cash commodities against futures contracts.
Grades are often accompanied by a schedule of discounts
and premiums allowable for delivery of commodities of
lesser or greater quality than the standard called for by
the exchange. Also referred to as contract grades.
|
|
Delivery:
The transfer of the cash commodity from the seller of a
futures contract to the buyer of a futures contract. Each
futures exchange has specific procedures for delivery of a
cash commodity. Some futures contracts, such as stock
index contracts, are cash settled. |
|
Delivery Day:
The third day in the delivery process at the Chicago Board
of Trade, when the buyer's clearing firm presents the
delivery notice with a certified check for the amount due
at the office of the seller's clearing firm. |
|
Delivery Month:
A specific month in which delivery may take place under
the terms of a futures contract. Also referred to as
contract month. |
|
Delivery Points:
The locations and facilities designated by a futures
exchange where stocks of a commodity may be delivered in
fulfillment of a futures contract, under procedures
established by the exchange. |
|
Delta:
A measure of how much an option premium changes, given a
unit change in the underlying futures price. Delta often
is interpreted as the probability that the option will be
in-the-money by expiration. |
|
Demand, Law of:
The relationship between product demand and price.
|
|
Differentials:
Price differences between classes, grades, and delivery
locations of various stocks of the same commodity.
|
|
Discount Method:
A method of paying interest by issuing a security at less
than par and repaying par value at maturity. The
difference between the higher par value and the lower
purchase price is the interest. |
|
Discount Rate: The
interest rate charged on loans by the Federal Reserve to
member banks. Discretionary Account: An arrangement by
which the holder of the account gives written power of
attorney to another person, often his broker, to make
trading decisions. Also known as a controlled or managed
account. |
|
Discretionary Account:
An arrangement by which the holder of the account gives
written power of attorney to person, often his broker, to
make trading decisions. Also known as a controlled or
managed account. |
|
Econometrics:
The application of statistical and mathematical methods in
the field of economics to test and quantify economic
theories and the solutions to economic problems.
|
|
Equilibrium Price:
The market price at which the quantity supplied of a
commodity equals the quantity demanded. |
|
Eurodollars:
U.S. dollars on deposit with a bank outside of the United
States and, consequently, outside the jurisdiction of the
United States. The bank could be either a foreign bank or
a subsidiary of a U.S. bank. |
|
European Terms:
A method of quoting exchange rates, which measures the
amount of foreign currency needed to buy one U.S. dollar,
i.e., foreign currency unit per dollar. See
Reciprocal of
European Terms. |
|
Exchange For Physicals (EFP):
A transaction generally used by two hedgers who want to
exchange futures for cash positions. Also referred to as
against actuals or versus cash. |
|
Exercise:
The action taken by the holder of a call option if he
wishes to purchase the underlying futures contract or by
the holder of a put option if he wishes to sell the
underlying futures contract. |
|
Expanded Trading Hours:
Additional trading hours of specific futures and options
contracts at the Chicago Board of Trade that overlap with
business hours in other time zones. |
|
Expiration Date:
Options on futures generally expire on a specific date
during the month preceding the futures contract delivery
month. For example, an option on a March futures contract
expires in February but is referred to as a March option
because its exercise would result in a March futures
contract position. |
|
Face Value:
The amount of money printed on the face of the certificate
of a security; the original dollar amount of indebtedness
incurred. |
|
Federal Funds:
Member bank deposits at the Federal Reserve; these funds
are loaned by member banks to other member banks.
|
|
Federal Funds Rate:
The rate of interest charged for the use of federal funds.
|
|
Federal Housing Administration (FHA):
A division of the U.S. Department of Housing and Urban
Development that insures residential mortgage loans and
sets construction standards. |
|
Federal Reserve System:
A central banking system in the United States, created by
the Federal Reserve Act in 1913, designed to assist the
nation in attaining its economic and financial goals. The
structure of the Federal Reserve System includes a Board
of Governors, the Federal Open Market Committee, and 12
Federal Reserve Banks. |
|
Feed Ratio:
A ratio used to express the relationship of feeding costs
to the dollar value of livestock. See Hog/Corn Ratio and
Steer/Corn Ratio. |
|
Fill-or-Kill:
A customer order that is a price limit order that must be
filled immediately or canceled. |
|
Financial Analysis Auditing Compliance Tracking System
(FACTS):
The National Futures Association's computerized system of
maintaining financial records of its member firms and
monitoring their financial conditions. |
|
Financial Instrument:
There are two basic types: (1) a debt instrument, which is
a loan with an agreement to pay back funds with interest;
(2) an equity security, which is a share or stock in a
company. |
|
First Notice Day:
According to Chicago Board of Trade rules, the first day
on which a notice of intent to deliver a commodity in
fulfillment of a given month's futures contract can be
made by the clearinghouse to a buyer. The clearinghouse
also informs the sellers who they have been matched up
with. |
|
Floor Broker (FB):
An individual who executes orders for the purchase or sale
of any commodity futures or options contract on any
contract market for any other person. |
|
Floor Trader (FT):
An individual who executes trades for the purchase or sale
of any commodity futures or options contract on any
contract market for such individual's own account.
|
|
Forex Market:
An over-the-counter market where buyers and sellers
conduct foreign exchange business by telephone and other
means of communication. Also referred to as foreign
exchange market. |
|
Forward (Cash) Contract:
A cash contract in which a seller agrees to deliver a
specific cash commodity to a buyer sometime in the future.
Forward contracts, in contrast to futures contracts, are
privately negotiated and are not standardized.
|
|
Full Carrying Charge Market:
A futures market where the price difference between
delivery months reflects the total costs of interest,
insurance, and storage. |
|
Full Membership (CBOT):
A Chicago Board of Trade membership that allows an
individual to trade all futures and options contracts
listed by the exchange. |
|
Fundamental Analysis:
A method of anticipating future price movement using
supply and demand information. |
|
Futures Commission Merchant (FCM):
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 wire house. |
|
Futures Contract:
A legally binding agreement, made on the trading floor of
a futures exchange, to buy or sell a commodity or
financial instrument sometime in the future. Futures
contracts are standardized according to the quality,
quantity, and delivery time and location for each
commodity. The only variable is price, which is discovered
on an exchange trading floor. |
|
Futures Exchange:
A central marketplace with established rules and
regulations where buyers and sellers meet to trade futures
and options on futures contracts. |
|
Gamma:
A measurement of how fast delta changes, given a unit
change in the underlying futures price. |
|
GIM Membership (CBOT):
A Chicago Board of Trade membership that allows an
individual to trade all futures contracts listed in the
government instrument market category. |
|
GLOBEXÆ:
A global after-hours electronic trading system.
|
|
Grain Terminal:
Large grain elevator facility with the capacity to ship
grain by rail and/or barge to domestic or foreign markets.
|
|
Gross Domestic Product (GDP):
The value of all final goods and services produced by an
economy over a particular time period, normally a year.
|
|
Gross National Product (GNP):
Gross Domestic Product plus the income accruing to
domestic residents as a result of investments abroad less
income earned in domestic markets accruing to foreigners
abroad. |
|
Gross Processing Margin (GPM):
The difference between the cost of soybeans and the
combined sales income of the processed soybean oil and
meal. |
|
Hedger:
An individual or company owning or planning to own a cash
commodity corn, soybeans, wheat, U.S. Treasury bonds,
notes, bills, etc. and concerned that the cost of the
commodity may change before either buying or selling it in
the cash market. A hedger achieves protection against
changing cash prices by purchasing (selling) futures
contracts of the same or similar commodity and later
offsetting that position by selling (purchasing) futures
contracts of the same quantity and type as the initial
transaction. |
|
Hedging:
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 businesses from adverse price
changes. See Selling (Short) Hedge and Purchasing (Long)
Hedge. |
|
High:
The highest price of the day for a particular futures
contract. |
|
Hog/Corn Ratio:
The relationship of feeding costs to the dollar value of
hogs. It is measured by dividing the price of hogs
($/hundredweight) by the price of corn ($/bushel). When
corn prices are high relative to pork prices, fewer units
of corn equal the dollar value of 100 pounds of pork.
Conversely, when corn prices are low in relation to pork
prices, more units of corn are required to equal the value
of 100 pounds of pork. See Feed
Ratio. |
|
Horizontal Spread:
The purchase of either a call or put option and the
simultaneous sale of the same type of option with
typically the same strike price but with a different
expiration month. Also referred to as a calendar spread.
|
|
IDEM Membership (CBOT):
A Chicago Board of Trade membership of trading privileges
for futures contracts in the index, debt, and energy
markets category (gold, municipal bond index, 30-day fed
funds, and stock index futures). |
|
Intercommodity Spread:
The purchase of a given delivery month of one futures
market and the simultaneous sale of the same delivery
month of a different, but related, futures market.
|
|
Interdelivery Spread:
The purchase of one delivery month of a given futures
contract and simultaneous sale of another delivery month
of the same commodity on the same exchange. Also referred
to as an intramarket or calendar spread. |
|
Intermarket Spread:
The sale of a given delivery month of a futures contract
on one exchange and the simultaneous purchase of the same
delivery month and futures contract on another exchange.
|
|
In-the-Money Option:
An option having intrinsic value. A call option is
in-the-money if its strike price is below the current
price of the underlying futures contract. A put option is
in-the-money if its strike price is above the current
price of the underlying futures contract. See
Intrinsic Value.
|
|
Introducing Broker (IB):
A person or organization that solicits or accepts orders
to buy or sell futures contracts or commodity options but
does not accept money or other assets from customers to
support such orders. |
|
Inverted Market:
A futures market in which the relationship between two
delivery months of the same commodity is abnormal.
|
|
Invisible Supply:
Uncounted stocks of a commodity in the hands of
wholesalers, manufacturers, and producers that cannot be
identified accurately; stocks outside commercial channels
but theoretically available to the market. |
|
Lagging Indicators:
Market indicators showing the general direction of the
economy and confirming or denying the trend implied by the
leading indicators. Also referred to as concurrent
indicators. |
|
Last Trading Day:
According to the Chicago Board of Trade rules, the final
day when trading may occur in a given futures or options
contract month. Futures contracts outstanding at the end
of the last trading day must be settled by delivery of the
underlying commodity or securities or by agreement for
monetary settlement (in some cases by EFPs). |
|
Leading Indicators:
Market indicators that signal the state of the economy for
the coming months. Some of the leading indicators include:
average manufacturing workweek, initial claims for
unemployment insurance, orders for consumer goods and
material, percentage of companies reporting slower
deliveries, change in manufacturers' unfilled orders for
durable goods, plant and equipment orders, new building
permits, index of consumer expectations, change in
material prices, prices of stocks, change in money supply.
|
|
Leverage:
The ability to control large dollar amounts of a commodity
with a comparatively small amount of capital. |
|
Limit Order:
An order in which the customer sets a limit on the price
and/or time of execution. |
|
Limits:
See Position Limit, Price Limit, Variable Limit.
|
|
Linkage:
The ability to buy (sell) contracts on one exchange (such
as the Chicago Mercantile Exchange) and later sell (buy)
them on another exchange (such as the Singapore
International Monetary Exchange). |
|
Liquid:
A characteristic of a security or commodity market with
enough units outstanding to allow large transactions
without a substantial change in price. Institutional
investors are inclined to seek out liquid investments so
that their trading activity will not influence the market
price. |
|
Liquidate:
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. See
Offset. |
|
Liquidity Data BankÆ(LDBÆ):
A computerized profile of CBOT market activity, used by
technical traders to analyze price trends and develop
trading strategies. There is a specialized display of
daily volume data and time distribution of prices for
every commodity traded on the Chicago Board of Trade.
|
|
Loan Program:
A federal program in which the government lends money at
preannounced rates to farmers and allows them to use the
crops they plant for the upcoming crop year as collateral.
Default on these loans is the primary method by which the
government acquires stocks of agricultural commodities.
|
|
Loan Rate:
The amount lent per unit of a commodity to farmers.
|
|
Long:
One who has bought futures contracts or owns a cash
commodity. Long Hedge: See
Purchasing Hedge. |
|
Low:
The lowest price of the day for a particular futures
contract. |
|
Maintenance Margin:
A set minimum margin (per outstanding futures contract)
that a customer must maintain in his margin account.
|
|
Managed Futures:
Represents an industry comprised of professional money
managers known as commodity trading advisors who manage
client assets on a discretionary basis, using global
futures markets as an investment medium. |
|
Margin:
See Clearing Margin and Customer Margin. |
|
Margin Call:
A call from a clearinghouse to a clearing member, or from
a brokerage firm to a customer, to bring margin deposits
up to a required minimum level. |
|
Market Information Data Inquiry System (MIDIS):
Historical Chicago Board of Trade price, volume, open
interest data and other market information accessible by
computers within the Chicago Board of Trade building.
|
|
Market Order:
An order to buy or sell a futures contract of a given
delivery month to be filled at the best possible price and
as soon as possible. |
|
Market Price Reporting and Information System (MPRIS):
The Chicago Board of Trade's computerized price-reporting
system. |
|
Market ProfileÆ:
A Chicago Board of Trade information service that helps
technical traders analyze price trends. Market Profile
consists of the Time and Sales ticker and the Liquidity
Data Bank. |
|
Market Reporter:
A person employed by the exchange and located in or near
the trading pit who records prices as they occur during
trading. |
|
Marking-to-Market:
To debit or credit on a daily basis a margin account based
on the close of that day's trading session. In this way,
buyers and sellers are protected against the possibility
of contract default. |
|
Minimum Price Fluctuation:
See Tick. |
|
Money Supply:
The amount of money in the economy, consisting primarily
of currency in circulation plus deposits in banks:
M-1ñU.S. money supply consisting of currency held by the
public, traveler's checks, checking account funds, NOW and
super-NOW accounts, automatic transfer service accounts,
and balances in credit unions. M-2ñU.S. money supply
consisting of M-1 plus savings and small time deposits
(less than $100,000) at depository institutions, overnight
repurchase agreements at commercial banks, and money
market mutual fund accounts. M-3 ñU.S. money supply
consisting of M-2 plus large time deposits ($100,000 or
more) at depository institutions, repurchase agreements
with maturities longer than one day at commercial banks,
and institutional money market accounts. |
|
Moving-Average Charts:
A statistical price analysis method of recognizing
different price trends. A moving average is calculated by
adding the prices for a predetermined number of days and
then dividing by the number of days. |
|
Municipal Bonds:
Debt securities issued by state and local governments, and
special districts and counties. |
|
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 rules, screen futures
professionals for membership, audit and monitor
professionals for financial and general compliance rules,
and provide for arbitration of futures-related disputes.
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Nearby (Delivery) Month:
The futures contract month closest to expiration. Also
referred to as spot month. |
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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.
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Offer:
An expression indicating one's desire to sell a commodity
at a given price; opposite of bid. |
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Offset:
Taking a second futures or options position opposite to
the initial or opening position. See
Liquidate. |
|
OPEC:
Organization of Petroleum Exporting Countries, emerged as
the major petroleum pricing power in1973, 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. Members are:
Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait,
Libya, Nigeria, Qatar, Saudi Arabia, the United Arab
Emirates, and Venezuela. |
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Opening Range:
A range of prices at which buy and sell transactions took
place during the opening of the market. |
|
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. |
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Open Market Operation:
The buying and selling of government securities Treasury
bills, notes, and bonds by the Federal Reserve.
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Open Outcry:
Method of public auction for making verbal bids and offers
in the trading pits or rings of futures exchanges.
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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. |
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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.
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Option Premium:
The price of an option the sum of money that the option
buyer pays and the option seller receives for the rights
granted by the option. |
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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. |
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Option Spread:
The simultaneous purchase and sale of one or more options
contracts, futures, and/or cash positions. |
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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. |
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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.
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Over-the-Counter (OTC) Market:
A market where products such as stocks, foreign
currencies, and other cash items are bought and sold by
telephone and other means of communication. |
|
P&S (Purchase and Sale) Statement:
A statement sent by a commission house to a customer when
his futures or options on futures position has 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 transactions. |
|
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 whic | |
